First Read

Sad News
The father of Doug Ashburn, our former colleague, passed away yesterday morning from a sudden heart attack. Doug is now at T3 Custom, a custom publishing firm. Any well wishes or condolences can be sent to him at
***** On behalf of the entire JLN team, our condolences to Doug and Nancy Ashburn and their families on the passing of Doug’s father. We will keep them in our thoughts and prayers as they deal with this sad time.


Options Industry Conference Preview Part 1: Is Regulation Damaging the Options Space?

The cost of regulation is heavy on certain participants in the options industry, and OCC is trying to help clearing firms and market makers deal with it.

“One of the things we’re most focused on is the increased capital burdens of doing business in the industry, and that’s starting to have an effect on liquidity provisions and trading,” Donohue said.

By that, Donohue is referring to the risk weighted assets for bank clearing members which fall under various regulatory regimes at the US Treasury and the Basel Committee. These issues and others will be discussed at the upcoming Options Industry Conference in Scottsdale, Arizona this week.

Read the rest and watch the video »


Views on Reg AT; CCO Obligations and Annual Reports; Jay Clayton; KISS and Tell
Gary DeWaal – Bridging the Week
Futures industry participants of all ilk broadly criticized proposed Regulation Automated Trading, even as most recently modified in November 2016, in comment letters filed with the Commodity Futures Trading Commission through last week. The two most common objections were that the proposed rules remain too prescriptive and that the CFTC’s proposed authority to request algorithmic trading system source code through special call procedures or by subpoena still does not provide nearly the same protections as mandatory requests by subpoena alone. Also last week, the CFTC proposed to modify the job descriptions of chief compliance officers of future commission merchants and swap dealers, and encouraged KISS and tell – at least in the context of advising the Commission on ways to make application of its rules more efficient.


The world’s most valuable resource is no longer oil, but data; The data economy demands a new approach to antitrust rules
The Economist
A NEW commodity spawns a lucrative, fast-growing industry, prompting antitrust regulators to step in to restrain those who control its flow. A century ago, the resource in question was oil. Now similar concerns are being raised by the giants that deal in data, the oil of the digital era. These titans—Alphabet (Google’s parent company), Amazon, Apple, Facebook and Microsoft—look unstoppable. They are the five most valuable listed firms in the world. Their profits are surging: they collectively racked up over $25bn in net profit in the first quarter of 2017. Amazon captures half of all dollars spent online in America. Google and Facebook accounted for almost all the revenue growth in digital advertising in America last year.

****** When you drill for data….


To Lift Growth, Janet Yellen Says, Make It Easier for Women to Work
In an unusually personal speech, Janet L. Yellen, the Federal Reserve chairwoman, said Friday that policies making it easier for women to work could significantly improve the nation’s economic growth.

****** Try boxing with one hand tied behind your back and you will get the idea here.


How to Fix the World (Not Just Reg NMS)
by Phil Mackintosh and Tom Eidt – KCG
In our Seven trends to watch in 2017 we mentioned that the SEC’s review of Reg NMS under the Regulatory Flexibility Act may set the stage for a more comprehensive analysis of how the market works. Before we all put pen to paper for yet another comment letter, we thought it would be good to:

***** Fix is a difficult word. There is no ultimate “fix.”


Friday’s Top Three
Our top viewed pieces of the day on Friday were led by the video presentation by Julie Armstrong Menacho, from the FinTech Exchange event So You Want Data? Julie Armstrong Menacho Says CME Is Transforming Data. Our second most viewed story was the Wall Street Journal’s Virtu CEO Aims to Be the Good Guy of High-Speed Trading, which somehow implies there are bad guys of high speed trading. Third went to the blog post You Broke Our Heart, Jeff, about ICE’s earning call, from


MarketsWiki Stats
99,814,306 pages viewed; 22,487 pages; 205,806 edits
MarketsWiki Statistics


Lead Stories

Traders Are Fleeing the Options Market; Falling volumes are raising concerns about the fragility of the options market
By Gunjan Banerji – WSJ
Falling volumes and spiraling costs are pushing trading firms out of U.S. options, raising concerns about fragility in a market that investors rely on to protect portfolios.

Wall Street frets as capital markets trading activity trails off; Second quarter slowdown comes as volatility falls and investors become cautious
by: Ben McLannahan and Robin Wigglesworth – FT
An eerie calm in capital markets is fuelling fears on Wall Street that a first-quarter rebound in trading revenues could prove a one-off.

There’s a new front in the brutal battle between America’s stock exchanges
Matt Turner – Business Insider
Bats, which is America’s second-largest stock market and is now a part of CBOE, is proposing an alternative to the closing auction at the end of the trading day. The proposal is a direct attack at the New York Stock Exchange and Nasdaq model, and comes at a time when more and more trading is conducted at the end of the day.

What’s it like to lose £350m? A rogue trader confesses
Andrew Anthony – The Guardian
In 2009, shortly after the global markets had suffered their worst crisis for 90 years, Alexis Stenfors was working as a currency trader for Merrill Lynch in London. With 15 years’ experience, he was good at his job and he prided himself on his ability to read the markets. His view was that the whole financial system was going to go “belly up”. That was what he was betting on.

City firms say they won’t be ready for Brexit in two years
Jill Treanor – The Guardian
City firms are making preparations for a hard Brexit even though they fear the two-year negotiation period for the UK for the EU will not be long enough for them to complete the complex restructuring needed, according to a report published on Monday.

In S.E.C.’s Streamlined Court, Penalty Exerts a Lasting Grip
On its face, it seemed like a simple case. Eric D. Wanger, according to regulators, had done things a money manager shouldn’t do.

Goldman Sachs wins largest concessions on Volcker rule; Bank gains permission to hold on to $6.2bn of illiquid assets
by: Alistair Gray in New York – FT
Goldman Sachs has emerged as a big beneficiary from US regulators’ decision to grant banks more time to comply with parts of the Volcker rule, which was aimed at forcing them to wind down risky activities.

Lies Traders Tell: A New Trial, a New Worry in Mortgage-Bond Circles
by Matt Scully and Chris Dolmetsch – Bloomberg
Traders grew anxious as prosecutors ramped up investigation; Evidence in latest case involving Nomura trio set for Monday
In the stock market, the tape never lies.
In the bond market, sometimes traders do.
That’s the message federal authorities have been sending for years as they’ve targeted dubious practices on Wall Street bond desks.

BlackRock, Pimco Said to Plan New Front in Bank FX-Rigging Cases
by Kit Chellel and Jeremy Hodges – Bloomberg
Investors have hired law firm Quinn Emanuel to recover losses; New lawsuits against banks may be filed in London and New York
Some of the world’s biggest investors are working with a U.S. law firm to prepare a fresh wave of litigation against banks accused of rigging foreign exchange markets.

200 large investors urge G7 to keep climate change promises; Fears rise that Donald Trump will pull out of Paris agreement to limit global warming
by: Attracta Mooney – FT
Calpers, Amundi and Schroders have teamed up with 200 other large investors to urge governments globally to stand by their commitment to fight climate change, as fears rise that Donald Trump, the US president, will pull out of the Paris agreement.

Exchanges, OTC and Clearing

Bats upgrades complex order book for CBOE options orders; New complex order book will form foundation for all complex orders handled by CBOE markets.
By Hayley McDowell – The Trade
Bats has announced plans to launch a new complex order functionality on its EDGX options exchange.

Bats Announces Alternative to Closing Auctions
– Bats Market Close is an end-of-day match process for non-Bats listed securities
– Follows significant and persistent demand from a broad range of industry participants
Bats, a CBOE company
CBOE Holdings, Inc.
Bats, a CBOE Holdings, Inc. company, and the second-largest operator of stock exchanges in the United States, announced today that it is proposing to adopt a new, competitively priced alternative to the primary market closing auctions that take place at the end of the U.S. equities trading day, subject to regulatory approval.

Hotspot Announces First Anonymous FX Forwards Trades
CBOE Press Release
Hotspot, a CBOE Holdings, Inc. company, and a leading market for institutional foreign exchange (FX) trading globally, announced today the first anonymous outright deliverable forward FX transaction executed on the platform. Hotspot is the first platform to provide outright deliverable forwards on an anonymous central-limit order book. Further, it is the first platform to allow prime brokerage clients to post passive quotes. This allows for expanded trading activity from participants, who are now able to trade without being forced to cross the bid-offer spread.

Nasdaq CEO warns that job growth and wealth creation could be stifled if more companies don’t go public; Nasdaq CEO Adena Friedman put out a blueprint for structural market reforms to prod more companies to go public.; “If we don’t have these companies go public, it could really ultimately limit the jobs that they’re able to create and the growth they’re able to achieve,” she says.
Matthew J. Belvedere – CNBC
Nasdaq CEO Adena Friedman said Thursday more private companies should go public in order to jump-start job and wealth creation.

U.S. flour millers scramble for high-protein wheat on quality fears
By Michael Hirtzer and Julie Ingwersen – Reuters
(Reuters) – U.S. flour millers were scrambling to find high-protein wheat supplies remaining from last year’s harvest amid fears the developing crop, some of which was hit by snow in Kansas this week, could yield lower-quality grain, buyers said on Friday.

Blank Check Debuts on Big Board After NYSE Eases Rules; Blank-check listings have become an increasingly important part of the initial public offering market
By Ryan Dezember and Alexander Osipovich – WSJ
The New York Stock Exchange is getting in on the blank-check bonanza. Blank-check listings have become an increasingly important part of the initial public offering market. The listings, which are by companies with no assets that are raising cash for acquisitions, have become a popular tool to launch firms among well-known executives, particularly in the oil patch.

LME ASIA WEEK 2017: Focus on competition is from exchanges, OTC – HKEX ceo Li
Metal Bulletin
Hong Kong Exchanges & Clearing (HKEX) is focusing on competition from futures exchanges and the over-the-counter (OTC) market in the LME space, ceo Charles Li said in an exclusive interview on Friday May 5.

HKEX Announces Plan for Physically Settled CNH and US$ Gold Futures
First of their kind gold futures contracts denominated in CNH and US$ and traded on the same platform; Physical kilobar (1 kilogram) contract ideal for Asia; After-hours as well as day trading (nearly 16 hours of trading per trading day)
Hong Kong Exchanges and Clearing Limited (HKEX) plans to introduce physically settled CNH (offshore Renminbi, or RMB) and US dollar (US$) Gold Futures contracts in the third quarter of this year, subject to regulatory approval.

Nasdaq Stockholm Orders Oscar Properties AB To Pay Fine Corresponding To Two Annual Fees
The Disciplinary Committee of Nasdaq Stockholm has found that Oscar Properties AB (“Oscar Properties”) has breached Nasdaq Stockholm’s regulations (“the Rule Book”) and, accordingly, has imposed a fine on Oscar Properties amounting to two annual fees, corresponding to an amount of SEK 410,000.|

ISDA AGM Focuses on Push for Derivatives Market Efficiency
The steps that could be taken to make the derivatives market more efficient and less complex will be debated by senior regulators and market executives at ISDA’s 32nd annual general meeting (AGM) in Lisbon on May 8-10.


Alfa Financial Software to list in largest UK tech IPO since 2015
by: Nicholas Megaw – FT
Alfa Financial Software has announced plans to join the London Stock Exchange next month, in what will be the largest UK tech listing for two years.

When blockchains run companies, here’s what your job will look like | VentureBeat | Business
by Jeremy Epstein – VentureBeat If you’re tired of going to unproductive meetings, commuting in to work just to put in face time, or following commands from a boss you don’t have much confidence in, you may be the right kind of employee for a new type of work environment called a DAO, or Decentralized Autonomous Organization.


The great British Brexit robbery: how our democracy was hijacked; A shadowy global operation involving big data, billionaire friends of Trump and the disparate forces of the Leave campaign influenced the result of the EU referendum. As Britain heads to the polls again, is our electoral process still fit for purpose?
by Carole Cadwalladr – The Guardian
In June 2013, a young American postgraduate called Sophie was passing through London when she called up the boss of a firm where she’d previously interned. The company, SCL Elections, went on to be bought by Robert Mercer, a secretive hedge fund billionaire, renamed Cambridge Analytica, and achieved a certain notoriety as the data analytics firm that played a role in both Trump and Brexit campaigns. But all of this was still to come. London in 2013 was still basking in the afterglow of the Olympics. Britain had not yet Brexited. The world had not yet turned.

Why Emmanuel Macron matters to the whole world; If he fails, populism, nationalism and protectionism will soon be resurgent
by: Gideon Rachman – FT
As Emmanuel Macron savours his victory in the French presidential election, he might consider the words of John Maynard Keynes in an open letter, written to Franklin Roosevelt in December 1933. The British economist told the US president: “You have made yourself the Trustee for those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out.”

Paris to redouble efforts to attract Brexit banks after Macron win
By Anjuli Davies and Maya Nikolaeva – Reuters
Emmanuel Macron’s victory in the French presidential election and his plans to swiftly implement structural reforms is a boon for Paris in its efforts to attract banks and other financial service companies seeking to move operations out of Britain, the head of lobbying group Paris Europlace said on Monday.


House Republicans Move to Gut Bank Regulations
WASHINGTON — Republicans took a big step toward repealing the Affordable Care Act on Thursday, and they took a small step toward dismantling another of President Barack Obama’s signature pieces of legislation, the Dodd-Frank Act.

From the London Whale to Wells Fargo, a Bank Regulator Looks Back
“You really have to be prepared for the next downturn,” Thomas J. Curry, the departing comptroller of the currency, said of bank regulators. Credit Carlos Barria/Reuters
Thomas J. Curry’s first week as a federal banking regulator was his worst.

UK Financial Conduct Authority Publishes MiFID II Commodity Position Reporting Instructions
The National Law Review
On May 3, the UK Financial Conduct Authority (FCA) published a document containing reporting instructions (Instructions) for trading venues and investment firms submitting position reports under the revised Markets in Financial Instruments Directive (MiFID II).

Investing and Trading

The ‘Short Vol’ Trade Isn’t Everything It Seems; Short bets on volatility have been around for while, surviving the market gyrations of recent years
There’s a lot of talk about a surge in bets on falling volatility. But those bets actually appear to be on the decline.The ‘Short Vol’ Trade Isn’t Everything It Seems

The 10-Year Note: A Futures Market Revolution
Debbie Carlson – CME OpenMarkets
Few futures contracts have done as well as the 10-year Treasury Note. When it debuted on May 3, 1982, it set a trading-volume record with 33,502 contracts traded, a figure still unsurpassed for a first trading day. In the intervening years, it has become the third-most actively traded futures product listed on the CME Group exchanges, surpassed only by the Eurodollars and e-mini S&P 500 stock index futures. It is the flagship long-term interest rate contract, and is used widely as a reference for government securities, mortgage rates and corporate-bond issuance.

Quantitative Investing: A Crisis Waiting to Happen
Everywhere investors turn, mathematics and machines seem to be rendering human judgment obsolete.

Bogle Says If Everybody Indexed, Markets Would Fail Under Chaos
by Sonali Basak – Bloomberg
Vanguard founder says chance of everybody indexing is ‘zero’; Warren Buffett praises Bogle for lower fees, better returns
Investors wouldn’t have a way to capture value in the stock market if it were entirely held by passively managed funds, according to Jack Bogle, the founder of Vanguard Group.

Buffett Says Money Spent on Plumbers Better Than on Hedge Funds
by Noah Buhayar and Jordyn Holman – Bloomberg
Dentists, plumbers add more value in aggregate, CEO says; Billionaire advocates index strategy for most investors
Warren Buffett isn’t done criticizing hedge-fund managers for wasting clients’ money.

This is why trying to predict stock-market tops is an exercise in futility
By Sue Chang – MarketWatch
There is no ‘discernible pattern’ in previous market peaks
Predicting where the stock market is headed may be a Sisyphean task.
Trying to foretell when the stock market is reaching its peak may be a fool’s errand. Even the most respected and famed investors and market pundits can’t claim to know when it’s time to get out—or for that matter into—the market, no matter how savvy they may be on investing.

One big hurdle for smart-beta funds—a market bereft of cycles
By Ryan Vlastelica – MarketWatch
Smart-beta funds may have a lot to offer investors, but the U.S. stock market isn’t giving them much opportunity to make the case that they can outperform.


Deutsche Bank Unit Near $517 Million London Building Deal
by Jack Sidders and Sharon R Smyth – Bloomberg
Deutsche Bank AG’s asset-management unit agreed to buy two office buildings near London Bridge railway station for about 400 million pounds ($517 million), according to two people with knowledge of the plan.

Brokers, funds add up research bill before new EU rules
By Simon Jessop and Vikram Subhedar |- Reuters
Brokers operating in the European Union have only a few months to comply with new rules requiring them to set a separate price for the investment research they have been bundling with the trading services they sell to fund managers.

This Bonus Season Is a Dud for London Bankers
by Stephen Morris – Bloomberg
61% of Deutsche Bank staff complain after CEO slashed pay; U.S. firms still pay more than U.K. and European peers
Less than a quarter of London’s investment bankers were pleased with their 2016 bonuses, with staff at Deutsche Bank AG the most disgruntled after Chief Executive Officer John Cryan slashed discretionary compensation for many top traders and advisers. By a small margin, those at JPMorgan Chase & Co. were happiest.


Ivory Coast and Ghana Seek to Counter Cocoa Slump Together
by Baudelaire Mieu and Olivier Monnier – Bloomberg
Ivory Coast and Ghana, the world’s largest cocoa producers, said they will work together to derive more value from growing beans after a slump in prices hurt their economies.


‘Make no mistake, there will be no Brexit negotiation’, says man who took on EU; ‘The last thing you do is go in there and say: “I’m triggering Article 50 and I am going to get my way”‘
Narjas Zatat – Independent
Former Greek finance minister Yanis Varoufakis has described Theresa May’s Brexit negotiation tactics as “precisely wrong”.

Blankfein Says City of London Growth May ‘Backtrack’ on Brexit
by Michael J Moore – Bloomberg
Goldman Sachs CEO calls for multi-year implementation period; City’s expansion as hub won’t totally reverse, he tells BBC
Brexit may cause the growth of London’s financial center to stall or “backtrack a bit,” Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said in an interview with the BBC.

Brexit Causes The Number And Wealth Of British Billionaires To Rise
Tim Worstall – Forbes
The Sunday Times compiles a rich list for the UK similar to the ones created by this magazine for the world and various countries within it.


Ad Buyers Have a Say in Whether Real News Survives
Jim Rutenberg – NY Times
Hey, America’s Advertisers: You got some good news last week, didn’t you?

Purdue Defends Plan to Acquire Kaplan University in Wake of Faculty Vote; Faculty senate wants Indiana university to withdraw offer for the mostly online, for-profit school
By Douglas Belkin – WSJ
Purdue University on Friday defended its plan to acquire Kaplan University, a day after the public university’s faculty gave a thumbs down to the deal to take over the for-profit, mostly online school.

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