Two Sigma to acquire Interactive Brokers’ US options arm; Comey’s Firing Is a Crisis of American Rule of Law; Cinnober to acquire market surveillance firm Ancoa

May 10, 2017

First Read

Bits & Pieces
By John J. Lothian

Four JLN team members are out in sunny Arizona for the Options Industry Conference, which gets underway officially today.

Jim Kharouf, Spencer Doar, Jeff Bergstrom and Patrick Lothian are covering the conference for JLN and will be conducting interviews, including with option exchange leaders.

Our coverage so far has included a two-part preview interview with OCC Executive Chairman and CEO Craig Donohue. The can be seen here and here

Across the pond, Patrick Thornton-Smith has left Duco and the City and has signed on as a non-executive director with Cult Wines Limited. I wish him well and advise him to stay away from the Jim Jones Wine.

Sometime later today MarketsWiki will go over the 100 million page view mark.

The story I wrote about Jim Oliff leaving the CME Group board has received over 600 views on LinkedIn, which is a huge number. I believe it is a reflection of the impact Jim had on the industry and how well liked he is.

Jim Kharouf and I will be in New York on May 22 and 23. We still have some meeting spots open, so let me know if you want to meet.

Last, registration for the MarketsWiki Education World of Opportunity series in New York and Chicago opens on June 1. You can see details about the series on We are still looking for more sponsors, so let me know if you are interested.



Cloudy With a Chance of Data

Adam Honoré, the founder and CEO of MarketsTech, is fond of making predictions and then seeing how many of them have come true. Back in 2015, he made some predictions about tech trends in the markets. With some he was right on; others less so. But, he said, when he predicts something he hopes will happen, he tries to make it happen.

Read the rest and watch the video »


Inaugural David Setters Trophy Tournament to Take Place in June
In one month, on Tuesday 13 June 2017, The City will be brought to a standstill with the inaugural David Setters Trophy. This event is not just any cricket tournament. It’s a fundraiser and an awareness promoter, which will see all proceeds going to the Motor Neurone Disease Association.
Where: The HAC is the venue
When: 9:00 – 18:00 on Tuesday 13 June
What: All day round-robin cricket tournament, and invitation-only evening drinks reception
Who: Main sponsors playing are INTL FCStone, The London Metal Exchange, ION Group, The FIA
For more information or to register, go here


Obituary: The Lord Bagri, CBE, 1930-2017
The Lord Bagri, CBE, who passed on 26 April 2017 aged 86, is the man most credited with the modernisation of the London Metal Exchange (LME).
The longest serving chairman in the LME’s 140-year history, Bagri was also the first non-British national to take the helm.
Not only did he lead the LME through an unprecedented period of change -presiding over the demutualisation of the Exchange in 2000 and the introduction of its first electronic trading platform in 2001 – Bagri was also key in leading the LME through the 1996 Sumitomo copper crisis, when the global metals world was rocked by the actions of a rogue trader.


The bonus that came along with CBOE’s Bats buy
By LYNNE MAREK – Crain’s Chicago Business
An out-of-town acquiree is putting its stamp on the Chicago Board Options Exchange, an iconic institution in Chicago business.

***** We missed this story.


Sorry Harvard and Yale, the Trading Whiz Kids Are at Baruch College; The students who dominated trading competitions recently go to public college in New York
By Akane Otani – Bloomberg
The college students who dominated trading competitions around North America this school year aren’t finance majors at Harvard, the University of Pennsylvania or the Massachusetts Institute of Technology. They’re students at Baruch College.

***** Baruch College has some good coaches.


New ISDA Animated Video: How do derivatives benefit the global economy?
Derivatives play a critical role in helping to reduce the uncertainty that comes from changing interest rates and exchange rates, as well as credit, commodity and equity prices.

***** This is not a Mickey Mouse video.


No, coffee is not the second-most traded commodity after oil
By Jon Greenberg – Politifact
Starbucks has a reputation for serving a strong cup of joe, but the ubiquitous coffee retailer’s director of public policy offered a claim on Capitol Hill that turns out to be a thin brew.

**** SR: But it goes much, much better with a donut.


Tuesday’s Top Three
Not surprisingly, it seems the doomsayer stories are getting the most hits. Top of the list on Tuesday was The New York Post’s Anonymous warns world to ‘prepare’ for World War 3. Next up was JLN’s own Options Industry Conference Preview Part 2: OCC’s Craig Donohue on Gina McFadden and Changes at the Top of OCC. Third was the exchange rivalry story of the week, Bats targets NYSE and Nasdaq end-of-day volume with new offering


MarketsWiki Stats
99,963,204 pages viewed; 22,487 pages; 205,809 edits
MarketsWiki Statistics


Lead Stories

Two Sigma to acquire Interactive Brokers’ US options arm; The acquisition completes Two Sigma’s journey to expand into the US options market, as it looks to reinvigorate Timber Hill business.
By Joe Parsons- The Trade
The market making arm of Chicago hedge fund Two Sigma will buy the options trading unit from Interactive Brokers’ Timber Hill, in a bid to build out a position in derivatives.

Comey’s Firing Is a Crisis of American Rule of Law; Trump’s actions are constitutional but violate powerful political norms.
By Noah Feldman – Bloomberg
It’s not a constitutional crisis. Technically, President Donald Trump was within his constitutional rights Tuesday when he fired FBI Director James Comey. The Federal Bureau of Investigation is part of the executive branch, not an independent agency. But the firing did violate a powerful unwritten norm: that the director serves a 10-year, nonrenewable term and is fired only for good cause.

Cinnober to acquire market surveillance firm Ancoa; Acquisition set to ‘deepen’ Cinnober’s product portfolio.
By Hayley McDowell – The Trade
Cinnober Financial Technology is set to acquire market surveillance specialist Ancoa, following a three-year relationship.

The Surprising Losers From the VIX’s Decline; A low VIX is dragging on the returns of income-seeking investors
By Spencer Jakab – WSJ
They have nothing to fear but the lack of fear itself. The low level of the market’s so-called fear gauge, formally known as the CBOE Volatility Index or VIX, is a divisive issue on Wall Street. Some assert that the lowest values in nearly a quarter-century signal investor complacency. They say that has almost always been a sign that a selloff is near. Others scoff that there is no cause-and-effect.

OCC Announces Robert Bodnar Joins Options Industry Council Roundtable
OCC, the world’s largest equity derivatives clearing organization and a leading provider of options education content through The Options Industry Council (OIC), today announced that Robert Bodnar, Executive Director at Morgan Stanley, has joined the OIC Roundtable. The OIC Roundtable is the independent governing body of the OIC, and is comprised of representatives from the options exchanges, member brokerage firms, and OCC.

The $9 Trillion Question: What Happens When Central Banks Stop Buying Bonds?; Central banks have been the world’s biggest buyers of government bonds and may soon turn into sellers
By Jon Sindreu – WSJ
Central banks have been the world’s biggest buyers of government bonds, but may soon stop—a tidal shift for global markets. Yet investors can’t agree on what that shift will mean.

CFA Exam to Add Big Data, Artificial Intelligence as Topics
by Jennifer Surane – Bloomberg
Updated exam will cover trio of forces automating the industry; Curriculum advisers decided not to require an ability to code
The CFA Institute plans to add questions on artificial intelligence, robo-advisory and methods for analyzing big data as it updates its exams — a move that happens to ensure professionals seeking an edge in their careers are familiar with forces driving automation.

Thomson Reuters And S&P Global Enter Strategic Transcript Data Agreement
Thomson Reuters
A strategic data agreement between Thomson Reuters and S&P Global (NYSE: SPGI) will deliver the industry’s most comprehensive transcript data service to financial services professionals. Under the agreement, S&P Global Market Intelligence (a division of S&P Global) will become a major provider of transcript coverage on both public and private companies including complete coverage of companies in the S&P 500® and other leading stock market indices to users of Thomson Reuters desktops platforms including Eikon, Thomson One and Thomson Reuters feeds.

A matter of time: New deal between National Physical Laboratory and Intercontinental Exchange in the high-frequency traders’ battle for punctuality
Jasper Jolly – City AM
Milliseconds can determine huge profits for high-frequency traders (Source: Getty)
High-frequency traders looking for an edge in the battle to be first into a trade have invested in a new link to the UK’s most reliable clock.

Exchanges, OTC and Clearing

Options exchange operator CBOE’s profit slumps 69.3 pct
CBOE Holdings Inc, the operator of the largest U.S. options exchange, reported a 69.3 percent fall in quarterly profit, hit by higher costs.

Exchange operator CBOE beats estimates on higher transaction fees
CBOE Holdings Inc (CBOE.O), the operator of the largest U.S. options exchange, reported a quarterly profit that beat analysts’ estimates, as transaction fees more than doubled.

Börsen-Zeitung: “MiFID II gives us opportunities”, Interview with Thomas Book, CEO, Eurex Frankfurt
In an interview with the Börsen-Zeitung Thomas Book, CEO Eurex, talks about Eurex’s strong performance in the year to date and the company’s outlook for the future as it “aspires to become the leading derivatives exchange for global indices”.

LME seeks to simplify LMEprecious contract structure in advance of new regulations
The London Metal Exchange is seeking to introduce a single accountability level and position limit across all prompts for each of the LMEprecious contracts, to be launched July 10 — subject to regulatory approval — in a bid to simplify the trading process, the exchange said in a note Tuesday.

1000 Companies to Inspire Britain report highlights significant growth potential of UK SMEs London Stock Exchange Group
London Stock Exchange Group’s annual report identifies fastest-growing and most dynamic SMEs across the UK

Tehran Stock Exchange Holds International Financing Event For Local Companies
An international financing conference was held on Monday 8 May 2017 in Tehran.|

Qatar Stock Exchange Completes Successful New York Investor Forum
Qatar Stock Exchange (QSE), in collaboration with QNB Financial Services and HSBC, today completed a two day roadshow that aimed to support the further development and practice of QSE’s listed companies’ investor relations.|

BME And The Bolsa Of Costa Rica Agree On The Distribution Of Openfinance Technology For The Management Of Investments In Costa Rica
BME continues exporting its IT and know-how to gain efficiency and improve productivity in the financial sector; Strengthening its development strategy in Latin America
BME and the Bolsa Nacional de Valores de Costa Rica (BNV) have signed an agreement for the distribution of the Openworkplace® platform of BME’s fintech subsidiary, OpenFinance, in Costa Rica.

TMX Group Limited Increases Dividend to $0.50 per Common Share
The Board of Directors of TMX Group Limited declared a dividend of $0.50 on each common share outstanding, an increase in $0.05 or 11%, from the previous $0.45 per common share. This dividend is payable on June 9, 2017 to shareholders of record at the close of business on May 26, 2017.

HKEX First Quarter Results


Cinnober acquires market surveillance specialist Ancoa Software
Cinnober Financial Technology announces today the acquisition of the business and assets of Ancoa Software, the UK-based market surveillance specialist company.

Cinnober Financial Technology AB (OM:CINN): A Look at the Margin Score
Pearson News
Investors having Cinnober Financial Technology AB (OM:CINN) on their watchlists might want to take into consideration the Gross Margin Score of the firm. Cinnober Financial Technology AB currently has a score of 32.00000. This score is derived from the Gross Margin (Marx) stability and growth over the previous eight years. The Gross Margin score lands on a scale from 1 to 100 where a score of 1 would be considered positive, and a score of 100 would be seen as negative. The low score of 32.00000 for Cinnober Financial Technology AB indicates a top score for stability and growth.

Tradovate Integrates Collective2 into its Offering
Tradovate, LLC, an online brokerage firm for active, self-directed futures traders, and Collective2 (C2), the online platform which connects investors with trade leaders, announced today that Tradovate has now integrated C2 into its offering, providing the first commission-free brokerage access to C2 futures trading systems.

S3 Launches Options Best Execution 2.0 – The New Standard for Options Best Execution
S3 (“the Company”), a financial services software company providing innovative solutions to monitor and analyze trade execution for options, fixed income securities, and equities, today announced that it has launched its Options Best Execution 2.0 platform for options trade analysis. This cutting-edge platform builds on the Company’s already-robust options offering to provide clients with even more granular and impactful analytics capabilities so that they may better identify, and achieve, best execution.
(Press release via email)

SoftBank Nears Closing on $100 Billion Tech Fund; Japanese internet and telecommunications giant posts decline in operating profit, but a rise in net profit
By Mayumi Negishi – WSJ
SoftBank Group Corp. 9984 1.43% logged a 7% fall in fourth-quarter operating profit, due to a loss at its distribution operations, but a rise in net profit, as its chief executive prepares to shift focus from telecom operations to running a $100 billion technology investment fund.

Big Tech Companies Could Face More Rules in the EU; Platforms such as Google, or TripAdvisor could be regulated on terms offered to small businesses
By Natalia Drozdiak – WSJ
Tech companies in Europe face the prospect of more rules dictating how they conduct business.


French Businesses Hope Macron’s Victory Will Ignite an Economic Revival
TROYES, France — As the results of France’s presidential election rolled in on Sunday, Françoise Horiot watched with relief, optimistic about the prospects for her small aviation business.
The victory of Emmanuel Macron, an economic centrist, gave her hope that the mechanics in her factory could be more productive if he followed through on promises to ease regulations. And it erased fears that her ties with suppliers and clients in Europe, Turkey and China might founder if his opponent, Marine Le Pen, could have made good on promises to pull France out of the European Union.

Carl Icahn Scrutinized for Shaping Policy That Helped Him Profit
Carl C. Icahn, the billionaire activist investor, was once known for causing consternation in the boardroom. Now, he is the source of much hand-wringing on Capitol Hill.


Giancarlo: SLR change would cut clearing capital by 70%; Isda AGM: netting of clearing collateral would boost activity without weakening banks, claims CFTC chair
Philip Alexander –
Reform of the US supplementary leverage ratio (SLR) could boost trading activity without weakening the banking industry, according to Christopher Giancarlo, who is awaiting confirmation as chairman of the US Commodity Futures Trading Commission (CFTC).

Head of US derivatives regulator warns of impact of euro clearing decision
by: Philip Stafford – FT
The head of the US derivatives regulator has warned that Europe’s decision on its future policing of euro-denominated clearing would have an impact on the agency’s thinking as it committed to implementing president Donald Trump’s call to push US interests in financial markets.

TRACE for Treasuries FIX Specification Update
FINRA has updated the TRACE for Treasuries FIX technical specification to address ongoing client testing feedback.

Clayton taps Silicon Valley lawyer for SEC role; New corporate finance division head signals desire to ease US capital raising rules
by: Kara Scannell in New York – FT
The Securities and Exchange Commission has tapped a seasoned Silicon Valley lawyer who advised on the initial public offerings of Square, Alibaba and Facebook to lead its corporate finance division, signalling a desire by its new chairman to ease rules on US capital markets.

SIFMA Executive Vice President Randy Snook Remarks as Prepared for the 2017 Operations Conference and Exhibition
SIFMA Executive Vice President Randy Snook Remarks as Prepared for the 2017 Operations Conference and Exhibition on May 8-11, 2017.

U.S. Democratic senators seek probe into Icahn’s biofuel credit dealings
Timothy Gardner – Reuters
Eight Democratic senators asked U.S. regulators on Tuesday to launch an investigation into billionaire Carl Icahn’s activities in the U.S. biofuels blending credit market, saying the activist investor may have violated trading laws since becoming an adviser to President Donald Trump.

Maurice Greenberg Loses Bid for Damages From A.I.G. Bailout
By LIZ MOYER – NY Times Dealbook
In the years since the 2008 financial crisis, Maurice R. Greenberg, the former chieftain of American International Group, has ferociously fought back at the government, winning moral victories here and losing other battles there.
The United States Court of Appeals for the Federal Circuit in Washington turned back one of those victories on Tuesday, throwing out a lower court’s ruling that the government’s huge bailout of A.I.G. in 2008 was illegal.

ISDA Appoints Pension Fund Expert to Board and Elects New Board Members
The International Swaps and Derivatives Association, Inc. (ISDA) has today appointed a senior executive from the pension fund industry to its Board of Directors, marking the latest step in an ongoing initiative to expand the scope of the Board.

Investing and Trading

Two Sigma to buy Interactive Brokers’ Timber Hill options arm; Fund hopes to reinvigorate derivatives business founded by Thomas Peterffy
by: Robin Wigglesworth in New York – FT
The market-making arm of Two Sigma, a giant computer-powered hedge fund, has swooped in for Interactive Brokers’ Timber Hill options unit, hoping to reinvigorate the pioneering but faded derivatives business founded by billionaire Thomas Peterffy.

The Surprising Losers From the VIX’s Decline
A low VIX is dragging on the returns of income-seeking investors
By Spencer Jakab – WSJ
They have nothing to fear but the lack of fear itself.
The low level of the market’s so-called fear gauge, formally known as the CBOE Volatility Index or VIX, is a divisive issue on Wall Street. Some assert that the lowest values in nearly a quarter-century signal investor complacency. They say that has almost always been a sign that a selloff is near. Others scoff that there is no cause-and-effect.

Multiple Paths to Multiple Factor Indexing
Fei Mei Chan – Indexology
Single factor “smart beta” indicized strategies that were once exclusive to the realm of active management. Multifactor indexing is beginning to garner much interest as the newest chapter of index innovation.

Goldman Sachs says U.S. border tax would ‘blow out’ Brent/WTI crude spread
Goldman Sachs commodity strategist Jeff Currie said on Wednesday if the U.S. government were to introduce a border tax adjustment on crude oil imports, the spread between Brent and U.S. futures would widen dramatically.

British Sandwiches to Land on Wall Street as Pret Plans Listing
by Kiel Porter , Ed Hammond , Ruth David , and Sarah Syed – Bloomberg
Buyout firm Bridgepoint has hired JPMorgan, Jefferies for IPO; British sandwich chain weighs U.S. listing to fuel growth
After opening shops across New York, U.K. sandwich and coffee chain Pret A Manger may be heading for Wall Street.

A New Paper Just Took a Huge Shot at Some of the World’s Hottest Investments
by Eric Weiner – Bloomberg
Researchers find that price aberrations can’t be replicated; ‘Capital markets are more efficient than previously reported’
Just about every week, some researcher reports finding another statistical quirk in the equity market that might be harvested for a trading edge. Now a new paper says most of them don’t work as billed.


Barclays chief apologises to shareholders for trying to identify whistleblower
by: Martin Arnold – FT
Jes Staley has apologised to Barclays shareholders for the “error” that the bank’s chief executive admitted he had made in trying to uncover the identity of a whistleblower.

J.P. Morgan Expands Investment in Detroit; Firm commits additional $50 million into city projects after first $100 million bet showed encouraging returns
By Adrienne Roberts – WSJ
Encouraged by its return on a $100 million bet it made on the Motor City three years ago, J.P. Morgan Chase & Co. is planning an additional $50 million investment in Detroit’s revitalization efforts.

Trump’s Newest Wall Street Watchdog Sidesteps Ethics Scrutiny
by Jesse Hamilton and Robert Schmidt – Bloomberg
Interim OCC chief Noreika comes with potential conflicts; Unusual maneuver allows administration to oust Obama holdover
The Trump administration used a highly unusual personnel move to skirt Senate confirmation and standard ethics requirements when it installed a financial services lawyer atop a powerful banking regulator.


Meet Switzerland’s New 20-Franc Note
by Catherine Bosley – Bloomberg
The Swiss National Bank takes its money seriously.

Luxembourg Lurks in Dark as Regulators Light Up Shadow Banking
by John Glover and Donal Griffin – Bloomberg
Grand duchy didn’t share non-bank monitoring data with FSB; Shadow banking surges to 69% of GDP of biggest countries: FSB
Luxembourg, the home of European Commission President Jean-Claude Juncker and of the European Union’s biggest fund industry, remains in the shadows.

China Is Building a Disney World for Wine; Changyu, China’s winemaking powerhouse, is building French-style chateaus and Italianate castles around the country—and an entire “Wine City”—to encourage the country’s passion for the grape.
by Mark Ellwood – Bloomberg
At Chateau Changyu Reina, honey-colored brick towers enclose wide cobbled courtyards, and vast, wood-beamed halls look as if they are prepared to host an imminent medieval banquet. At first glance, the Italianate castle and winery could have been built hundreds of years ago, in Italy’s Tuscan hills.

Scotland’s Unicorn Hunter; How an old-school money manager became one of the world’s most important tech investors
by Jeremy Kahn – Bloomberg
Jeff Bezos, the billionaire founder and chief executive officer of Inc., doesn’t spend much time schmoozing with investors. He takes just a handful of meetings with the fund managers who own Amazon’s shares each year. And when he comes to the U.K., there’s just one investor he regularly meets with: Baillie Gifford.


European banks warn of London exodus if told to convert branches to subsidiaries
By Maya Nikolaeva and Anjuli Davies – Reuters
European banks are privately warning they will have to shift thousands of people out of Britain if Brexit negotiations push the Bank of England to demand that they reinforce London operations with fresh capital, executives have told Reuters.


Cyber Crime Fears Drive Growing Demand for Anti-Hacker Insurance
by Oliver Suess – Bloomberg
Market for cyber coverage may triple to $10 billion by 2020; Risks and damages from hacker attacks fuel coverage demand
For companies and organizations, an attack by hackers can inflict financial losses, corporate embarrassment and legal action. For insurers jumping into the brave new world of cyber crime insurance, it’s free marketing for what could be a $10 billion opportunity.

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