Two Trading Heavyweights Lead CBOE Into the Future of Futures; Wall Street’s New Favorite Way to Swap Secrets Is Against the Rules; Improving your chat; Instant messaging technology got a bad rep during the recent rate fixing scandals

Mar 31, 2017

First Read

I [Blank] Surveys: But You’ll Love This One
For the past month, we’ve been pushing, coaxing and cajoling you, our valued readers, to fill out our annual survey. We’re coming to the end of this drive here and would truly appreciate three minutes of your time to give us your feedback on what you like and don’t like, and would like to see from us. It does make a difference.

And if you fill it out, you could win an Amazon Echo, which answers just about everything but cannot take our survey. Here’s the link to the survey. Alexa says thanks!


JLN Exchange Leader Series 2017: SGX’s Syn Says Trade Barriers Mean Opportunities for Offshore Exchanges

Singapore Exchange’s Michael Syn says that when economic barriers to open trade come down, offshore jurisdictions like SGX can benefit by showing their worth for hedging exposure. The “big three” Asian markets – India, Japan and China – taken together account for about 25 percent of world GDP and 40 percent of world population. But each is regulated very differently and therefore the elements of risk in those countries will not be proxies for each other, Syn said. Each will behave in a distinct way.

Read the rest and watch the video »

****SD: In case you missed our Exchange Leaders series, here is the line-up to date.


[[|Sprecher Says ICE Ready To Roll Out Data and Analytics To Meet The Demand For More Info]]; [[|Durkin Says CME Growth Is All About Customers]]; [[|By Leveraging Bats’ Technology, CBOE’s Tilly Wants To Expand Footprint]]; [[|Nasdaq’s Friedman on New Tech and Positive Momentum]]; and [[|LSEG’s Hackett on a Clear Path Forward.]]
Editor’s Note: In the copy corresponding to yesterday’s London Stock Exchange Group Exchange Leader Video, LSEG’s U.S. headcount was mistakenly attributed to LCH. It is LSEG as a whole that has nearly 500 employees, not LCH.


Brazil’s BM&FBovespa to be renamed after takeover of rival
Brazil’s BM&FBovespa SA, which last week won regulatory approval to take over a rival, will change its name once the combination of both exchange and clearinghouse companies is approved by shareholders, executives said on Thursday.

**JK: Just when you thought saying BM&FBovespa was hard to say three times, they change the name to B3 SA Brasil Bolsa Balcão, all in the song of Girl From Ipanema.


Horse Market Stays in the Race, Despite Decade Long Decline
Polly Mosendz – Bloomberg
Owning a pony just isn’t as popular as it once was, but the horse industry isn’t lame yet. A new report from market researcher Packaged Facts predicts that the equine market will finish the year strong after a decade of steady declines.

****SD: I guess the end is not neigh — I mean nigh.


Investors beware: the Ponzi scheme is thriving; A scam promising profits from Hamilton ticket sales was recently uncovered
by: Bruce Love – FT
The Ponzi scheme is alive and well, and investors should beware. That is the message from lawyers, regulators and new data on the prevalence of this infamous fraud.

**JK: It’s time for Ponzimonium, part 2 from Bart Chilton.


Thursday’s Top Three
Our top three stories of the day were led by The Trade’s piece
ICE warns clients global regulation could harm business. Second went to our interview with LSE Group’s Ali Hackett in our ongoing JLN Exchange Leader Series 2017: LSEG’s Hackett on a Clear Path Forward. Third went to the FT’s
Race for speed among algo traders hits peak


MarketsWiki Stats
96,687,806 pages viewed; 22,398 pages; 204,585 edits
MarketsWiki Statistics


Lead Stories

Two Trading Heavyweights Lead CBOE Into the Future of Futures; CBOE’s veteran chief, Edward Tilly, is an options stalwart, while its new president, Chris Concannon, has legal and tech experience
The unlikely deal combining CBOE and Bats, which closed in February, puts two industry heavyweights at the top of one enterprise: Chief Executive Edward Tilly, a trader who ascended the ranks at CBOE, the biggest U.S. options platform, and Chris Concannon, a market-structure veteran with experience in regulation, high-frequency trading and exchanges.

Wall Street’s New Favorite Way to Swap Secrets Is Against the Rules
by Laura J Keller – Bloomberg
Encrypted messaging apps are raising risk of widespread abuse; Employees at big banks share gossip, client data and more
Dirty jokes and NSFW GIFs. Snaps of unsuspecting colleagues on the trading floor. Screenshots of confidential client positions.

Improving your chat; Instant messaging technology got a bad rep during the recent rate fixing scandals. Will efforts to tighten up chat culture threaten Bloomberg’s dominance in the market?
By Sarfraz Thind – The Trade
With compliance teams at financial institutions looking at new initiatives to tighten up chat culture, Bloomberg’s hegemony could come under threat by new entrants.

Yale fund chief reveals truth about hedge fund failures; Investing secrets don’t stay secret for long
By Mitch Tuchman – MarketWatch
By now you’ve begun to notice a pattern in the news about hedge funds: Nobody is making money anymore, so managers are returning millions to disappointed investors.

UW professor: The information war is real, and we’re losing it
Danny Westneat – Seattle Times
A University of Washington professor started studying social networks to help people respond to disasters. But she got dragged down a rabbit hole of twitter-boosted conspiracy theories, and ended up mapping our political moment.

Ex-Citi traders fined $550k for spoofing US treasury future markets; Fines follow Citi’s $25 million penalty for spoofing US treasury futures markets in January this year.
By Hayley McDowell – The Trade
Two former traders at Citigroup in the US have been fined a combined $550,000 and a six-month ban from trading for spoofing treasury futures markets.

VIX Owner Plots New Fear Gauge to Help Measure European Fright
by John Detrixhe – Bloomberg
CBOE just bought Bats, strengthening its position in Europe; Company could expand business in indexes, ETFs, futures
A new European fear gauge is on the drawing board. CBOE Holdings Inc.’s VIX is already the flagship product for betting on price swings in the U.S. stock market. Now, armed with a big European stock exchange picked up when it acquired Bats Global Markets Inc. this year, the Chicago-based market operator thinks it can eventually expand the VIX franchise.

Hedge Fund Pioneer’s Investing Advice for Kids: Learn Coding
Amanda L Gordon – Bloomberg
David Siegel has some advice for kids with an appetite for investing — they should start from Scratch. Siegel, the quantitative hedge-fund pioneer and co-chairman of Two Sigma, was at the Scratch Foundation benefit Wednesday night at the event space Tribeca Three Sixty in Manhattan. Siegel, a foundation co-founder, said Scratch, an easy-to-use free program, encourages kids to learn coding as technology comes to dominate his world of finance.

OIC Launches New Digital Education Advertising Campaign
The Options Industry Council (OIC), the leading provider of unbiased options education, today introduced its new digital advertising campaign, “The Next Great Investing Adventure.” This campaign supports OIC’s mission of educating individual investors, their financial advisors and the general public about the prudent and responsible use of exchange-listed equity options.

SGX weighing options in pursuing overseas tie-ups
It held exploratory talks with other operators as industry tries to consolidate even as regulators are blocking deals

Are LSE and Deutsche Börse worthy prizes for rivals?; Now we will find out how much of a takeover target the lone exchanges really are
by: Philip Stafford – FT
There ends a third and perhaps final attempt to unite the London Stock Exchange Group and Deutsche Börse. Do they remain independent or prizes for rivals?

Departing tough bank regulator is a pivotal moment for Wall Street; After Tarrullo, the prospect of regulatory relief for financial firms looms
by: Ben McLannahan – FT
They don’t go in for pomp and ceremony at the US Federal Reserve. The retirement of Daniel Tarullo next Wednesday will be marked by coffee and doughnuts, according to a person familiar with the send-off.

Madoff Deals Locked in Safe at Center of U.K. Hedge-Fund Lawsuit
by Patrick Gower – Bloomberg
Principal says Randall Dillard, colleagues hid investments; Dillard denies hiding files in safe in ritzy area of London
Principal Financial Group Inc. accused the managers of Liongate Capital Management LLP of hiding investments with Bernie Madoff while negotiating to sell half of their London hedge fund to Principal.

Exchanges, OTC and Clearing

SGX and Tullett Prebon launch LNG spot index for Dubai, Kuwait and India region
Singapore Exchange (SGX) and Tullett Prebon have successfully launched a liquefied natural gas (LNG) spot index for Dubai, Kuwait and India (DKI), a collaboration that seeks to enhance price discovery and risk management in one of the fastest-growing regions for LNG spot trading.

OCC lines up two new board members
Securities Lending Times
OCC has lined up Andrej Bolkovic, CEO of ABN AMRO Clearing Chicago, and Jamil Nazarali, head of execution services at Citadel Securities, as replacements for departing board members.

Merger veto leaves LSE free to move in its own clear direction
Matthew Vincent – Financial Times
For a demographic so in favour of the free movement of people, and capital, the French and German individuals running the London Stock Exchange and Deutsche Börse have seemed increasingly divided over their merger. So when — with arch timing — Brussels vetoed the deal just hours before Britain triggered Article 50 to leave the EU, it was hardly surprising that neither Xavier Rolet nor Carsten Kengeter was singing Ode to Joy — or even from the same hymn sheet.

Pioneering CCP transparency to maintain safer markets
The Public Quantitative Disclosure (PQD) is an internationally agreed format defined by CPMI-IOSCO with the intention of enhancing CCP market transparency.

30-minute continuous Intraday trading successfully launched in France, Germany and Switzerland
The European Power Exchange EPEX SPOT and the clearing house European Commodity Clearing (ECC) have successfully introduced 30-minute continuous trading of power spot contracts in the intraday markets in France, Germany and Switzerland, enabling local and implicit cross- border trades on the respective borders.

Nasdaq Files Notice Of Annual Meeting Of Stockholders
On March 29, 2017, Nasdaq, Inc. (“Nasdaq”) filed with the U.S. Securities and Exchange Commission (the “SEC”) the following materials relating to its 2017 annual meeting of stockholders: (i) a definitive proxy statement and (ii) a notice regarding the availability of proxy materials.

World’s Largest Corporate Masala Bond Starts Trading On London Stock Exchange
London Stock Exchange today welcomes the world’s largest corporate Masala bond. The landmark bond issuance from Housing Development Finance Corp (HDFC), one of India’s leading banking and financial services companies comes less than 12 months after HDFC’s INR 30 billion ($450 million) debt issuance in London, the first ever Indian corporate to list a Masala bond.

Why is NSE bogged in negatives? Maybe it needs to put protocol first
Dinesh Narayanan – Economic Times
On February 28, Securities and Exchange Board of India (Sebi) chairman UK Sinha’s last day in office, the markets regulator wrote to the National Stock Exchange (NSE) asking it to expand an ongoing investigation into futures and options to the cash and currency segments. Sinha’s parting shot has effectively placed India’s biggest stock exchange, which is preparing for a mega public offer of shares, under an open-ended investigation with incalculable consequences.

NSE IPO: Algo issue resolution and defreezing of funds needed, say experts; Lack of closure to the algo controversy could weigh on sentiment, say experts
Shrimi Choudhary – Business Standard
Defreezing of revenue and closure of the long-pending algorithmic trading case are key for the success of the proposed Initial Public Offer (IPO) of equity by the National Stock Exchange (NSE), say experts.

SGX and Tullett Prebon launch LNG spot index for Dubai, Kuwait and India region
Singapore Exchange (SGX) and Tullett Prebon have successfully launched a liquefied natural gas (LNG) spot index for Dubai, Kuwait and India (DKI), a collaboration that seeks to enhance price discovery and risk management in one of the fastest-growing regions for LNG spot trading.

SGX inks MOU with Crowdo and PwC’s Venture Hub to deepen support for start-ups and early stage SMEs
Singapore Exchange (“SGX”) today announced the signing of two Memoranda of Understanding (“MOU”) separately with Crowdonomic Media Pte Ltd (“Crowdo”) and PwC’s Venture Hub, as part of its drive towards supporting and facilitating capital access for the start-up and early stage Small and Medium Enterprises (“SMEs”) communities.

London Stock Exchange Group launches inaugural ‘Companies to Inspire Africa’ report
London Stock Exchange Group
Landmark report identifies fastest-growing and most dynamic private businesses across Africa

Exchange Launches Director Training Webcasts
Emphasis is on practical advice and tips; Goal is to help improve board performance; All directors are encouraged to complete the training
The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today launched the first of its director training webcasts entitled “Duties of directors and the role and functions of board committees”.

SIX’s multi-currency platform gains MTF status; SIX Securities Service’s CO:RE trading platform is now recognised as a multilateral trading facility.
By Hayley McDowell – The Trade
SIX Securities Service’s multi-currency trading platform has been recognised by Swiss authorities as a multilateral trading facility (MTF).

BlackRock low touch trading head joins MarketAxess; Bruce Repasy joins MarketAxess in newly created role, global head of product engineering.
By Hayley McDowell – The Trade
The global head of the low touch trading team at BlackRock, Bruce Repasy, has joined MarketAxess’ product management team.

BrokerTec completes acquisition of Italian bond platform; NEX Group’s fixed income business expands footprint in Italian debt and money markets.
By Hayley McDowell – The Trade
NEX Group’s BrokerTec has completed its acquisition of Italian central limit order book (CLOB) platform, e-MID, following approval from the Bank of Italy.

Japan Exchange Group: Update Of 2nd Midium-Term Management Plan
Heightened uncertainty in global politics and economies

The Amman Stock Exchange Started Publishing It’s Circulars And Resolutions In English Version
The ASE started publishing it’s circulars and resolutions in English version as well as Arabic as of March 23, 2017; The CEO of the ASE , Nader Azar stated that the main purpose is to enable the interested foreign investors to follow up the news and the corporate actions of the companies, as well as the need to provide all investors with all disclosures at the same time regardless of their nationality, in addition to promote and market issuers of securities In Jordan outside the Kingdom.

Japan Commodity Clearing House Receives ESMA Recognition As Third-Country CCP
The Japan Commodity Clearing House Co., Ltd (JCCH), a wholly owned subsidiary of the Tokyo Commodity Exchange, Inc.,(TOCOM)announced today its recognition as a third-country CCP by the European Securities and Markets Authority (ESMA). This was granted on March 29 under the European Market Infrastructure Regulation (EMIR), adopted in July 2012.


Hong Kong’s monetary authority unveils trade finance platform based on blockchain technology
Bien Perez – South China Morning Post
Hong Kong appears set to burnish its credentials as a global trading hub, with its development of a proof-of-concept distributed ledger platform for trade finance using Blockchain technology. The Hong Kong Monetary Authority (HKMA) led this initiative, which was supported by professional services group Deloitte and five of the city’s top banks, according to a joint announcement on Thursday.

Thomson Reuters collaborates with Finatext to analyse social media…
Thomson Reuters has announced the launch of a new investment information service in collaboration with Japanese FinTech firm Finatext.

OptionsCity Selects ChartIQ to Offer Advanced Charting Functionality
OptionsCity Software, a global provider of futures and options trading and analytics solutions, today announced that it has selected ChartIQ to provide new and improved charting functionality to its entire user base. ChartIQ builds lightweight financial applications that drive capital market innovation. The integration allows OptionsCity to deliver seamless charting through its futures and options trading platforms. OptionsCity CityTrader customers will be the first to benefit from the charting functionality as the firm expects the charting capability to be added to its web-based platform in the coming weeks.

Blockchain Foundry Integrates Syscoin Blockchain Offerings with Microsoft Azure
Blockchain Foundry Inc. (“Blockchain Foundry” or the “Company”) is pleased to announce a major milestone in the form of Microsoft Azure product certification for three products powered by the Syscoin blockchain.

Colt Reveals SDN & NFV Next Steps
Light Reading
Enterprise communications player Colt is set to add further network-as-a-service offerings to its Novitas platform, including an Internet-access-on-demand feature, and says it will extend the availability of other services into Asia in the months ahead.


Parties and pies: Democrats should be more comfortable discussing economic growth
The Economist
Steve Bannon is right. This week, in a New York Times Magazine piece otherwise dedicated to the President’s dance with Congress, he offered this: “I think the Democrats are fundamentally afflicted with the inability to discuss and have an adult conversation about economics and jobs, because they’re too consumed by identity politics. And then the Republicans, it’s all this theoretical Cato Institute, Austrian economics, limited government—which just doesn’t have any depth to it. They’re not living in the real world.”


CFTC Chief Taps New York Prosecutor for Top Enforcement Role
Andrew Ackerman – WSJ
A federal prosecutor in Manhattan will head the Commodity Futures Trading Commission’s enforcement division, the commission’s acting chairman said Thursday. James McDonald, an assistant U.S. attorney for the Southern District of New York, will join the commission on April 10, acting CFTC Chairman J. Christopher Giancarlo said.

CFTC Acting Chairman Giancarlo Appoints James McDonald as Enforcement Director
U.S. Commodity Futures Trading Commission (CFTC) Acting Chairman J. Christopher Giancarlo today announced the appointment of James McDonald to be the Director of the agency’s Enforcement Division. Mr. McDonald, who was most recently a prosecutor in the Southern District of New York, brings to the agency a successful track record of pursuing white collar and other crimes. Mr. McDonald will assume his duties at the agency on April 10.

CFTC fines ex-Citi traders for spoofing in Treasury futures
The U.S. Commodity Futures Trading Commission (CFTC) said on Thursday it had settled charges against two former traders for Citigroup Global Markets Inc, a unit of Citigroup Inc (C.N), for spoofing in U.S. Treasury futures markets.

SEC Charges Pastor With Defrauding Retirees
The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze obtained against a Michigan-based pastor accused of exploiting church members, retirees, and laid-off auto workers who were misled to believe they were investing in a successful real estate business. The SEC alleges that Larry Holley, the pastor of Abundant Life Ministries in Flint, Mich., cloaked his solicitations in faith-based rhetoric, replete with references to scripture and biblical figures.

****SD: As if Flint, Mich. needed any more issues.

MiFID II: ESMA issues final specifications for non-equity tape
The European Securities and Markets Authority (ESMA) has issued today regulatory technical standards (RTS) specifying the scope of the consolidated tape for bonds, structured finance products, emission allowances and derivatives.

ESMA provides implementing details for SFTR
The European Securities and Markets Authority (ESMA) has issued today a final report on standards implementing the Securities Financing Transaction Regulation (SFTR), which aims to increase the transparency of securities financing transactions (SFTs).

ESMA publishes updated Q&A on CFDs and other speculative products
The European Securities and Markets Authority (ESMA) has published today an updated version of its question and answer document (Q&A) on the application of the Markets in Financial Instruments Directive (MiFID) to the marketing and sale of financial contracts for difference (CFDs) and other speculative products to retail clients, such as binary options and rolling spot forex.

Investing and Trading

The Gains No Longer Available To You
The Reformed Broker
Michael Mauboussin’s most recent research paper, The Incredible Shrinking Universe of Stocks, is absolutely incredible. There are like 50 separate profound insights to be gleaned from it. One thing I wanted to show you that I feel has huge implications for ordinary investors is the fact that we are no longer able to capture the upside of stocks in the way prior generations once were.

US investors drawn to environmentally friendly green bonds; Big companies are tapping the debt market for renewable energy projects
by: Murray Coleman – FT
President Donald Trump may not be a fan of environmental regulation, but there is considerable interest from investors in so-called green bonds, which is one of the fastest growing areas of the global fixed-income market.

How the Yellen Fed Got Religion Over the Stock Market and Policy
by Matthew Boesler – Bloomberg
Dudley’s financial focus traces through Goldman to Ottawa; Stock-market rally increasing Fed debate over tightening pace
For two decades, William Dudley has led a charge to change the way central bankers think about how they steer their economies through the booms and busts of financial markets. As president of the Federal Reserve Bank of New York, he’s showing them during the current tightening cycle what he’s been talking about all along.

The Importance of Financial Conditions in the Conduct of Monetary Policy
William C. Dudley, President and Chief Executive Officer – Remarks at the University of South Florida Sarasota-Manatee, Sarasota, Florida As prepared for delivery
It is a pleasure to be here today. I would like to thank the University of South Florida for sponsoring this conference. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System.


JPMorgan economist sees Fed shrinking balance sheet starting 2018
A JPMorgan economist said on Thursday he expected the U.S. Federal Reserve to start paring the size of its $4.5 trillion balance sheet in early 2018 with a focus on ending its reinvestment in mortgage-backed securities.

Credit Suisse says it faces tax probes in multiple countries
by: Financial Times
Credit Suisse has confirmed it is the subject of tax investigations launched in the UK, France and the Netherlands, setting back Switzerland’s attempts to clean up its image as a haven for tax evaders.

Credit Suisse Offices Searched in Three Cities in Tax Probe
by Cindy Roberts and Jan-Henrik Foerster – Bloomberg
London, Amsterdam, Paris offices were visited by authorities; Bank clients suspected of hiding money in Swiss accounts
Credit Suisse Group AG said its offices in London, Paris and Amsterdam were searched by authorities in connection with client tax matters.

Mind the gap: high banker pay no guarantee of success
By John O’Donnell – The Trade
Some of Europe’s most profitable lenders pay their chief executives the least, data from shareholder advisory group ISS shows, while loss-making banks reward their bosses more lavishly.


Upbeat mood drives record emerging market sovereign debt sales
James Kynge and Thomas Hale – Financial Times
Emerging market countries sold record levels of government debt in the first quarter of this year, taking advantage of a surge in optimism towards the developing world as trade grows at its fastest rate for seven years and inflationary pressures ebb.

China’s economy and currency not out of the woods yet, says Capital Economics
Laura He – South China Morning Post
With recent signs pointing to the stabilisation of the Chinese economy and currency, sentiment has turned around dramatically among market watchers. But some analysts warn it may be too early to cheer as there are good reasons to expect growth to slow again and the yuan to come back under pressure.

****SD: And also from SCMP, Deutsche Bank strategist: China’s growth story remains intact

Peso and Poland lead emerging markets’ Q1 charge
Marc Jones – Reuters
Emerging markets have had a stellar start to the year, with equities delivering world-beating returns in the first 2017 quarter and the Mexican peso topping currency gains with a 10 percent bounce against the dollar. There have been the odd laggard – Turkey has seen the lira slump and some Latin American commodity plays have retreated as oil prices have toppled back again – but for the most part it has been a bumper few months.


EU draws up tough stance on Brexit transition deal; Initial Brussels guidelines prioritise withdrawal terms over future relations
by: Alex Barker in Brussels – FT
EU leaders are preparing a tough opening stance in Brexit talks, explicitly stating that Britain must accept the bloc’s existing laws, court, and budget fees if it seeks a gradual transition out of the single market.


How to Handle an Oil Shock
Carmen Reinhart – Project Syndicate
The global oil market is a volatile place. But, abstracting from high-frequency fluctuations, average annual world prices (in US dollars) plummeted about 60% between 2012 and 2016. So how do countries like Russia, Saudi Arabia, Iraq, and Venezuela cope with a collapse in the price of their dominant (and in some cases, only) export?

Inside YouTube’s Battle Against the Internet’s Darkest Corners; The future of online advertising is at stake.
by Mark Bergen and Aki Ito – Bloomberg
A crisis is brewing at the world’s largest video service. YouTube has seen big advertisers from AT&T to Wal-Mart pull their ads off the platform over fears that their brand will appear next to offensive or extremist content. This week, Bloomberg Technology’s Mark Bergen and Aki Ito plunge into one of the thorniest corners of the modern internet and ask: how do you police the unwieldy, ever-expanding mess that is the world wide web? Please note: some short examples of offensive material have been included in this episode.

Google’s AI Hasn’t Passed Its Biggest Test Yet: Hunting Hate; If anyone can train software to parse entire videos, Google can. But it still has work to do.
by Mark Bergen – Bloomberg
An advertiser boycott of YouTube is testing a critical and much-hyped part of Google’s future: its prowess in artificial intelligence. Some experts in the field say the technology isn’t up to scratch yet, but that if any company can solve the problem at hand, it’s the online search giant.

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