Hits & Takes
Congratulations to OIC’s Mary Savoie and the OCC/OIC team that organized this year’s Options Industry Conference. The venue was great, the weather nice and the execution of the conference was terrific.~JJL
No one wanted to sponsor a porta potty for the OIC beach cabana party yesterday. Something about bad branding. I suggested OCC should have sponsored them. After all, OCC is where our liquidity is pooled.~JJL
FIA’s event, Listed Derivatives for the Retail Market on May 14 in Chicago, will be held at the Union League Club from 12:15 pm to 4:30 pm, followed by networking. JLN’s Jim Kharouf will moderate the panel “Products – Crypto, Equity Options, FX and More” with Nick LaMaina of TradeStation, Dan Ryba of E*Trade, John Tornatore from Cboe and Mark Omens from CME. Should be a great event and good panel on what’s happening in retail. Sign up HERE. ~JK
TP ICAP has appointed Pieter Van Vredenburch, previously head of global markets at HSBC, as head of institutional services, Americas. Vredenburch also held senior roles at UBS and Droit Financial Technologies.~SR
SIX Turns 10: SIX’s Urs Rüegsegger Says the Vertical Model and Interoperability Works
Ten years ago, SIX Group was formed in a merger between SWX Group, Telekurs Group and SIS Group, creating a new vertical business model. Urs Rüegsegger, chairman of SIX Swiss Exchange, helped lead that transition and growth as CEO of the exchange for nine years before stepping down last December. JLN’s Jim Kharouf sat down with Rüegsegger at the WFE’s IOMA Conference in Chicago to talk about how SIX and its clearing business has grown over the past decade.
How Could Bitcoin Suspect Leave an Iceland Prison’s Comforts Behind? Easily; Held for questioning in a $2 million theft of Bitcoin-mining computers, Sindri Stefansson soon escaped a low-security facility. But his arrest days later in Amsterdam made him eager to get back.
David Segal – NY Times
It has been more than four months since thieves pulled off the biggest heist in the history of Iceland, and the police here still have no idea where the booty — roughly $2 million worth of Bitcoin-mining computers — is stashed.
Thursday’s Top Three
Our top read story of the day yesterday was Bloomberg’s The Gambler Who Cracked the Horse-Racing Code. Second was another Bloomberg story, Inside the World’s Most Elite (and Secret) Traders’ Club. Third went to Bloomberg’s Stock Exchanges Get Warning Shot From SEC Over Data Profits
125,031,727 pages viewed; 23,091 pages; 212,939 edits
VIX Faces Probes With Controversial Auction at Issue
Matt Robinson and Nick Baker – Bloomberg
Allegations that Cboe Global Markets Inc.’s widely used VIX benchmark is being manipulated have drawn attention from regulators.
The nation’s top two markets watchdogs — the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission — opened investigations into the gauge of stock market volatility, according to people familiar with the matter.
Liquidity ousts leverage as the big market worry; Some say banks’ retreat from their role as market makers will amplify the next crisis
Robin Wigglesworth and Ben McLannahan in New York- FT
Since the financial crisis investment banks have beat a rapid retreat from their historic role in buying and selling equities and bonds. Almost a decade on it is stirring concern that deteriorating liquidity could prove as dangerous as leverage has been in past crises.
CFTC Officials Want Close Cooperation With SEC on Crypto Rules
Two officials at the Commodity Futures Trading Commission (CFTC) spoke about regulating cryptocurrencies this week, stressing the need for cooperation between their agency and another powerful U.S. regulator, the Securities and Exchange Commission (SEC).
How Morgan Stanley Got Its Mojo Back; CEO James Gorman wasn’t a star trader or a banker. He was a consultant, and well matched for Wall Street’s new mundane style of business
Liz Hoffman – WSJ
Morgan Stanley MS -1.20% had slashed bonuses after another bad year. Chief Executive James Gorman, at a Swiss Alps conference, defended the move in a television interview. “If you’re really unhappy,” he told employees, “just leave.”
SGX takes stake in UK start-up Cobalt; Cobalt plans to use blockchain in vast foreign exchange market
Philip Stafford – FT
SGX, the Singapore exchange, has taken an undisclosed minority stake in Cobalt, a UK start-up trying to put the plumbing of the vast foreign exchange market on blockchain technology.
Goldman to treble Swedish office as post-Mifid equities hub; US bank to expand fintech team as well as some Brexit relocations
Martin Arnold and Philip Stafford in London – FT
Goldman Sachs plans to more than treble the size of its Swedish office to use the country’s financial technology expertise to bolster its European equities trading as well as find new homes for bankers ahead of Brexit.
Hong Kong Stock Exchange Sees High IPO Demand After Rule Changes
Benjamin Robertson and Stephen Engle – Bloomberg
New rules for initial public offerings in Hong Kong have helped boost applications, according to the head of the city’s stock exchange. Hong Kong Exchanges & Clearing Ltd.’s Chief Executive Officer Charles Li expects a “very substantial autumn” for IPOs, he said in an interview on Bloomberg Television on Friday. Chinese smartphone maker Xiaomi Corp. was the first to file for a listing under the new regime, kicking off what could be the world’s biggest debut since 2014.
Wall Street’s Fear Gauge Hasn’t Jumped Like This Since XIV Died
Luke Kawa – Bloomberg
Jump from under 15 to above 18 last occurred in early February; Return to a low-volatility world may not be imminent
The wall of worry is growing taller. Not only has the S&P 500 Index breached its 200-day moving average, but the Cboe Volatility Index — the VIX, Wall Street’s fear gauge — leapt from below 15 intraday on Wednesday to above 18 in trading on Thursday.
Virtu posts ‘outstanding’ first quarter as market volatility returns
Philip Stafford – FT
Virtu Financial, the US high-speed market maker, reported what it called “an outstanding” first quarter as market volatility returned and it benefited from its $1.4bn purchase of rival KCG Holdings.
High-speed trader Virtu saw net income increase 1,845% thanks to anxious markets
Frank Chaparro – Business Insider
Virtu Financial, the market making firm, reported eye-popping results on Friday for the first quarter of 2018, a period marked by a return of volatility and volume to the markets.
The Problem With Prosecuting ‘Spoofing’
Peter J. Henning – NY Times
Federal prosecutors sometimes lose trials, and it is usually not considered too much of a setback. But when the loss involves only the second prosecution for a new crime called “spoofing,” it raises questions about how the government will pursue future cases.
How Five Robots Replaced Seven Employees at a Swiss Bank
Stephan Kahl – Bloomberg
St. Galler Kantonalbank’s pilot project seen as a success; Bank will decide on further assignments by the end of May
Have seven employees work for three days or use software robots instead? In a pilot project, St. Galler Kantonalbank AG opted for the second option. The bank is so satisfied with the test results that it wants to decide on further assignments by the end of May.
Poor quality bond data hits live reporting under Mifid II; Difficulties in capturing data under new trading rules remain an issue for banks and fund managers
Samuel Agini – Financial News
A flagship initiative to bring more transparency to European bond markets has run into early problems, as difficulties in capturing data under new trading rules remain an issue for banks and fund managers.
Exchanges, OTC and Clearing
Singapore Exchange Backs Distributed Ledger Alternative For FX Trading
Michael del Castillo – Forbes
The Singapore Exchange Limited (SGX) has increased its wager that distributed ledger technology will be the key to leadership in global financial markets in the future.
1 million contracts traded – another milestone achieved by Eurex Total Return Futures
Achievements are nothing new to Eurex’ Total Return Futures (TRF) on the EURO STOXX 50® Index. Only three months after their launch in December 2016 their traded notional value already exceeded EUR one billion. Now, a little more than one year on, they have reached another important marker: 1 million traded contracts on 3 May, which is equivalent to EUR 35 billion.
Record Activity in Eurex Clearing’s Partnership Program
In March, Eurex Clearing’s OTC Interest Rate Derivatives (IRD) segment saw record activity under the new Partnership Program. Volumes increased around elevenfold compared to March 2017 with a total of EUR 1.7 trillion notional cleared. The total notional outstanding reached EUR 4.7 trillion compared to EUR 1.2 trillion in March 2017.
13 new international companies join ELITE, bringing the total number of companies to over 850 London Stock Exchange Group
ELITE, London Stock Exchange Group’s business support and capital raising programme, today welcomes 13 new international companies, bringing the total number of companies in the ELITE community to over 850. The CEOs of the 13 new ELITE international companies and seven CEOs from the newly graduated ELITE companies opened trading in London this morning alongside Luca Peyrano, CEO, ELITE.
Single Stock Futures: Introduction of five SSFs; Single Stock Dividend Futures: Introduction of one SSDF
The Management Board of Eurex Deutschland took the following decisions with effect from 9 May 2018, due to previous corporate actions:
Swiss Exchange Acquires Microwave Network
SIX has formed a joint venture so the Swiss exchange can own and operate a microwave-based trading network and send trade data far more quickly.
SET Officially Launches “LiVE” Platform With Blockchain Technology To Grow Startups
“LiVE” – the first Thailand crowdfunding platform for startups and SMEs developed by The Stock Exchange of Thailand (SET) with support from the public and private sectors – has officially launched with eight targeted businesses from various sectors such as mobile application, consumer products and medical equipment, to join while prompting over 50 companies to follow suit amid growing enthusiasm from investors.
Cboe Global Markets Reports Record Results for First Quarter 2018 and Raises Run-rate Expense Synergy Target to $85 Million
CHICAGO, May 4, 2018 /PRNewswire/ — Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE) today reported record financial results for the first quarter of 2018.
CQG Connects to Dalian Commodity Exchange to Offer International Market Participants First Access
CQG, Inc. today announced its connectivity to the Dalian Commodity Exchange (DCE) to offer global clients access to iron ore futures. The move marks the second Chinese market available on CQG, as the firm continues to expand business in China with offices, local staff, infrastructure, and exchange coverage.
Cobalt FX post-trade network secures investment from SGX
Cobalt, the foreign exchange (FX) post-trade processing network based on shared infrastructure and high performance technology, has secured a strategic investment from Singapore Exchange (SGX), which operates Asia’s largest, most diverse and fastest growing FX exchange.
Fidessa scoops industry award for its low touch execution services
XOMS platform recognised for excellence and innovation at RegTech Awards
Fidessa group plc (LSE: FDSA) today announced that its low touch execution OMS (XOMS) has been named Best Algorithmic Tagging Solution at the 2018 RegTech Awards. Presented at a ceremony in London last night, these awards recognise technology excellence and innovation amongst providers of RegTech solutions and services.
A new leader in capital markets technologies
BTS Profiles: Brian Muhr
Blue Trading Systems
Blue Trading System’s is a family of traders, technologists, innovators and committed professionals. The women and men that work here want to build something that not only meets demand but advances the industry. We are sharp, loyal and strategic.
‘Fintech’s success depends upon talent which is in short supply’; In an increasingly competitive global landscape, the UK’s attractiveness for innovators, entrepreneurs and firms alike will be key to the future prosperity of our financial services
BY CHARLOTTE CROSSWELL, chief executive of Innovate Finance
From changing how we manage our money, to creating a more pluralistic finance industry, financial technology (fintech) represents a growth sector for the UK.
Asset Freeze Continues for Public Company That Pivoted to Crypto
Annaliese Milano – Coindesk
May 3, 2018 at 02:00 UTC | Updated May 3, 2018 at 02:02 UTC
The U.S. Securities and Exchange Commission (SEC) is likely to win its case against three individuals associated with Longfin Corp, a company whose stock skyrocketed after a blockchain pivot, said a federal judge.
U.S. District Judge Denise Cote said on Tuesday that the regulatory agency has a good chance of proving that Andy Altahawi, Suresh Tammineedi and Dorababu Penumarthi illegally benefited from the pivot. Longfin’s price jumped by more than 2,000% last year after it announced the acquisition of a blockchain startup.
Mastercard’s quarterly report slumps due to cryptocurrency ban
Mastercard’s growth for the last quarter was slightly lower than expected due to a decline in the number of customers purchasing Bitcoin, Ethereum, and other cryptocurrencies, CNBC reported.
“This is due to the recent drop-off in crypto wallet funding,” Mastercard chief financial officer Martina Hund-Mejean said on the earnings call Wednesday. “We expect cross-border growth to moderate somewhat.”
Bermuda Geeked Out With Blockchain Fans After Davos
Lily Katz and Rob Urban – Bloomberg
Enthusiasts made impromptu trip to meet with government; Territory seeks to create ‘sandbox,’ gets funding from Binance
It was the last day of the World Economic Forum in Davos and Wayne Caines, Bermuda’s minister of national security, was about to head home after an exhausting week. But before leaving, he told a group of blockchain enthusiasts, “If you are really serious about advancing this space and working with us, meet us in Bermuda on Monday.”
Crypto Is In Limbo, Whatever Goldman Does; It will take more than a derivatives desk to boost waning investor enthusiasm.
Lionel Laurent – Bloomberg
Three coins representing Bitcoin cryptocurrency sit on a computer circuit board in this arranged photograph. Photographer: Chris Ratcliffe/Bloomberg
Imagine if Goldman Sachs Group Inc. had announced a Bitcoin trading operation at the end of 2017, just as public enthusiasm was reaching fever pitch. What an endorsement! With Bitcoin futures being rolled out on exchanges and hedge funds reinventing themselves as cryptocurrency firms, supporters of stateless money would no doubt have claimed Wall Street’s use of it as inevitable step on the path to riches.
Obama martial law scare was stoked by Russian bots, say ex-director of CIA; Right speculated that 2015 military exercise was attack on Texas; Michael Hayden: success encouraged Moscow to target election
Tom Dart – The Guardian
Speculation about a US armed forces exercise that led some Texans to fear that the Obama administration was plotting martial law was stoked by a Russian disinformation campaign, according to a former director of the CIA.
Can Markets Make Us Equal?; A new book argues that markets don’t just have to make people rich. They can make society fairer.
Peter Coy – Bloomberg
Proposed solutions for inequality are depressingly familiar. Liberals want to raise taxes; conservatives want to cut them; populists in the Trump mold want to exclude immigrants and restrict foreign trade. The centrist business community triangulates between stale agendas. Doesn’t anybody have anything new to offer?
Banks Thought They Had a Win With Guns. Now They’ve Got a Big GOP Headache; How Citigroup and Bank of America shot themselves in the foot with D.C. Republicans.
Robert Schmidt – Bloomberg
On April 24 a handful of Citigroup Inc. executives went to the Securities and Exchange Commission for what they thought would be a routine meeting about a boring but key part of their business: derivatives regulation. Instead, they got a stern lecture on guns. A month earlier, in the aftermath of the school shooting in Parkland, Fla., Citigroup had announced it would curtail some of the business it does with companies that sell firearms. That didn’t go over well with Michael Piwowar, one of three Republican appointees on the five-member SEC.
ASIC revises licensing regime for domestic and overseas market operators
ASIC has modernised and updated its regulatory guidance on the licensing regime for financial markets.
ASIC consolidates guidance on market integrity rules for market participants
ASIC has today published two regulatory guides that consolidate and replace guidance in seven regulatory guides for securities and futures markets participants.
Podcast: CFTC Talks EP041: Alex Rampell, General Partner at Andreessen Horowitz
This week on CFTC Talks, CFTC’s Dan Gorfine and I bring on Andreesen Horowitz’ lead on fintech investments, Alex Rampell. We cover a wide range of fintech issues from crypto currencies to blockchain (what it’s not) and AI.
Sebi’s risk management measures for derivatives likely to impact volumes; Market players attribute this to sharp drop in several F&O stocks
Pavan Burugula – Business Standard
The Securities and Exchange Board of India’s (Sebi’s) additional risk management measures for the derivatives market are likely to impact volumes and increase trading costs.
Swiss likely to oppose ‘Vollgeld’ banking overhaul, poll shows; Central bank chairman says ‘sovereign money’ plan would be dangerous experiment
Ralph Atkins in Zurich – FT
Radical proposals meant to make Swiss banks safer by changing the way they provide loans to the economy are set to be rejected decisively in a national referendum on June 10, the first opinion poll of voter intentions has shown.
NFA bars Rapid City, S.D. commodity trading advisor The Stock Mentor LLC and its principal Brian Kelly Johnson from membership
NFA has permanently barred Rapid City, S.D. commodity trading advisor The Stock Mentor LLC (Stock Mentor) and its principal and associated person, Brian Kelly Johnson, from membership and from acting as a principal of an NFA Member.
Investing and Trading
Active versus passive trading: The end of a false dichotomy?; The active versus passive trading debate has evolved with the emergence of new technologies and products, but does this make any difference to the end investor?
David Whitehouse – The Trade
Active investors are sensing that the long-term tide towards passive investing may be starting to turn. According to Morningstar’s bi-annual Active/Passive Barometer published in March 2018, the success rate of stock-pickers in the US increased sharply in 2017: 43% of active managers outperformed their average passive peer, compared with just 26% of active managers in 2016. With US interest rates starting to rise, could 2018 be the year when active strategy finally rebounds?
Elon Musk Rejects ‘Boring, Bonehead Questions,’ and Tesla’s Stock Slides
Matt Phillips – NY Times
Investors seemed to take another big quarterly loss from Tesla in stride. At least until the company’s chief executive, Elon Musk, started talking.
What to Do Now That the Deduction for Investment Fees Is Dead; For starters, refocus how you pay those fees and do some research
Laura Saunders – WSJ
Now is the time to refocus on how you pay your investment fees. In a little-noticed move, the recent tax overhaul repealed a deduction for investment-advisory fees that effectively will raise these fees for millions of investors.
Watch Out: Junk Bonds Are Getting Junkier; Increased demand has allowed high-yield issuers to get away with weaker covenants that would never have been accepted in the past
James Mackintosh – WSJ
One thing owners of junk bonds are usually sure of is that when the borrower defaults, they will get a veto on cash going to shareholders, to junior debtors or into new deals.
AllianceBernstein’s Nashville move threatens New York and London; Digital disruption makes it easier for financial companies to relocate
Gillian Tett – FT
In decades past, the city of Nashville, Tennessee, has been famous for its vibrant music scene. Now its leaders are singing a new note — finance. Yes, you read that right. On Wednesday AllianceBernstein, one of the largest US asset managers with $550bn under management, said it will move its headquarters out of New York, where it has been based for 50 years.
HSBC shares slide despite $2bn stock buyback; John Flint’s first results as chief reveal rising costs and falling return on equity
Martin Arnold in London and Don Weinland in Hong Kong – FT
John Flint has made a shaky start to his tenure as HSBC chief executive after costs rose faster than expected in the first quarter, overshadowing a $2bn share buyback and sending the bank’s stock down as much as 2.7 per cent in Hong Kong.
Lloyds ‘tried to silence’ whistleblower over HBOS fraud; ‘Extraordinary’ that bank removed employee, says police commissioner
Jonathan Ford in London – FT
Bosses at Lloyds Banking Group tried to silence a whistleblower whose internal report heavily criticised their handling of a fraud that destroyed scores of small business customers, a police commissioner has claimed.
HSBC Costs and Conduct Charge Overshadow $2 Billion Buyback
Stephen Morris and Alfred Liu – Bloomberg
Shares fall as first-quarter expenses rise faster than revenue; New CEO John Flint says job like ‘drinking from a fire hose’
John Flint is off to a bumpy start at HSBC Holdings Plc. Costs at Europe’s largest bank rose at a quicker pace than revenue in the first quarter and it took a surprise charge for past misconduct. It also said a $2 billion share buyback would be the only one this year given the “growth opportunities” it currently sees, signaling HSBC plans to reinvest the excess capital it’s generating rather than return it to investors. Some analysts had expected $4 billion or more to be repurchased.
Former Millennium Trader Dodson to Start New Oil Hedge Fund
Jack Farchy – Bloomberg
Dodson is targeting $500 million in assets for Philipp Oil; Launch bucks recent trend of closures among commodity funds
Andrew Dodson, a former partner at Izzy Englander’s Millennium Management, has set up a new fund to trade oil, bucking the trend of closures among commodities hedge funds in recent years.
BNP Paribas, SocGen Tumble After Missing Out on Trading Rebound
Fabio Benedetti Valentini – Bloomberg
Banks’ trading revenue lags behind U.S., European competitors; French retail revenues slip on slower mortgage refinancings
BNP Paribas SA and Societe Generale SA missed out on the trading gains that boosted earnings at some of their U.S. and European rivals in the first quarter, sending their shares tumbling.
Norway’s $1 trillion fund says high return is key objective
Norway’s $1 trillion sovereign wealth fund, the world’s largest, continues to seek high returns regardless of its other objectives, its chief executive told an annual hearing in parliament on Friday.
Vivo Energy – largest UK-listed African IPO in over a decade
London Stock Exchange Group
London Stock Exchange today welcomes Vivo Energy, a leading retailer and marketer of Shell-branded fuels and lubricants in Africa, to the Premium Segment of the Main Market. Shareholders raised £548 million from the sale of existing shares to international investors, valuing the company at £1.98 billion.
Big Winners From India’s Cash Clampdown Are Private Bankers
Anto Antony – Bloomberg
HDFC Bank to add up to 150 private bankers to 250-strong team; Advises clients to steer clear of India’s stressed assets
India’s clampdown on unaccounted cash has sent a flood of money into the private banking industry, prompting a major lender to embark on a hiring binge for wealth managers.
Overflowing With Cash, The World’s Largest-Money Market Fund Is Trying a New Tactic; Billionaire Jack Ma’s Ant Financial Services Group said it would offer two additional money-market funds to customers who have been parking their spare cash in its hugely popular online fund.
Stella Yifan Xie – WSJ
The world’s largest money-market fund has too much cash to manage. Billionaire Jack Ma’s Ant Financial Services Group on Thursday said it would offer two additional money-market funds to customers who have been parking their spare cash in its hugely popular online fund, the latest attempt by the company to limit flows into the giant fund.