Bits & Pieces
By John J. Lothian
This morning we present the first of our MarketsWiki Education World of Opportunity videos from Stockholm. Peter Fredriksson of Baymarkets is the first up with a story about Stockholm.
My phone experienced a series of text messages yesterday as NYSE Arca Equities had electronic trading problems late in the day. Here is the System Status page with the details on the problem.
It was ten years ago when I went to the FIA Boca Raton conference with an idea: MarketsWiki. It was there I pitched various firms about the idea. I hired Jon Matte and he and I would launch the MarketsWiki development project on August 1, 2007. This morning MarketsWiki sits at nearly 96 million page views
It was good to see so many friends, colleagues and sponsors down in Boca. It is the best conference for us to connect with so many people. The JLN team shot a lot of video interviews, including our Boca Exchange Leader series. Expect to see those videos soon.
Walt Lukken really did a great job at Boca with his FIA team. This was the first Boca without Mary Ann Burns at the controls and it went very well. It was terrific to see Mary Ann honored with the FIA Hall of Fame membership.
Lastly, congratulations to Thom Lant on completing his 300 mile trek in support of MND, re-enacting a 1936 workers’ protest march from the North East of England to London. You are a good man, Thom! You can still give to support Thom’s walk here
Peter Fredriksson, Baymarkets – Stockholm: The Origin and Global Leader of Transaction Technology
“The market has moved from transaction to a lot of other parts of the transaction chain – to pre-trade, post-trade, clearing and post-clearing.”
In this MarketsWiki Education video, Peter Fredriksson, CEO of Baymarkets, says OM, the company that eventually became Nasdaq OMX, basically invented transaction technology. In his view, Stockholm and more broadly, Sweden, have been pioneers in automating the financial markets and making them more efficient.
Stockholm was even early in the exchange merger and acquisition space, paving the way for OM to acquire the Stockholm Stock Exchange. And that led to industry innovators like ORC (now Itiviti), Sungard (now FIS) and TriOptima (now part of NEX Group) to grow. The next FinTech boom will be in “RegTech,” Fredriksson says, as firms grapple with US and European regulations after the 2008 financial crisis. He also sees opportunities across the whole transaction chain: pre-trade, post-trade and clearing.
There’s a problem with electronic bond trading
Chris White, ViableMkts – Business Insider
It is hard to imagine today, but in the not so distant past, there was a lively debate regarding the usefulness of electronic trading in the corporate bond market.
**JK: Chris knows of what he speaks. He also spoke about the basics of finance at our MarketsWiki Education series.
Ken Griffin of Citadel tops Forbes’ Illinois billionaires’ list
Crain’s Chicago Business
Griffin, CEO of the Chicago hedge fund firm, had a net worth of $8 billion as of Feb. 17, according to Forbes, up from $7.5 billion on last year’s list. He is 166th overall on the world list.
**JK: How would one go about asking Ken for a loan?
Wall Street Bull artist calls BS on ‘Fearless Girl’ statue
Jeremy Olshan and Linda Massarella – MarketWatch
Arturo Di Modica says this little girl has no place on Wall Street
The artist who sculpted Wall Street’s iconic “Charging Bull” is seeing red over the statue of the defiant girl placed in his snorting beast’s path – and says she should be carted away immediately.
**JK: Art is so misunderstood.
David Rockefeller, Philanthropist and Head of Chase Manhattan, Dies at 101
Jonathan Kandell – NY Times
David Rockefeller, the banker and philanthropist with the fabled family name who controlled Chase Manhattan bank for more than a decade and wielded vast influence around the world for even longer as he spread the gospel of American capitalism, died on Monday morning at his home in Pocantico Hills, N.Y. He was 101.
Takeaways from FIA Boca
Doug Monieson – Medium
FIA Boca is unique among financial industry conferences: it brings together an incredibly diverse range of participants that includes regulators, exchange leaders, trading firms, vendors, and a sizable contingent of representatives of all stripes from around the world. This years edition attracted over 1,100 registrants from 25 countries for three days of panels and meetings.
Monday’s Top Three
Sometimes when you’re in the trenches you want an overarching look at the times as the day-to-day takes top priority. At least, I’m guessing that’s why droves of people clicked on High-frequency trading has reshaped Wall Street in its image. Second place went to a Forbes article on how How Cliff Asness Became A Billionaire By Building A Kind Of Vanguard Of Hedge Funds. In third was Don Ross’ thought place on regulatory reform, It’s time for the SEC to take a hard look at this stock market rule.
95,989,951 pages viewed; 22,388 pages; 204,488 edits
Webinar: Improving execution quality using market microstructure, 28 March, 10:00 EDT
Join FOW and Deltix for a free technical webinar on order execution, discussing prerequisites for managing execution quality and how you can capitalise on CME’s new Market by Order (MBO) data.
Providing full transparency into order book composition, CME’s new MBO data offers a new level of insight and opportunities for increased precision in execution strategies.
The webinar is aimed at algorithmic trading firms seeking to better understand advanced order management strategies and improve their execution quality.
To register, visit: http://bit.ly/FOWwebinar.
NYSE Arca Suffers Glitch During Closing Auction; At least $150 billion of exchange-traded funds said to be affected, including world’s largest gold ETF
Asjylyn Loder – MarketWatch
A glitch snarled closing trading in dozens of exchange-traded funds late Monday at the New York Stock Exchange’s Arca platform, in one of the largest trading snafus of 2017.
****SD: WSJ version here.
High-Frequency Traders Fall on Hard Times; Once-lucrative business is now fighting unfavorable market conditions, brutal competition and rising costs
Alexander Osipovich – WSJ
The flash boys aren’t as flashy as they used to be. High-speed trading gained notoriety after Michael Lewis’s 2014 book “Flash Boys.” These days, the industry is struggling with another problem: It is having trouble making money.
Threat or Opportunity? Blythe Masters Talks Blockchain Jobs Impact
Addressing the matter last week was Blythe Masters, CEO of one of the industry’s best funded startups, New York-based Digital Asset Holdings.
In her remarks to several hundred industry leaders at the DC Blockchain Summit, Masters shifted the focus to how the wider job market – not just corporate executives – might benefit from blockchain.
Frankfurt takes early lead in Brexit race to poach City jobs; As UK triggers EU divorce, other financial centres jostle to take business from London
James Shotter, Laura Noonan and Martin Arnold – Financial Times
Frankfurt is emerging as the early frontrunner in the race between rival financial centres to win jobs from London ahead of Britain’s departure from the EU.
Rookie Currency Traders Are Causing Trouble at Crucial Moments
Lananh Nguyen – Bloomberg
Job cuts leave fewer senior staff to handle black-swan events; Inexperienced traders amplified pound’s flash crash, BIS says
It’s been something of a common lament among Wall Street veterans for a while now. And it goes, more or less, like this: All these darn twenty-something-year-olds around here have no idea what they’re doing.
Quants Are Eating Away at Wall Street’s Edge
Dani Burger – Bloomberg
For quant investors, fast money’s a hard addiction to break. A mob of trend-followers is eroding the advantage that quantitative analysis usually provides to short-term equity trading strategies more quickly than normal, according to research from Bank of America Corp.
Cost of Repo Safety Net Hits $74 Billion
Katy Burne – WSJ
The price of a safer financial system is going up. The tab for backstopping a type of short-term lending on Wall Street known as repurchase agreements has risen to $73.84 billion, according to a filing this month by Depository Trust & Clearing Corp., which operates the clearinghouse that facilitates trading in that market. That compares with a $50 billion estimate circulated two years ago by people familiar with the DTCC, a firm owned by banks and trading firms that is a key cog of Wall Street’s plumbing.
Fed’s Dudley Says Wells Fargo Shows Bank Culture Needs Improving
Matthew Boesler – Bloomberg
‘There was a serious mismatch’ between values and incentives; Dudley didn’t discuss the rate outlook in his prepared remarks
The scandal involving Wells Fargo & Co. that surfaced last year shows the U.S. banking industry still has work to do on improving its culture, Federal Reserve Bank of New York President William Dudley said.
Deutsche Bank Said to Face Regulatory Fines Over Currency Trades
Greg Farrell and David McLaughlin – Bloomberg
Probes by Fed, N.Y. wrap up as U.S. closes criminal inquiry; German lender is largest currency trader that hasn’t settled
Deutsche Bank AG is expected to be fined by the Federal Reserve and New York’s Department of Financial Services for its conduct in the foreign exchange market, a person familiar with the matter said.
British banks handled vast sums of laundered Russian money
Luke Harding, Nick Hopkins and Caelainn Barr – The Guardian
Britain’s high street banks processed nearly $740m from a vast money-laundering operation run by Russian criminals with links to the Russian government and the KGB, the Guardian can reveal. HSBC, the Royal Bank of Scotland, Lloyds, Barclays and Coutts are among 17 banks based in the UK, or with branches here, that are facing questions over what they knew about the international scheme and why they did not turn away suspicious money transfers.
Stung by Smaller Bonuses, Energy Traders Hang Hopes on Trump
Kelly Gilblom – Bloomberg
Average EU gas and power bonuses may drop to 275,000 euros; Financial deregulation in U.S. seen boosting trader paychecks
Make the trading floor great again. That’s the mantra among power and gas traders from London to New York and Houston after another lackluster year for bonuses against a backdrop of strict post-financial crisis rules.
Exchanges, OTC and Clearing
SGX Told To Enhance Recovery Processes Following Trading Disruption Last Year
The Monetary Authority of Singapore (MAS) has directed SGX to implement measures to enhance its recovery processes and operational resilience, following supervisory investigation into the trading disruption to the securities market on 14 July 2016. These measures include recommendations by the Industry Working Group (IWG), comprising SGX and industry stakeholders. SGX will contribute $1.5 million to co-fund the costs that may be incurred by brokerage firms to implement the IWG measures.
Bats Europe Successfully Launches Buy-side Access To New European Equities Block IOI Platform
Bats Europe, a CBOE Holdings, Inc. company and the region’s largest equities exchange operator, and BIDS Trading, L.P. (BIDS), the operator of the largest block trading alternative trading system (ATS) by volume in the U.S., announced today the successful buy-side focused launch of Bats LIS (Large in Scale), a new block trading service for the European equity market, on Friday, 17 March 2017. The platform, which rolled out to sell-side participants late last year also reported record volume of EUR36.5 million on 16 March and record weekly volume of EUR114.8 million for the week ending 17 March.
Single Stock Futures: Introduction of two SSFs; Single Stock Dividend Futures: Introduction of two SSDFs
The Management Board of Eurex Deutschland and the Executive Board of Eurex Zürich AG took the following decisions with effect from 23 March 2017:
Introduction of the Co-location 2.0 service and optimisation of back-end network infrastructure to improve market data distribution and access to the high frequency gateways
As previously announced in Eurex circular 010/17, Eurex Deutschland and Eurex Zürich AG (collectively: the Eurex Exchanges) are planning to implement the Co-location 2.0 service which will ensure a state-of-the-art and more predictable technical infrastructure set-up within the Eurex Exchanges’ Co-location facility. The launch of the Co-location 2.0 service is currently planned to take place on 29 May 2017 prior to the launch of the T7® Release 5.0 which is scheduled for 19 June 2017.
OTC Clear Launches Client Clearing Ahead of Hong Kong Clearing Mandate
OTC Clearing Hong Kong Limited (OTC Clear), a subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX) that provides clearing and settlement services for over-the-counter (OTC) derivative transactions, has launched a client clearing service following approval by the Securities and Futures Commission (SFC).
IBM Releases a Beta Blockchain Service for Enterprises
IBM announced a beta release of IBM Blockchain, an enterprise blockchain service based on the Linux Foundation’s Hyperledger Fabric. The service enables developers to build production blockchain networks on the IBM Cloud, underpinned by the IBM LinuxONE server.
Trading Technologies Sees Increased Adoption of Cloud-Based Platform, Sets Sights on New Coverage Areas
10 percent of TT’s user base is now live on the cloud-based platform as the vendor preps new functionality and asset-class coverage.
SIX deploys blockchain for bond trading platform
SIX Securities Services has developed a blockchain powered service covering the full bond trading life cycle from issuance to settlement.
Equinix Cloud Exchange Expands in Europe to Accelerate Digital Transformation
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data centre company, today announced that it will be significantly expanding the availability of the Equinix Cloud Exchange™, bringing the innovative solution to three new markets including Dublin, Milan and Stockholm.
Is Google Working on its Own Bitcoin? Why Blockchain Doesn’t Suit Conventional Banks
Google-funded Currencycloud is following a roadmap that is similar to the R3 consortium. Instead of pegging their system on Blockchain, Currencycloud is entering the financial industry with a Blockchain-inspired technology that is actually applicable to a wide range of operations such as transaction facilitation.
Comey Deals Trump a Political Blow When He Can Least Afford It
Justin Sink – Bloomberg
Lawmakers are weighing Trump’s political capital as votes near; Health care bill, Supreme Court nomination both at stake
FBI Director James Comey dealt President Donald Trump a stinging rebuke on Monday at a time of acute political vulnerability for the White House.
The Comey Hearing Was a Bipartisan Failure of Oversight
Jonathan Bernstein – Bloomberg
The House Intelligence Committee’s hearing with FBI Director James Comey and NSA Director Michael Rogers did an excellent job of demonstrating why the House isn’t even remotely ready to investigate Russian involvement in the 2016 U.S. presidential election, let alone any possible wrongdoing by Donald Trump and his campaign.
All the President’s Lies
David Leonhardt – NY Times
The ninth week of Donald Trump’s presidency began with the F.B.I. director calling him a liar.
Sean Spicer’s GCHQ smears have revealed his deep ignorance and indifference to the truth
William Hague – Telegraph
A great deal of the job of Foreign Secretary is in the public eye: the summits, handshakes, press conferences and speeches from every troubled part of the world. But there is also a more secret and less appreciated side to this role, which involves overseeing the work of two of Britain’s intelligence agencies, the Secret Intelligence Service – MI6 – and the Government Communications Headquarters, GCHQ.
***** A recent Boca speaker’s latest thoughts.
N.Y. Rule Could Be Model for Cyber-Collaboration
Richard Hill – Bloomberg BNA
New York financial regulators’ outreach efforts while developing new cybersecurity rules could serve as a model for harmonizing existing regulations elsewhere.
New Jersey Pastor Accepted Bribes of $150,000 in Bitcoin Scheme
Josh Saul – Newsweek
A New Jersey pastor was found guilty of pocketing $150,000 from shady bitcoin traders in exchange for giving them control of a credit union he headed so they could run it as a front for their bitcoin exchange.
Investing and Trading
The Quiet Bear Market in Bonds
Ben Emons – Bloomberg
Don’t be fooled by the surprising rally in bonds after the Federal Reserve raised interest rates and signaled that at least two more increases are likely to happen before the year is over. The quiet bear market that has been under way since yields bottomed in mid-2016 is alive and well.
Hedge funds rush for exit after oil trade becomes crowded: Kemp
John Kemp – Reuters
Hedge funds cut their bullish bets on oil by the largest amount on record in the week to March 14, according to the latest data published by regulators and exchanges.
Lawyers allowed to quiz government witness on insider trading stories; Thomas Davis expected to take the stand in ‘Billy’ Walters trial
Kara Scannell – Financial Times
Lawyers for William “Billy” Walters can ask the government’s key witness if news articles about a criminal probe into insider trading influenced his behaviour and decision to co-operate with authorities.
Rise in new form of ‘portfolio insurance’ sparks fears; Popularity of trend-following funds — and their promises — carries echoes for some of 1987 crash
Robin Wigglesworth – Financial Times
On Wall Street, bad ideas rarely die. They often go into hibernation until resurrected in a new form. And portfolio insurance — a leading contributor to the 1987 “Black Monday” crash — is, for some, making a return to markets.
An asset manager’s uphill fight against index funds; Capital Group is at the forefront of the fightback against passive investing
Robin Wigglesworth and Stephen Foley – Financial Times
When Tim Armour graduated from Middlebury College, a liberal arts institution in Vermont, he faced a conundrum. He could either accept a graduate programme slot at a West Coast investment group, or go and run a windsurf shop in Florida.
Mind-Blowing’ U.S. Is the Future for One $60 Billion Money Manager
Lukanyo Mnyanda – Bloomberg
For Kames Capital, new market may be as big as U.K., says CEO; Davis says Trump will be help, not hindrance, to his firm
The $60 billion Scottish fund manager owned by Aegon NV is shrugging off talk of a rise in protectionism under U.S. President Donald Trump to focus on the “mind-blowing” opportunities of the world’s biggest economy.
AIG Will Need to Pay a Lot More for a New CEO
Anders Melin and Sonali Basak – Bloomberg
American International Group Inc.’s new chief executive officer can expect to deal with a volatile industry, pressure from ratings firms and a restless board. And if the past is any guide, the new leader won’t get an industry-leading compensation package for the trouble.
Carney Says BOE Has Learned Lessons From Hogg’s Error
Brian Swint and Stephen Morris – Bloomberg
BOE exceeded minimum response, but didn’t force Hogg to resign; Banking regulation has made progress since financial crisis
The Bank of England has learned the lessons from the sudden resignation of Deputy Governor Charlotte Hogg after she failed to disclose a potential conflict of interest, Governor Mark Carney said.
Wall St. bellwether Jefferies confirms business is booming at the banks
Julie La Roche – Yahoo Finance
Investment bank Jefferies, a bellwether for Wall Street, reported its first quarter results on Tuesday, marking the firm’s fourth consecutive quarter of improving results.
Ivory Coast Said to Face $327 Million in Losses Over Cocoa Deals
Baudelaire Mieu – Bloomberg
Cocoa regulator seeking compensation from defaulting exporters; Local exporters can’t honor deals for 350,000 tons of beans
Ivory Coast’s cocoa regulator is facing losses of more than 200 billion CFA francs ($327 million) after local exporters defaulted on their contracts because they wrongly speculated that prices would rise, according to a person familiar with the matter.
Emerging Markets Are on a Tear
Srinivasan Sivabalan – Bloomberg
The strength of a rally across developing nations after the Federal Reserve’s rate increase has become a riddle for global investors. But the answer may be simple: growth prospects.
China Sits on Financial House of Cards; OECD Finds Rising debt, excess production capacity and frothy prices add to the risk of ‘disorderly default’
Mark Magnier – WSJ
China faces mounting financial risk even as an innovation drive aimed at rebalancing the economy away from low-value manufacturing falls short, according to a report by the Organization for Economic Cooperation and Development.
IMF acknowledges Islamic banking’s prolific growth
Mushtak Parker – New Straits Times
The International Monetary Fund (IMF), especially under its current managing director, Christine Lagarde, has been a proactive supporter of Islamic banking, and, together with the World Bank, has declared it a priority for its operations in countries with Islamic banking.
Laundered Russian Cash Went Through Big Banks, Guardian Says
Zeke Faux and Yalman Onaran – Bloomberg
HSBC allegedly handled about $545 million tied to network; Paper cites documents detailing 70,000 banking transactions
Cash that flowed from Russia through a vast money-laundering network sometimes ended up passing through the world’s largest banks, with U.K. firms including HSBC Holdings Plc handling almost $740 million, the Guardian reported, citing a cache of financial records it reviewed.
Theresa May: The British Prime Minister on Donald Trump, Hillary Clinton, Brexit and More
Gaby Wood – Vogue
She stepped into a whirlwind to lead Britain into the Brexit era. But—leather trousers aside—Theresa May’s own style is decidedly no-drama. Gaby Wood meets her.
What the Biggest Banks Are Planning Once Brexit Starts
Gavin Finch – Bloomberg
Frankfurt, Dublin favorites for U.K.-based banks after Brexit; Firms steeling for no access to EU market once U.K. leaves
Big investment banks will begin the process of moving some London-based operations into new hubs inside the European Union within weeks after U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the bloc.