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Post-Bitcoin Technology Has Geeks, Giants, and Hackers Excited; Acting SEC chair plans test to lower exchange fees; Cowen Group in talks to buy brokerage Convergex

First Read

Bits & Pieces
By John J. Lothian

John Lothian News has learned that OCC President and COO Mike McClain has resigned and left the organization. His last day was two days ago when the OCC held a goodbye event in Chicago.

The official narrative is that he left for personal reasons, including the continued attention to his wife, who is battling illness. Other sources have cited the high turnover the OCC has seen in recent years and some of the pressures at the core of that for McClain’s departure.

McClain had been with the OCC for 15 years and risen to the title of president under the leadership of OCC Executive Chairman and CEO Craig Donohue

A replacement for McClain is being sought, and given the pattern of hires recently, odds are on a current or former CME Group employee for the position. Since Donohue has come to the OCC, seven former CME Group employees have joined the OCC in senior positions as he works to change the structure and culture at the clearinghouse.

Today we present the MarketsWiki Education presentation by Rolf Andersson of Goldman Sachs. Rolf is someone you should know if you don’t. His firm, Pantor, was recently acquired by Goldman in Stockholm.

We also present our second Exchange Leaders interview from FIA Boca, with CME President Bryan Durkin. It too is well worth a look.

MIAX came to Chicago yesterday to talk up their MIAX Pearl Exchange that was recently started. They had a good turnout from the Chicago options community at an event at Mastro’s. In the first 5-plus weeks, MIAX Pearl grabbed just under 1 percent marketshare in options volumes. Look for them to get more aggressive in the marketplace in the coming months. As MIAX Chairman and CEO Thomas P. Gallagher told his guests, this is a start-up exchange, launched in 2012, that has an experienced staff of people who come from every other US options exchange. It now has 103 employees and continues to pick up talent from the former ISE team and from CBOE/Bats mergers. Jeromee Johnson and Shelly Brown are working to grow their options business with an eye on other opportunities. They are worth keeping on your radar.


JLN Exchange Leader Series 2017: Durkin Says CME Growth Is All About Customers

CME Group is proud of the diversity in its product lines – from a broad range of commodities to a full suite of interest rate, index and FX contracts. That range of contracts has allowed the exchange to “hit” consistent winners somewhere on the board, as markets move from one sector to another. Bryan Durkin, president of CME, told JLN at the FIA Boca 2017 conference that energies, metals, interest rates and FX posted solid if not record volumes last year. This year, they hope that diversity continues to pay off.

Read the rest and watch the video »


Rolf Andersson, Goldman Sachs – Attention To Detail: High Performance Requires Hard Work
MarketsWiki Education

“I can’t stress enough the importance of being really good at software in one form or another, whether it’s managing, running projects or sponsoring projects.”

Rolf Andersson of Goldman Sachs is a software architect, and he says that software is taking over the world. But all the competition out there is making it much harder to innovate than it was a number of years ago. You have to have a good idea, plus the stamina and expertise and experience. And a good team.

Read the rest and watch the video »


‘Hamilton’ Fights the Laws of Economics (and Loses)
Joe Nocera – Bloomberg
The first to leave was King George III. It was April 2016 when Jonathan Groff, who played King George in the megahit musical “Hamilton,” left the show. Three months later, Lin-Manuel Miranda, who created the show, composed the music and starred as Alexander Hamilton, took his final bow. By the end of 2016, virtually the entire cast had been replaced.

***** Supply, demand, the arts and greed all in one story.


Republican Senator Hails Goldman Sachs As A Champion Of ‘The Little Guy’; He’s also into Atlas Shrugged. Go figure.
Zach Carter – Huffington Post
Sen. Thom Tillis (R-N.C.) announced on Thursday that he is trapped in a Randian nightmare where members of Congress seek to “beat down” the virtuous organization Goldman Sachs ? a benevolent force in American democracy that goes to great lengths to “employ the little guy.”

***** I don’t think it is fair to make fun of Lloyd Blankfein’s height like that.


Wednesday’s Top Three
When you have a headline like this ‘Bro, I’m Going Rogue’: The Wall Street Informant Who Double-Crossed the FBI from Bloomberg, you’re gonna get the top story. And so they did, by a long shot. Second went to the new moves at RCG, Rosenthal Collins Group Promotes Robert Turner, Patrick Carey To New Executive Roles. Third went to our JLN Exchange Leader Series 2017: Jeff Sprecher Says ICE Ready To Roll Out Data and Analytics To Meet The Demand For More Info.


MarketsWiki Stats
96,240,774 pages viewed; 22,391 pages; 204,502 edits
MarketsWiki Statistics


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Lead Stories

Post-Bitcoin Technology Has Geeks, Giants, and Hackers Excited; “We’ve built an unstoppable, uncensorable world computer,” says one blockchain developer.
Matthew Leising – Bloomberg
In late February about 200 executives, coders, and developers gathered in the downtown Brooklyn office of JPMorgan Chase & Co. to hear an all-day pitch for a new industry group called the Enterprise Ethereum Alliance. Ethereum? It’s the ghostly sounding name for a so-called blockchain technology similar to the one that made the digital currency bitcoin possible. Its inventor, Vitalik Buterin, released his software to the world in 2015, not long after dropping out of the University of Waterloo, in Canada. Less than two years later, JPMorgan, BP, Microsoft, International Business Machines, and ING are among the companies in the group experimenting with it.

Acting SEC chair plans test to lower exchange fees
Sarah N. Lynch – Reuters
The acting head of the U.S. Securities and Exchange Commission has directed the regulator to launch a pilot plan that would test how the market would be affected if exchanges lowered the fees they charge brokers to execute trades.

Cowen Group in talks to buy brokerage Convergex
Nicole Bullock – Financial Times
Financial services company Cowen Group is in talks to buy Convergex, a brokerage, according to people briefed on the matter, as scale becomes increasingly important in the brokerage industry due to rising costs and low trading volumes. No deal had been made and the discussions could still fall apart, the people said. Officials for Convergex did not respond to calls seeking comment and neither did GTCR, the private equity company that owns the brokerage. A spokesman for Cowen declined to comment.

China should ‘prompt’ HKEX to buy the London Stock Exchange; If China is going to play a leading role in this century then this acquisition and a good trade deal with the UK will cement its dominance of capital markets
Peter Guy – South China Morning Post
He who can prevail in chaos is God. A historical opportunity exists for China to change the balance of power in global economics and financial markets by prevailing amid chaos through a key acquisition and trade deal.

SEC May Regret the Day It Allowed Leveraged ETFs
Jared Dillian – Bloomberg
The only thing better than getting rich slow is getting rich quick. That bit of truism is all you need to understand the rapid rise in leveraged exchange-traded funds, which were created in 2006 as a way for investors to double their exposure to stock indices. More were created later tied to bonds, commodities, currencies and just about anything else that fund issuers could dream up.

Trumpflation story is fake news when explaining market moves; Shift in sentiment owes more to reduced fears of deflation than by inflation worries
Matthew Klein – FT
It is hard to think of a policy agenda more likely to boost inflation than the one President Trump campaigned on. Tax cuts give households and businesses more money to spend. Infrastructure projects, border walls, and extra military kit require specialist labour and finite raw materials.

PwC settles with MF Global over Corzine brokerage’s collapse
PricewaterhouseCoopers LLP has settled a $3 billion negligence lawsuit over the October 2011 collapse of MF Global Holdings Ltd, the futures and commodities brokerage once run by former New Jersey governor Jon Corzine.

French financial markets watchdog wants special access rules for UK
Huw Jones – Reuters
The European Union’s system for granting market access to banks from outside the bloc will not work for a financial centre as big as Britain’s, a top European regulator said on Thursday.

The Countdown to MiFID II – Post-Trade Priorities
Tony Freeman, DTCC via TABB Forum
MiFID II will alter the landscape for post-trade processing and will require affected firms to adapt their middle- and back-office activities accordingly. There is still a tremendous amount of work to be done before the industry can claim it is ready for its implementation in January 2018.

Cawley quits as CEO of BGC Sef; Angelo Toglia named interim chief following Cawley’s exit
Robert Mackenzie Smith –
The chief executive of BGC Partners’ swap execution facility (Sef) has resigned, has learned. New York-based James Cawley stepped down as head of BGC Derivative Markets in February after nearly two-and-a-half years in the job. Angelo Toglia, chief operating officer of BGC Derivative Markets, has been appointed interim CEO of the Sef business until a permanent replacement is found. A spokesperson for BGC declined to comment. Cawley joined BGC in October 2014 after leaving Javelin

Hard Times For HFT
Themis Trading Blog
Yesterday we wrote about how the HFT community has begun to lobby to eliminate the Order Protection Rule. It’s no surprise to us that they are trying to change the rules now since their cash machine, which unofficially began in 2007 (with the implementation of Reg NMS), seems to be grinding to a halt. After squeezing every last arbitrage (latency, regulatory, rebate) penny out of Reg NMS for the past 10 years, the HFT community now wants new rules so they can create new arbitrage opportunities. So why now?

Defeat could cast doubt on agenda; passage could reinvigorate ‘Trump trade’
William Watts – MarketWatch
Investors and traders in stocks and other financial markets are focused on a take-it-or-leave-it House vote Friday to repeal Obamacare, convinced its outcome will set at least the near-term direction for a variety of assets.

Exchanges, OTC and Clearing

Euronext Launches CAC 40 Governance Index With Vigeo Eiris
Euronext and Vigeo Eiris today launched the CAC 40 Governance Index, a thematic index that rates companies in the Paris market’s benchmark CAC 40 index on their corporate governance performance.

China, Hong Kong exchanges jointly tackle cross-border speculation: paper
Business Times
The Shanghai, Shenzhen and Hong Kong stock exchanges are coordinating supervision over illegal trading activities as speculative Chinese money is flowing into Hong Kong via the stock connect schemes to skirt rules on the mainland, the official Shanghai Securities News reported on Wednesday. Chinese money was blamed for volatility in Hong Kong-listed Meitu Inc, whose shares surged as much as 28 per cent on Monday, before reversing to end down 11 per cent.

HKEX News Release
HKEX to Introduce 5-year China Ministry of Finance Treasury Bond Futures; Offshore markets’ first futures on domestic Chinese government bonds; HKEX’s first Mainland-related interest rate derivatives; Important addition to risk management tools offered by HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) will introduce 5-year China Ministry of Finance Treasury Bond (MOF T-Bond) Futures on Monday, 10 April 2017.

Adjustment of SOHO China Futures
Hong Kong Exchanges and Clearing Limited (HKEX) has announced the arrangements for the adjustment to SOHO China Ltd (SOHO China) futures to account for SOHO China’s special dividend.


In blow to London, EU considers passporting for fintech services
Francesco Guarascio – Reuters
The European Commission could introduce EU passporting and lower regulatory requirements for financial technology firms, moves that could undercut London’s leading position in “fintech” as Britain gets ready to leave the European Union.

The new business disrupter: How IBM is taking blockchain all the way to the bank
If bitcoin is the new currency then blockchain is the new bank. IBM Corp. recently made investments in developing blockchain technology and is working with the open-source project Hyperledger to advance the concept of blockchain throughout the enterprise.

C.I.A. Developed Tools to Spy on Mac Computers, WikiLeaks Disclosure Shows
Vindu Goel – NY Times
The C.I.A. developed tools to spy on Mac computers by injecting software into the chips that control the computers’ fundamental operations, according to the latest cache of classified government documents published on Thursday by WikiLeaks.

Banks and Tech Firms Battle Over Something Akin to Gold: Your Data
Nathaniel Popper – NY Times
The big banks and Silicon Valley are waging an escalating battle over your personal financial data, including the amount you spent on dinner last week and how much you are paying for your mortgage.


Wall Street is Ready to Eat Trump’s Lunch; After a few months of optimism, the markets are getting ready to thrash the Trump presidency.
William D. Cohan – Vanity Fair
The overdone “Trump bump,” a reference to the Dow Jones Industrial Average’s relentless post-election romp to 21,000, is finally coming to an end, and with good reason. It was always a chimera anyway, and just a matter of time before the moneyed class, which recognizes executive incompetence when it sees it, finally came to its collective senses.

Democrats press Trump’s SEC nominee on Wall Street ties
David J. Lynch – Financial Times
Democrats criticised Donald Trump’s choice to run the Securities and Exchange Commission on Thursday, saying that Jay Clayton, a veteran securities lawyer, is too deeply entangled with Wall Street to be an effective markets cop.

Trump’s Wall Is 30 Feet of Scary Politics for Builders
Thomas Black – Bloomberg
Trepidation on both sides of the border and the Atlantic; ‘We are against any construction that is anti-liberty’
Hundreds of companies have been eyeing work on President Donald Trump’s 30-foot border wall with Mexico. Some, however, won’t touch it with a 10-foot pole.

Congress Moves to Strike Internet Privacy Rules From Obama Era
Cecilia Kang – NY Times
Republican senators moved Thursday to dismantle landmark internet privacy protections for consumers in the first decisive strike against telecommunications and technology regulations created during the Obama administration, and a harbinger of further deregulation.


Acting SEC chair plans test to lower exchange fees
Sarah N. Lynch – Reuters
The acting head of the U.S. Securities and Exchange Commission has directed the regulator to launch a pilot plan that would test how the market would be affected if exchanges lowered the fees they charge brokers to execute trades.

Too much misconduct goes undetected: ex-CFTC enforcement chief
Karen Freifeld – Reuters
A “massive amount of misconduct” in futures, options and swaps markets goes undetected because of insufficient data mining, Aitan Goelman, who until last month was enforcement chief for the top U.S. derivatives regulator, said in an interview.

Warren Wants SEC to Review Icahn’s Role Advising Trump on Rules
Benjamin Bain and Zachary Mider – Bloomberg
U.S. Senator Elizabeth Warren said the Securities and Exchange Commission should be vigilant in ensuring that billionaire investor Carl Icahn isn’t using his role as an adviser to the Trump administration to gain unfair trading advantages.

Critics talk conflicts as SEC chair nominee Clayton wants more IPOs
Francine McKenna – MarketWatch
President Donald Trump’s nominee to lead the Securities and Exchange Commission got grilled Thursday over his conflicts of interest as he discussed ways to revitalize the initial public offering market.

SEC charges two Israeli residents with Mobileye insider trading
Jonathan Stempel – Reuters
Two Israeli residents have been charged by the U.S. Securities and Exchange Commission with insider trading in Mobileye NV before the maker of sensors and cameras for driverless vehicles agreed to be acquired by Intel Corp for $15.3 billion.

Credibility of Key Witness Questioned in Gambler’s Insider Trading Case
Colin Moynihan – NY Times
A lawyer for the Las Vegas sports gambler William T. Walters, who is on trial in Manhattan on insider trading charges, attacked the credibility of one of the government’s main witnesses on Thursday, saying that the witness had lied repeatedly to investigators.

Investing and Trading

Financial Markets Grow More Resilient in Wake of Terror Attacks
Riva Gold – WSJ
Financial markets barely budged following Wednesday’s deadly attack in London, underscoring investors’ increasing conviction that such tragedies are unlikely to shake the businesses and economies of affected regions. In the past, terror attacks on Western targets have spurred investors to dump stocks and regional currencies while rushing into haven investments such as government bonds. But such reactions have decreased as the incidents have become more regular.

Rising Rates Arrive
Fei Mei Chan – Indexology
At its March 2017 meeting, the Federal Open Market Committee voted to raise the federal funds rate, the second increase since 2008’s financial crisis. The Fed’s dot plots forecast more increases this year, and of course rising short term rates place pressure on the longer end of the yield curve as well.

Why advisers say tactical allocation funds usually aren’t worth the fees
Anora Mahmudova – MarketWatch
The idea that investors can reduce risk in their portfolios without diminishing future expected returns is perhaps one of the most widely perpetuated myths on Wall Street. Tactical allocation funds, which purport to deliver less risk and higher rewards, are a case in point, according to financial advisers.

Investors the hot new customer for Europe’s trading venues; Scramble reflects Mifid II rules intended to inject more transparency into equity markets
Hannah Murphy – FT
For Europe’s stock exchanges and trading venues, the hottest new customer is the institutional investor.

Eton Park is going out of businessóhighlighting troubled times for hedge funds
William Watts – MarketWatch
A hedge fund run by high-profile investor Eric Mindich is closing after 13 years in businessóthe latest casualty of tough times in an industry that saw a postcrisis jump in closures last year. In a letter to investors dated Thursday, Mindich, a star Goldman Sachs Group alum, said he was shutting Eton Park Capital Management, that he founded in 2004.

Eric Mindich’s Eton Park Hedge Fund to Close Down; Poor performance among the issues hurting fund run by youngest partner in Goldman Sachs history
Gregory Zuckerman and Juliet Chung – WSJ
High-profile investor Eric Mindich is closing his $7 billion hedge fund, Eton Park Capital Management LP, as poor performance weighs on even longtime stars of the hedge-fund business.

Hedge Fund Run by Former ‘Big Wolf’ Trader Delivers 46% Return
Mikael Holter – Bloomberg
Former Fredriksen associates’ fund aims to raise $175 million Oil-recovery bet could triple the money in 3-5 years: Westeren Two former associates of billionaire shipping and rig tycoon John Fredriksen are delivering out-sized returns by snapping up distressed and shunned oil-related assets. And they say it’s a bet that has plenty of room to run.

Hedge fund manager Friedman to list investment fund in London
U.S. hedge fund manager Emanuel ‘Manny’ Friedman plans to list a fund in London to invest in asset-backed securities and real estate assets put up for sale as a result of regulatory change in the financial sector.


eVestment: $7.9B In Hedge Fund Industry Inflows In February
After a long string of redemptions, hedge funds netted an estimated $7.9 billion in inflows in February and are now positive year-to date in 2017, according to new data from eVestment.

Deutsche Bank commits to London by securing new HQ
Rhiannon Bury – The Telegraph
Deutsche Bank has agreed a deal to move to a new City headquarters, defying fears that large financial institutions are planning to leave the capital after Brexit.

Credit Suisse Increases Bonus Pool 6%, CEO Thiam Gets $12 Million
Jeffrey Voegeli and Jan-Henrik Foerster – Bloomberg
Credit Suisse Group AG increased its bonus pool 6 percent, defying a trend toward smaller payouts at many of its peers in an effort to prevent an exodus of talent from its investment banking and Asian operations.


Asia’s No Home Run for Wall Street Banks
Nisha Gopalan – Bloomberg
America, one; Europe, nil.In Asia, at least, U.S. financial institutions are climbing up the investment banking league tables while their euro-area counterparts sink. But champagne corks shouldn’t be popping on Wall Street just yet. How long their current reign lasts will depend to a large degree on how long fixed income, currencies and commodities business remains robust

The Controversial Chinese Economist Uncovering Tough Truths; “What he found fundamentally changes the way we think.”
Dexter Roberts – Bloomberg
Economist Gan Li and his researchers at Chengdu’s Southwestern University of Finance and Economics are gearing up for their national survey of Chinese households, which begins in early July. The aim of the biennial census is to measure the wealth of China’s 1.4 billion peopleóhow much they earn, how many apartments they own, and how much land they have and how they use it. Bankers, economic analysts, property developers, and policymakers are eager to see what the survey will reveal.

BOJ chief Kuroda says ‘no reason’ to withdraw stimulus now
William Mallard and Leika Kihara – Reuters
Bank of Japan Governor Haruhiko Kuroda said there is “no reason” to raise the bank’s bond yield targets now with inflation so far from its 2 percent target, offering his strongest denial to date of the chance of withdrawing its massive stimulus any time soon.

China Money Market Jittery After PBOC Cash Splash Dries Up; The People’s Bank of China on Friday resumed tightening after injecting funds early in the week
Shen Hong – WSJ
Anxiety is lingering in China’s money market after Beijing showed no signs of reversing its effort to use higher interest rates to rein in the speculative investment threatening to destabilize the financial system and derail long-term economic growth.

One of Canada’s Biggest Stock Managers Says Bond Spike No Threat
Kristine Owram – Bloomberg
‘Stocks are still very compelling,’ Investors’ Downie Says; Looking for bargains in Canada after oil-induced sell-off
The head of one of Canada’s biggest equity funds says the bull market in stocks has room to run because dividend yields will remain attractive even if bond yields move higher.

Climate Change May Be Intensifying China’s Smog Crisis
Chinese leaders, grappling with some of the world’s worst air pollution, have long assumed the answer to their woes was gradually reducing the level of smog-forming chemicals emitted from power plants, steel factories and cars.


Britain to fire starting gun on Brexit talks
Padraic Halpin – Reuters
The nine-month Brexit “phoney war” is set to come to an end next week when British Prime Minister Theresa May notifies the European Union of Britain’s intention to leave, starting two years of unprecedented negotiations.


Big Oil Replaces Rigs With Wind Turbines
Jess Shankleman – Bloomberg
Big oil is starting to challenge the biggest utilities in the race to erect wind turbines at sea. Royal Dutch Shell Plc, Statoil ASA and Eni SpA are moving into multi-billion-dollar offshore wind farms in the North Sea and beyond. They’re starting to score victories against leading power suppliers including Dong Energy A/S and Vattenfall AB in competitive auctions for power purchase contracts, which have developed a specialty in anchoring massive turbines on the seabed.

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Graduate of University of Minnesota School of Journalism and Mass Communication