Hits & Takes
By JLN Staff
Yesterday was a success for the MarketsWiki Education World of Opportunity at the Stuart School of Business at Illinois Tech in Chicago. We had six strong speakers who were appreciated by the audience of industry interns.
Rick Cooper, a professor at IIT’s Stuart School of Business, talked about the importance of the markets for funding companies and ensuring fair prices, and how participants help the economy in general by driving out market inefficiencies. Tom Sexton, NFA CEO, said that without regulation from bodies such as his (and FINRA, and the CFTC, etc.) to insure fairness, people wouldn’t use our markets; and he talked about the many job opportunities available in market regulation.
tastytrade’s Tom Sosnoff spoke about how trading gives people the ability to make quick decisions and to value goods and services. Paul Georgy, president of the introducing broker Allendale, outlined the “Three steps to thriving as a futures broker”. Dan Gramza, president of Gramza Capital Management, injected some zen into the conversation by reminding the audience that even in trading, “how we think creates our reality,” and that we cannot control the outcome of a trade, only our actions.
Rich Mackey, the president of Rosenthal Global Securities, wrapped things up by explaining what caddying as a teenager taught him about trading and building algos.
It was a lively and varied event, and the large audience stayed until the end, some hanging on to talk to the speakers afterwards.
Our friends at ICDA in Switzerland are happy to announce Eurex as sponsors and new CEOs joining as speakers for their Bürgenstock Conference. In addition, they announced the support of China Futures Association and Zug Commodity Association. The conference is scheduled for September 11 to 13.
You may notice two sponsored content pieces in today’s newsletter. One, from CME Group, highlights some of the key aspects for the Russell Indexes, now trading on CME with comments from Ron Bundy, of Russell, Blu Putnam and Tim McCourt both of CME Group.
Our second sponsored content piece today is from the Intercontinental Exchange, which features a preview for key central bank meetings starting with the ECB meeting on July 20, the Fed meeting on July 25-26 and the Bank of England meeting on August 3.
Both are worth checking out.
Mind the Regulatory Gap: Friction, MiFID II and Populism
At Trading Chicago presented by FOW and John Lothian News, Steve Grob, director of group strategy, spoke to JLN about how the financial regulatory environment of the U.S. is starting to stray from that of the rest of the world. To Grob, this development means more systemic risk in the system and an added burden on market participants.
New Report: SME Financing & Equity Markets
The World Federation of Exchanges (WFE) recognises the importance of ensuring small and medium enterprises (SMEs) can access equity market financing. This research identified globallyconsistent barriers and opportunities for enhancing access to equity market finance.
**JK: One aspect touched on in the report was crowdfunding, which showed more than a 1000% increase from 2012 to 2015. An interesting space and competition to traditional stock exchanges.
20th Anniversary of Securities Options; Osaka Exchange, Inc. (OSE) is celebrating the 20th anniversary of the launch of Securities Options.
On July 18, 1997, securities options markets were launched at then Osaka Securities Exchange and at Tokyo Stock Exchange. Though only a mere 20 underlying securities were being traded at each respective market at the time, said number has surpassed 200 today in response to the needs of market users over the years.
***** Party like it’s 1997!
SGX to adjust equities market structure after supportive feedback
Singapore Exchange (SGX) is proceeding with adjustments to the equities market structure after receiving largely supportive feedback during the public consultation process in March 2017.
***** Change was needed to try to shake things up.
How Nasdaq is Using Machine Learning and AI in the Post Trade World.
Adena Friedman – Nasdaq
Capital market operators worldwide are tasked with maintaining resiliency and mobilizing the latest technologies to constantly strengthen and evolve their performance. At Nasdaq, where our technology powers more than 90 marketplaces worldwide, we understand this better than any other exchange.
***** Strong statements from the Nasdaq CEO
Upcoming Central Bank Meetings: When & What to Watch
Prepare for the next round of central bank meetings and learn how you can manage your exposure through ICE’s deeply liquid interest rate product portfolio.
Monday’s Top Three
Our top three were led by Nasdaq’s idea to clear the Treasury markets in the Wall Street Journal’s Nasdaq Urges Central Clearing of Treasury Trading. Second went to the analysis piece from Bloomberg What Milton Friedman Got Right, and Wrong, 50 Years Ago. Third was the Bloomberg podcast, Odd Lots: Why the Most Exciting Market in the World Right Now Is in Wheat
104,599,128 pages viewed; 22,608 pages; 207,095 edits
The Return of the Russell 2000
FTSE Russell Indexes have brought the Russell index futures and options back to CME Group. See what both have to say about the contracts and what it means for traders.
Watch the video above and visit us at www.cmegroup.com.
Frankfurt Is the Big Winner in Battle for Brexit Bankers
Gavin Finch, Hayley Warren and Tim Coulter – Bloomberg
Frankfurt has emerged as the biggest winner in the fight for thousands of London-based jobs that will have to be relocated to new hubs inside the European Union after Brexit.
Robotic Hogwash! Artificial Intelligence Will Not Take Over Wall Street; For all the hype, applying AI to investment still has a few serious problems
James Mackintosh – Bloomberg
Ten years ago, computer-driven traders pulled the plug after their algorithms ran amok, leading to billions in losses and the eventual closure of Goldman Sachs ‘s flagship quantitative fund.
Wall Street Profits by Putting Investors in the Slow Lane
Jonathan Macey and David Swensen – NY Times
Wall Street has developed a new way, clouded in obscurity, to fleece the hundreds of millions of Americans who have money invested in company pension plans, mutual funds and insurance policies.
London forex traders plead not guilty to U.S. rigging charges
Jonathan Stempel – Reuters
Three former London-based traders pleaded not guilty on Monday to U.S. charges they conspired to rig prices in the roughly $5 trillion foreign exchange market.
Citadel to Give FX Clients Outside Check on How Trades Stack Up
Lananh Nguyen – Bloomberg
Market maker to provide independent trade analysis via BestX; Measurements will include transaction costs, market impact
Citadel Securities LLC, the electronic market maker founded by Kenneth Griffin, wants to give clients a closer look at its foreign-exchange trades.
U.S. Federal Reserve fines BNP Paribas $246 mln for foreign exchange fixing
Pete Schroeder – Reuters
The Federal Reserve announced on Monday it had fined BNP Paribas (BNPP.PA) $246 million for “unsafe and unsound” practices in its foreign exchange markets, saying it had found deficiencies in the bank’s oversight and internal controls of its traders.
World Federation of Exchanges Responds To FCA’s Discussion Paper on DLT
The World Federation of Exchanges (“WFE”), which represents more than 200 market infrastructure providers including exchanges and CCPs, today responded to the UK Financial Conduct Authority’s (“FCA”) Discussion Paper on Distributed Ledger Technologies (DLT).
California confronts solar power glut with novel marketplace; Negative wholesale power prices proliferate in state with high retail rates
Gregory Meyer in New York – FT
California is a leader in solar and wind power. The Golden State is well on its way to reaching a self-imposed goal of getting a third of its electricity from renewable sources by 2020, part of an aggressive agenda to cut greenhouse gas emissions.
Citigroup Chooses Frankfurt as New European Trading Hub
Dakin Campbell – Bloomberg
U.S. lender said to add 150 to 250 new jobs in German city; Citigroup to keep London as its European headquarters: source
Citigroup Inc. has chosen Frankfurt as its newest trading hub in the European Union and plans to present that option to its board of directors this week for approval, according to a person with knowledge of the decision.
Four priorities to secure the UK finance sector post-Brexit
Stephen Barclay – City AM
The thousands of financial services firms in the UK employ over one million people, two thirds of whom work outside of London.
FTSE 100 history: how the index has changed over 33 years
David Brett – City AM
The FTSE 100 index has just seen one of its quarterly changes with security firm G4S and real estate investment trust Segro promoted to the top 100.
Exchanges, OTC and Clearing
Bats gets MiFID II-ready with software update; Third of four planned software updates adds new FIX functionality and transparency capabilities.
John Bakie – The Trade
Bats Europe has rolled out new software for its exchange as part of preparations for MiFID II.
Irish Stock Exchange introduces new T7 trading technology
Irish Stock Exchange introduces new T7 trading technology
The Irish Stock Exchange (ISE) has introduced Deutsche Börse’s new T7 trading platform for the Irish equity market. The new platform evaluates ISE’s offer for the equity market in terms of performance and capacity. T7 brings synergies, as it makes the connection and trading of Irish shares easier and cheaper for international trading houses. This is due to lower development and maintenance costs for companies that use T7 for multiple markets. The new system will further reduce latency for all trading participants.
Monthly report: Clearstream prepares for CSD regulation
CSDR aims to further harmonize the European settlement landscape and improve the protection of assets / applications for CSD licenses by the end of September 2017 / protection of assets is a central concern for Clearstream
LCH’s CDSClear launches CDX high-yield clearing
Clearing of Markit CDX North American High Yield index now available; First European CCP to offer clearing of this index; Further expands CDSClear’s North American index coverage; LCH has broadest credit coverage of any CCP globally
LCH, a leading global clearing house, has extended its CDSClear service to offer clearing for the CDX North American High Yield index. This latest addition to LCH’s credit derivatives clearing service follows the launch of clearing for the CDX North American Investment Grade index at LCH in 2016.
Arrangements for Belle Stock Options and Structured Products
Hong Kong Exchanges and Clearing Limited (HKEX) has announced the arrangements for Belle International Holdings Limited (Belle) stock option contracts and structured products with Belle shares as underlying asset to account for the privatisation of Belle and the withdrawal of its listing.
NYSE President Farley to Testify on Sarbanes-Oxley Impact on Public Companies
The New York Stock Exchange, part of the Intercontinental Exchange (NYSE: ICE) global network, today announced that NYSE President Thomas W. Farley will appear before the House Financial Services Capital Markets Subcommittee to discuss Sarbanes-Oxley and corporate governance.
MIAX Options Exchange Enters into 2017 Equity Rights Transaction with Exchange Members Including Barclays, Citadel Securities, IMC, Morgan Stanley & Co., Optiver US, Susquehanna Securities, Timber Hill, and Wolverine Trading
MIAX Options Exchange announced today that it has closed its 2017 Equity Rights Program (ERP-III) following its entry into agreements with several leading order flow providers and market making MIAX Options member firms. Similar to the structure of ERP-I and ERP-II, its prior two Equity Rights Programs, ERP-III provides these MIAX Options member firms with the right to invest in MIAX Options’ parent holding company Miami International Holdings, Inc. in exchange for payment of an initial purchase price or the prepayment of certain transaction fees and the achievement of certain liquidity volume thresholds on the Exchange.
MCX partners with Thomson Reuters to launch co-branded commodity indices; As Sebi gradually opening up mkt, next could be PMS in commodities that are useful for benchmarking
Rajesh Bhayani – Business Standard
Multi Commodity Exchange of India (MCX) on Tuesday announced that it has joined hands with Thomson Reuters to launch co-branded commodity indices in India. The move follows signals from the Securities and Exchange Board of India (Sebi) to open up commodity markets.
Colo, IPO challenges beckon Vikram Limaye as first outsider to head NSE; Limaye takes charge as managing director and chief executive officer of the exchange from July 17
Samie Modak – Business Standard
Having been a part of the financial industry during the 2008 global meltdown and the recent asset quality problem, Vikram Limaye is no stranger to handling crisis.
FESE Publishes The European Exchange Report 2016
The European Exchange Report is a valuable source of integrated information on Europe’s exchange industry. The Report includes key figures of each operator of Regulated Markets which are summarised on a one-page statement allowing for easy and transparent comparison of their key financial figures.
Boerse Stuttgart Introduces Instant Trading Also For Bonds – Investors Now Have Individual Request Options, Giving Them Better Price Quality And Higher Probability Of Execution
Due to the ongoing low interest-rate policy and changes to regulatory and technological framework conditions, the bond market is characterised by decreasing liquidity and increasing fragmentation. This adds complexity to the price discovery and hence price and trading quality. Nevertheless, debt instrument investors expect attractive and tradable prices – without restrictions of the product universe on offer. To take better account of these customer demands, Boerse Stuttgart has now incorporated instant trading for bonds in its hybrid market model.
Rise of the Robots: The Quant Revolution
RCM Alternatives Blog
Artificial Intelligence, Algorithms, Quants, Computer Driven Strategies, FinTech. No matter how you phrase it, those buzz words are here to stay in the financial realm. And what stories they have become… with yesterday’s more “normal” quant stories of machines taking over for analysts turning into stories about hedge fund managers trying to teach computers to copy their brain.
FX: Cobalt fends off blockchain competition
Paul Golden – Euromoney
Despite the progress of other projects applying blockchain technology to FX, Cobalt’s CEO remains confident that his post-trade processing network can reach critical mass.
Level 3, Equinix, AT&T Among Data Center Colocation Leaders
James Anderson – Channel Partners
A new study shows the profit that partners can earn from data-center colocation sales now and in the near future.
MarketsandMarkets predicts the colocation market to go from $32 billion this year to $62 billion in 2022. That is an annual growth rate of 14.6 percent.
The study lists the increased complexity of data centers as well as the need for reliable, secure and cost-effective infrastructure as major drivers for the colocation market.
In the crypto world, you can get something for nothing
5 HOURS AGO By: Kadhim Shubber – FT
In the old economy, people used money to buy goods and services. I have some cash, you have a delicious burrito, and when we exchange the two, you end up with something you want, and so do I. Something for something.
CloudMargin and South Africa’s First Tri-Party Collateral Agent – Strate Collateral Management – Bring Unprecedented Automation, Efficiencies to South African OTC Derivatives Participants
South African market participants can now enjoy unprecedented automation and straight-through processing by leveraging newly available, integrated cloud-based technology to exchange tri-party SWIFT1 messaging for collateral instructions, settlement and confirmations. CloudMargin, the multi-award winning creator of the world’s first web-based collateral and margin management solution, and Strate, the South African Central Securities Depository (CSD) and South Africa’s first Tri-Party Collateral Management Agent, today announced that they have just integrated their platforms. The move makes tri-party messaging and collateral optimisation more accessible for both buy- and sell-side participants in the country.
Cloud as a Competitive Advantage in Banking
Steven O’Hanlon -Numerix via TABB Forum
There are some banks that still remain hesitant to adopt the cloud, largely because of perceived data security and privacy risks. But cloud computing has many forms—public, private, and hybrid—and its various delivery methods can empower banks to meet the new information, data aggregation, calculation, processing and risk management requirements in an agile and flexible environment, while at the same time reducing IT expenses over time.
New York Seeks Bank Records of Former Trump Associate Paul Manafort; Loans issued by a bank run by former campaign adviser Steve Calk are focus of subpoena
By Michael Rothfeld – WSJ
New York prosecutors have demanded records relating to up to $16 million in loans that a bank run by a former campaign adviser for President Donald Trump made to former campaign chairman Paul Manafort, according to a person familiar with the matter.
House Republicans Set Out Plan to Rewrite Tax Code; Party aims to pair landmark tax bill with hefty deficit- cutting measures, all without Democratic support
By Richard Rubin – WSJ
House Republicans are unveiling an ambitious fiscal plan on Tuesday that could let them rewrite the tax code, revamp medical malpractice laws, change federal employees’ retirement benefits and partially repeal the Dodd-Frank financial regulations—all in a single law without any votes from Democrats.
The Trumps and the Truth; The best defense against future revelations is radical transparency.
By The Editorial Board – WSJ
Even Donald Trump might agree that a major reason he won the 2016 election is because voters couldn’t abide Hillary Clinton’s legacy of scandal, deception and stonewalling. Yet on the story of Russia’s meddling in the 2016 election, Mr. Trump and his family are repeating the mistakes that doomed Mrs. Clinton.
U.S. SEC’s Piwowar urges companies to pursue mandatory arbitration clauses
Sarah N. Lynch – Reuters
A key U.S. securities regulator on Monday voiced support for possibly allowing companies to tuck language into their initial public offering paperwork that would force shareholders to resolve claims through arbitration rather than in court.
Lombard: FCA announces platform alteration for gravy train; Fund rating agencies set to face greater scrutiny
Matthew Vincent – FT
Who wields most power over the UK’s £592bn online investment industry? On Monday, the Financial Conduct Authority proved beyond doubt that?.?.?.?it’s US fund manager Vanguard.
CoinDash Says Hacker Stole $7 Million at Initial Coin Offering
Alexandria Arnold – Bloomberg
Social trading platform tells investors to stop sending money; Token sale garnered $6.4 million from early participants
Does this support the notion that there’s a bubble in digital currencies and initial coin offerings?
Mifid II cost disclosures pose risk to liquidity, warn banks; Dealers hope standardised methodology for some clients could mitigate impact
Chris Davis – Risk.net
Dealers have warned that Europe’s incoming cost disclosure requirements for over-the-counter derivatives trades will significantly increase trade latency and impact market liquidity for plain vanilla instruments. Banks are hoping regulators bless a standardised, grid-based methodology for trades with professional clients, which they say may help ease the burden.
Investing and Trading
BlackRock Keeps Getting Bigger But Fails to Meet on Revenue
By Sabrina Willmer – Bloomberg
Rakes in a record $74 billion for exchange-traded funds; But overall revenue fails to meet analysts’ expectations
While BlackRock Inc. raked in $74 billion in exchange-traded fund flows in the second quarter, that record was in part obscured by revenue that failed to beat estimates.
Morgan Stanley Just Doubled Down on Its Bullish Bet on the S&P
Sid Verma – Bloomberg
Chief equity strategist reiterates call for 2,700 by year end; Price-to-earnings ratio to move higher, Michael Wilson says
There’s juice in the equity rally yet.
A second-quarter earnings season that’s set to beat the consensus and reinvigorated faith in the Trump Administration’s policy objectives will spur the S&P 500 Index about 10 percent higher to a record 2,700 by the end of the year, according to Morgan Stanley Chief Equity Strategist Michael Wilson.
BlackRock reduces trade count as it looks for tech scale; BlackRock’s Larry Fink said the asset manager has reduced its trades by 80%, and plans to spend $1 billion on technology.
By Joe Parsons – The Trade
BlackRock has significantly reduced its trade count over the last five years, with an aim to increase its scale through technology-driven initiatives.
This Magic Formula Reveals How the ECB Might Taper
Piotr Skolimowski – Bloomberg
Louis Harreau of Credit Agricole CIB may have cracked the code for how the European Central Bank will end its quantitative easing program.
It’s contained in a simple equation, which he has dubbed the “new generation” Taylor rule, a reference to a tried-and-tested central bank model for setting interest rates based on how much inflation and growth are deviating from their target rates.
Citi expected to move UK sales and trading roles to Frankfurt; Move could see hundreds of jobs leave London.
By John Bakie – The Trade
Citi is set to choose Frankfurt as its main base of operations in the European Union as part of preparations ahead of the UK leaving the bloc in March 2019.
Goldman Sachs Reports Surprise Profit Increase; Bank’s earnings rise despite tough conditions in its core trading businesses
By Liz Hoffman – WSJ
Goldman Sachs Group Inc. GS 0.29% reported a surprise increase in second-quarter profit despite tough conditions in its core trading businesses.
Citigroup is staffing up for a new center that will unleash robotics throughout the bank
Frank Chaparro – Business Insider
Citigroup is staffing up for the robotic revolution.
BGC Partners Agrees To Acquire 100 Percent Of Berkeley Point Financial LLC
BGC Partners, Inc. (NASDAQ: BGCP) (“BGC Partners”, “BGC”, or the “Company”), a leading global brokerage company servicing the financial and real estate markets, today announced that it has agreed to acquire Berkeley Point Financial LLC.1 Berkeley Point is a leading commercial real estate finance company focused on the origination and sale of multifamily and other commercial real estate loans through government-sponsored and government-funded loan programs, as well as the servicing of commercial real estate loans, including those it originates. Berkeley Point was acquired by an affiliate of Cantor Fitzgerald, L.P.2 on April 10, 2014.
Australian Markets: Mid Caps a Sweet Spot for Investors
John Welling – Indexology Blog
We have previously taken a dive into performance differences between Australian market cap segments and observed that mid caps offer a “sweet spot” for market participants. Year-to-date, this message continues to resonate—the S&P/ASX MidCap 50 has returned 10.1% as of July 13, 2017.
India’s Most Valuable Bank Vies for Bond Crown Amid Record Sales
By Divya Patil – Bloomberg
HDFC Bank just 95 billion rupees away from overtaking Axis; Issuance to climb to 7 trillion rupees this year: Axis Bank
HDFC Bank Ltd. is threatening to end Axis Bank Ltd.’s decade-long reign as the largest arranger of rupee-denominated corporate bonds as sales climb to a record for a third straight year.
Citigroup to pick Frankfurt as EU base this week: sources
Alexander Hübner and Anjuli Davies – Reuters
U.S. bank Citigroup Inc (C.N) is set to become the latest Wall Street bank to pick Frankfurt as its European Union base this week in preparation for when Britain leaves the European Union, two sources told Reuters on Monday.
Europe Is Bored With Brexit
By Alan Crawford and Stefan Nicola – Bloomberg
Brexit talks fail to make it onto front pages across Europe; Newspaper focus hints at Europe’s real political priorities
As the U.K. finally gets down to Brexit business, the rest of Europe has already moved on.