Breaking News

Deutsche Börse probe widens; DRW to Buy HFTer RGM; Trump’s business councils fall apart

Deutsche Börse AG - Carsten Kengeter CEO, The Cube

First Read

No, Not the VIX – the VSTOXX
Sarah Rudolph – JLN

Even your dog has heard of the VIX, the Chicago Board Options Exchange‘s benchmark volatility index, but the VSTOXX, the benchmark for volatility in European stocks, is less of a household name in the U.S. Eurex has been trying to change that by adding more and more functionality to their VSTOXX products, starting out with spot prices and futures contracts on the index and then more recently moving into options on futures and ETNs.

Yesterday, Eurex and Rival teamed up for a meetup in Chicago at a popular Randolph Street restaurant to share the latest about VSTOXX and Rival Systems‘ offerings. Mark Shore of Shore Capital Research was engaged to give an update on the VSTOXX based on his research into the subject.

VIX is the go-to measure for volatility in the U.S., but “VSTOXX is a better proxy than the VIX for European volatility,” Shore said. Rival Systems, a trading systems and technology provider that launched in 2015, last year added access to Eurex products on its Rival Trader platform.

Shore said VSTOXX derivatives are ideal for hedging, trading short term moves, doing spreads between futures on VSTOXX and VIX, and deploying strategies that use both futures and options.

The VSTOXX measures the 30-day implied volatility of the EURO STOXX 50. VSTOXX derivatives settle in euro. The index has a negative correlation with equities, and tends to move somewhat more than the VIX, Shore said.

Eurex had offered options on the spot VSTOXX (OVS) but that was limited to US market participants who are a Qualified Institutional Buyer. In February of this year the exchange started offering options on the futures (OVS2), which opens up participation to individuals as well. And just a few weeks ago it introduced exchange-traded notes, rounding out its suite of VSTOXX-related products and giving its customers more functionality to trade a whole range of derivatives on the index, including options on the VSTOXX-VIX spread.

Rival Systems does not yet offer an autospreader for this functionality, but its CEO, Rob D’Arco, says one is in development. D’Arco also said Rival has benefitted in the short term from the recent news of Vela Trading Technologies’ acquisition of OptionsCity Software, noting that uncertainty over their strategy has encouraged options traders to take a look at Rival’s offerings.


Hits & Takes

During NEX Group’s Trading Tech 300 merit badge workshop offering the Geocaching badge, they had a lot of help. Tom Scanlan said he and Chris Keating “had an amazing day and we enjoyed it so much. We learned and had a ton of laughs.”

He said they had a lot of help, including from Jefferson Davis of the CBOT Building security staff, Ricky Stern at Geneva Trading, Sean Murphy and Dan Cleaves of the management of NEX in New York, the staff at the Money Museum at the Federal Reserve and Wintrust’s Kitty Schreiber. They fed the Scouts at Boni Vino.~JJL

Bryan Durkin of the CME Group is the speaker in today’s video from the Chicago sessions of MarketsWiki Education World of Opportunity.~JJL

Big consolidation news yesterday as DRW announced it will be buying RGM. My favorite bit from the WSJ story we have below in Lead stories: “The firm made $17 on its first day of trading in December 2001, which its founders used to buy three margaritas…” ~SD

Are you hiring interns next summer? Contact us about our MarketsWiki Education Recruiting event on October 16 at the CBOE, the Monday of EXPO week in Chicago.~JJL


The Impact of Global Finance – Brian Durkin

“As you journey onward, it’s not always about the next promotion. When your colleagues or boss suggest that you make a lateral move, take it. Don’t just sit there and ask what’s in it for me.”

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Brian Durkin, president of CME Group, discusses the impact of global finance and how everyone from farmers to asset managers flocks to the CME because it represents the broadest array of asset classes in virtually every aspect of commodities. Durkin preaches the importance of networking and perseverance and reminds everyone not to be entitled. You have to be willing to roll with the punches and adapt. Durkin recalls after his first day on the floor of the CBOT, he cried and didn’t want to go back. But he did.

Read the rest and watch the video »


Deutsche Börse launches a series of seminars on stock market knowledge; Basic and construction seminars “Your way to the stock exchange” takes place in Frankfurt, Eschborn, September, October and November
Deutsche Börse
Deutsche Börse is organizing evening seminars for private investors via its in-house stock exchange academy, the “Capital Markets Academy”. There will be six basic seminars for beginners, which will take place in the trading hall of the Frankfurt Stock Exchange, as well as six building seminars at the company center in Eschborn. The seminars can be booked in the block or individually.

***** I want to go.


TMX Group Remembers Stan Deudney, Founder and Former President of CDS
TMX Group today offers sincere condolences on the passing of Stan Deudney, the founder and first President of the Canadian Depository for Securities (CDS). A champion of innovation and true pioneer in Canada’s capital markets industry, Stan leaves behind a legacy of innovation. He was the architect and driving force behind the creation of CDS, Canada’s equities and fixed income clearing house and served as CDS’s first President and Chief Executive Officer from 1980 to 1983. He went on to establish the first discount brokerage in Canada and created the first global trade reporting system and settlement system in 1987. For the past 25 years, Mr. Deudney has served as president of Transatron Systems Inc., a provider of software and consultancy services to the financial community. In 2012, he was awarded the Queen Elizabeth II Diamond Jubilee Medal by the Investment Industry Association of Canada in recognition of his achievements in his career in the securities industry.

***** Condolences to the family and friends of Stan Deudney.


Wednesday’s Top Three
Yesterday’s top story was Does CME Group Inc (CME) Pay Its CEO Based On Company Performance? In second was a story which prominently featured Russ Rausch, formerly of TT, The NFL’s Mindfulness Movement Is Spreading. In third was Institutional Investor’s The Next Quant Meltdown


MarketsWiki Stats
106,187,516 pages viewed; 22,676 pages; 207,826 edits
MarketsWiki Statistics


Lead Stories

Deutsche Börse probe widens to all of top management; Prosecutors, state regulator and financial watchdog now examining German stock exchange
Philip Stafford – FT
Investigations of Deutsche Börse’s chief executive have widened to examine the “reliability” of all of its top management, threatening to engulf the board and hobble its efforts to move on from its failed deal with the London Stock Exchange Group.

Trading Firm DRW to Buy High-Frequency Trader RGM; The deal is the latest sign of how the long period of low volatility is forcing out weaker players
Alexander Osipovich – WSJ
Electronic-trading firm DRW Holdings LLC has agreed to buy high-frequency trader RGM Advisors LLC, the latest sign of how the long period of low volatility is shaking up the high-speed trading world and forcing out the weaker players.
Chicago-based DRW said Wednesday it is acquiring Austin, Texas-based RGM, though it declined to disclose the purchase price. DRW, whose roots are in futures trading, is buying a firm with an expertise in stock trading. The deal is expected to close in September, DRW said.

Trump’s business councils fall apart after CEO resignations; Executives faced consumer pressure and reputational risks from Charlottesville furore
Ed Crooks and David Crow in New York – FT
Donald Trump’s high-level business advisory groups have fallen apart after chief executives walked away in protest against the president’s failure to clearly denounce white supremacist violence in Charlottesville at the weekend.

New Currency in Race to Remake One of World’s Oldest Markets
Luzi-Ann Javier and Susanne Barton – Bloomberg
Using bitcoin’s blockchain ledgers as template for gold trades; Bid to make $27 billion of bullion buying faster, more secure
The blockchain revolution is gunning for the gold market. Public online ledgers that emerged from the explosive markets for bitcoin, a virtual currency, already have drawn the attention of businesses from banks to retailers who see blockchain systems as a revolutionary way to verify and record transactions. Now, companies including exchange owner CME Group Inc., IEX Group Inc. spinoff TradeWind Markets and financial technology firm Paxos are rolling out similar platforms to bring gold into the digital age.

The Gas Tankers Lurking at Sea Looking for a Better Deal
Anna Shiryaevskaya – Bloomberg
Less LNG evaporation means more flexibility to find best buyer; Gas market looking more like oil as ships become trading tools
When the tanker Provalys left Louisiana for Chile last month with a full load of U.S. liquefied natural gas, it sailed around South America instead of taking a shortcut through the expanded Panama Canal. Not only may the route be cheaper without canal transit fees, but advances in technology mean less of the fuel would end up lost at sea during the journey.

Prosecutors Allege Insider Trading Involving Former Bank of America IT Worker; Former tech employee at bank allegedly tipped several friends about pending corporate mergers
Dave Michaels – WSJ
A former Bank of America Corp. BAC -1.14% employee and several friends at prominent Wall Street firms face criminal insider-trading charges over tips about potential mergers gleaned from a confidential deals database.

Black banker sues Goldman Sachs for racial discrimination
Daniel Weissner – Reuters
A black banker in Goldman Sachs Group Inc’s (GS.N) personal wealth management unit filed a lawsuit on Wednesday accusing the firm of steering top clients to her white colleagues and denying her promotions because of her race.

JPMorgan hires AI expert to help build global trading hub; Wall Street’s biggest banks are turning to artificial intelligence to make their giant trading units more efficient
By Samuel Agini – Financial
JPMorgan has hired a machine-learning expert from its big Wall Street rival Goldman Sachs to work in the unit that monitors the bank’s vast trading positions.

Exchanges, OTC and Clearing

Monthly Report: Clearstream supports liberalization of the Chinese financial market; Opening of the Chinese market is progressing / Clearstream will support BondConnect’s initiative
Frankfurt, Eschborn, September, October and November
Deutsche Börse
Recent announcements, according to which a selection of A-shares from mainland China is to be included in indices for emerging markets, opens a new chapter in the liberalization of the Chinese market. Analysts expect the international interest in Chinese equities to grow significantly.

ASX Ltd Full-Year Results Media Release

No Change to Trading of HSCEI Futures and Options after Index Methodology Changes
No change to trading of HSCEI futures and options after methodology for underlying index changes; Hang Seng Indexes’ website has details of planned HSCEI methodology changes
Hong Kong Exchanges and Clearing Limited (HKEX) has announced that there will be no change to the trading of its futures and options linked to the Hang Seng China Enterprises Index (HSCEI) after planned changes to the index universe announced today (Thursday) are implemented.

SGX and Singapore Institute of Surveyors and Valuers to jointly review practices and reporting for valuations used by listed issuers
Singapore Exchange (SGX) and the Singapore Institute of Surveyors and Valuers (SISV) are jointly reviewing valuation practices and the reporting carried out by real estate valuers that listed issuers engage.

NSE, BSE initiate audit of 100 ‘shell’ firms; Sources said the exchanges were in the process of appointing an audit panel
Shrimi Choudhary – Business Standard
Stock exchanges have initiated audits of suspected shell firms. According to sources, the National Stock Exchange (NSE) and the BSE will first audit 100 suspended companies of the 331 listed by the government.

ASX blockchain-based CHESS project still in testing; The securities exchange is yet to determine if blockchain is the best solution to replace its equity clearing and settlement platform, with a final decision expected by March 2018.
Asha McLean
The Australian Securities Exchange (ASX) has said that its new post-trade solution to replace its legacy Clearing House Electronic Subregister System (CHESS) platform is still in testing phase, with the software on track for assessment in December by a third party.


The Key to Increasing Diversity in the Tech Industry; Damien Hooper-Campbell, chief diversity officer at eBay, says it can’t be only about the numbers
Cat Zakrzewski – WSJ
As eBay Inc.’s first chief diversity officer, Damien Hooper-Campbell is helping break new ground daily for both his company and the tech industry as a whole. And a lot of people are watching.

Liquidnet taps Deutsche Bank for technology head; With 16 years experience, Patrick Strobel joins Liquidnet from Deutsche Bank and has also worked at JP Morgan.
Hayley McDowell – The Trade
A former technology veteran from Deutsche Bank has departed to join Liquidnet as head of technology for the EMEA region.

Swiss digital asset exchange buys U.S. wallet maker in all-bitcoin deal
Gertrude Chavez-Dreyfuss – Reuters
Swiss digital currency exchange ShapeShift AG said on Wednesday it has acquired Seattle-based KeepKey Holder LLC, a maker of devices known as digital wallets, in an all-bitcoin deal. Financial terms were undisclosed. KeepKey’s wallet, which sells for about $100, stores digital currencies.


The Untold Story of How Gary Cohn Fell for Donald Trump
William D. Cohan – Vanity Fair
As Goldman Sachs’s long-suffering No 2., Cohn approached his board about his future. He didn’t get the answer he wanted. And then Jared Kushner swooped in. This is how Goldman Sachs took over the White House.

Trump’s Business Councils Disband After CEOs Defect; Move follows Donald Trump’s controversial response to the recent violence in Charlottesville
Emily Glazer, Sarah Krouse and Elena Cherney – WSJ
Business leaders disbanded two CEO councils created by the White House, a move they said was protesting Donald Trump’s failure to sufficiently condemn racism, marking a dramatic break between U.S. companies and a president who has sought close ties with them.?

The New Right-Wing Extremism: Unified, Tech-Savvy and Emboldened; The white-nationalist movement, until recently fragmented, is amplifying its small numbers with help from the web and new leaders
Dan Frosch, Cameron McWhirter and Ben Kesling – WSJ
The white nationalist drove from South Carolina. The self-described patriot trekked from Tennessee. The college student espousing white pride flew in from Nevada.

Trump Comments on Race Open Breach With C.E.O.s, Military and G.O.P.
Michael D. Shear, Glenn Thrush and Maggie Haberman – NY Times
President Trump found himself increasingly isolated in a racial crisis of his own making on Wednesday, abandoned by the nation’s top business executives, contradicted by military leaders and shunned by Republicans outraged by his defense of white nationalist protesters in Charlottesville, Va.

C.E.O.s Long Avoided Politics. Trump Is Changing the Calculus.
James B. Stewart – NY Times
The bar for a chief executive of a public corporation to repudiate a United States president is extraordinarily high. Corporate leaders aren’t given their power, prestige, responsibility and nine-figure pay packages to use the corner office as their personal soapbox.

DIMON: I ‘strongly disagree’ with Trump’s Charlottesville reaction and supported disbanding his business council
Bob Bryan – Business Insider
JPMorgan CEO Jamie Dimon addressed President Donald Trump’s reaction to the weekend violence in Charlottesville, Virginia and his participation in the now disbanded Strategic and Policy Forum in a memo to staff obtained by Business Insider.


Stanley Fischer, Fed vice-chair, on the risky business of bank reform; Over trout in Washington, the economist discusses his fears over US post-crisis banking
Sam Fleming in Washington – FT
It is an oppressively hot early August day, even by the steamy standards of Washington DC. In Georgetown, the elegant neighbourhood favoured by the capital’s lobbyists, lawyers and media personalities, many of the residents have fled for cooler climes, leaving the streets quiet.

Ex-Eaton Vance Corp trader gets 1.5 years in prison for fraud
Nate Raymond – Reuters
A former Eaton Vance Corp (EV.N) portfolio manager was sentenced to 1-1/2 years in prison on Wednesday for engaging in a fraudulent options trading scheme that prosecutors said had netted him more than $1.5 million in profits.

Insider trading ring exposed by SEC; Former Bank of America IT Consultant allegedly tipped friends about imposing mergers and acquisitions.
Hayley McDowell – The Trade
Seven ‘inexperienced’ traders have been charged with criminal offences by US authorities after making millions in profits from insider trading.

Sebi slaps Rs 18 cr fine on 22 entities for round tripping funds, IPO fraud; Sebi said the actions were serious in nature, having a cascading adverse effect on investors
Business Standard
Markets regulator Sebi on Thursday imposed a penalty of Rs 17.55 crore on 22 entities for round tripping of funds through fictitious transactions and siphoning off proceeds from the initial share sale of Brooks Laboratories Ltd (BLL).

FINRA’s July 2017 Quarterly Disciplinary Review
FINRA staff give examples of registered representatives’ misconduct, as featured in the July 2017 issue of FINRA’s Quarterly Disciplinary Review.

Transparency Services Forms Updates
Effective August 28, 2017, FINRA will make several changes to the TRACE New Issue Form, TRACE Order Form and FINRA Participation Agreement.


Pimco Warns That a Misstep on Replacing Libor Could Be Costly
Liz McCormick – Bloomberg
Pacific Investment Management Co. says there will be consequences from being too complacent during the phasing out of Libor, the global borrowing benchmark that underpins more than $350 trillion of financial products.

A senior exec in Citigroup’s equities unit has left
Alex Morrell – Business Insider
A senior executive in Citigroup’s equities unit has left the bank.
David Tenney, formerly the co-head of Investor Sales Services for the Americas, left Citi in July after four years at the firm, Tenney wrote in a post on LinkedIn.

High speed trader DRW acquires Texas rival as pressure to consolidate mounts
Philip Stafford – FT
DRW Holdings, one of the world’s largest high-frequency traders, has agreed to buy US peer RGM Advisors as the low volatility plaguing markets forces further consolidation in the industry.

DRW to acquire rival in latest HFT tie-up; Terms of the deal were not disclosed but it is expected to close by the end of September.
Hayley McDowell – The Trade
One of the world’s largest proprietary trading firms confirmed this week it will acquire RGM Advisors in the latest tie-up between high-frequency trading (HFT) firms.

Regulators wary of machine learning in model risk; Banks acknowledge they “cannot hide behind a complex tool” to assess interconnectedness
Louie Woodall –
US regulators are raising concerns about the use of machine learning techniques to assess contagion risks in bank model networks.


Chinese stocks get unified Hong Kong treatment; End to split of H-shares and red chips as market struggles to find best China gauge
Jennifer Hughes in Hong Kong – FT
Tencent and China Mobile could join ICBC in a shake-up of Hong Kong’s key China-tracking indices in a move designed to limit the complexities caused by China’s multiple share classes.

China Shows How Not to Sell $11.7 Billion in Shares
Bloomberg News
China United retracts statement on share sale in Shanghai; ‘Confusion right to the very last moment,’ investor says
For a deal that’s been months in the making, the $11.7 billion share sale plan announced by China’s second-largest wireless carrier sure looked like a rushed job.

Hunt On for a Billion Kronor About to Be Worthless in Sweden
Jonas Cho Walsgard – Bloomberg
Old one, two, and five krona coins become worthless in Sept.; Change for Change seeks coins to help neediest children
Time is running out. About 1.6 billion kronor ($200 million) of coins will soon be worthless in Sweden. A charity is now urging people to dig these out from between sofa cushions, kitchen jars or wherever they’re hidden to create Sweden’s biggest piggy bank for needy kids.


Most businesses have not changed strategic planning due to Brexit: Thomson Reuters CFO survey
Alistair Smout – Reuters
A majority of businesses are yet to change their strategic planning due to Britain’s decision to leave the European Union, a survey of chief financial officers by Thomson Reuters showed.

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Graduate of University of Minnesota School of Journalism and Mass Communication