Hits & Takes
Welcome to Deep Dive, our new show that features in depth conversations with key professionals in the industry. Our first two shows include key professionals from Trading Technologies. Today, Brian Mehta, chief marketing officer, is joined by Doug Moneison, partner in Hyde Park Angels, along with Jim Kharouf, who hosts the show. The first episode delves into the topic of where the industry is going to get the next generation of talent, what we have to offer and the rise of new firms that aim to attract new traders. You can watch the show in its entirety or just select shorter segments of interest. We have a second episode with TT’s Drew Shields and Julie Armstrong of CME. Let us know what you think. Email Jim at email@example.com.~JK
According to the IMF’s recent Global Financial Stability Report, assets under management in CTA/systematic trading strategies is around $220 billion, representing 19 percent growth in AUM the past three years.~[[SD
And thanks to all our sponsors and speakers for their support of the MarketsWiki Education event yesterday, held at the CBOE. We had 185 students sign up for the event. Thank you again to CBOE, National Futures Association, ED&F Man, Fidessa, Geneva Trading, Nasdaq and the OCC. If you know a student who would like to submit a resume for a 2018 internship, they can still do so HERE. ~JK
Deep Dive With JLN: How Can The Financial Industry Draw In The Next Generation Of Talent?
John Lothian News’ CEO Jim Kharouf sat down with Brian Mehta, chief marketing officer at Trading Technologies, and Doug Monieson, partner at Hyde Park Angels, to talk about what will attract the next generation of traders and professionals into this space. From college outreach programs like TT CampusConnect to a variety of new education, training, competitions and platforms that open the world to new traders with new ideas, both see the financial markets as having much to offer.
“Getting companies involved is really important because it’s a great two-way street,” Mehta said. “It’s good for companies to see the potential talent out there. But it’s also important for the students to see the different possibilities. It’s not just going into a trading firm, or it’s not just going into a technology firm, but what about the exchanges? What about the other partners we work with that open the capital markets to students?”
Financial Services Operations and Technology Solutions Provider Deep Systems Announces Formal Launch
Deep Systems announced its launch at the Futures Industry Association’s Expo 2017 in Chicago. Built from the ground up to service financial institutions, Deep Systems’ cost-effective infrastructure, IT, and software solutions empower asset managers, proprietary trading shops, sell side firms, SROs, and financial ISVs to simplify operations, eliminate key dependencies, and regain focus on their core business goals.
**Deep Systems is led by CEO Steve Tumen.
Change of Official Website Address
In order to allow visitors to access our website more securely, Japan Exchange Group, Inc. (JPX) will be enabling Always-On SSL (AOSSL or HTTPS everywhere) as a means for responding to security risks such as falsification, wiretapping, and spoofing conducted by third parties.
***** More cyber security news.~JJL
Monday’s Top Three
Yesterday’s top stories were led by Business Insider’s piece on CBOE Bats in An upstart exchange just took a big swing at two of Wall Street’s most powerful players. Second went to the Wall Street Journal’s Cohn: Overuse of Clearinghouses Could Create New Systemic Problem. Third went to Bloomberg’s piece on the Chicago Stock Exchange’s sale saga in Two Chinese Bidders for Chicago Exchange Drop Out
MarketsWiki Page of the Day: Cboe Global Markets
CBOE Holdings on Tuesday unveiled its new name, Cboe Global Markets, Inc., at the Futures Industry Association (FIA) Expo 2017 conference, currently taking place in Chicago. The company said the changes were made to reflect the evolving nature and spirit of the company following the acquisition of Bats Global Markets (Bats) earlier this year.
|MarketsWiki Statistics Sponsored by Level Trading Field|
CBOE Holdings Becomes Cboe Global Markets, Unveils New Corporate Identity
CBOE Holdings, Inc. today unveiled its new name, Cboe Global Markets, Inc., identity and mission at the Futures Industry Association (FIA) Expo 2017 conference, currently taking place in Chicago. The changes were made to better reflect the evolving nature and spirit of the company and follows the acquisition of Bats Global Markets (Bats) earlier this year.
Three biggest U.S. clearing houses pass liquidity stress tests: CFTC
The three largest U.S. clearing houses have all passed stress tests assessing whether they could handle a major market shock, the country’s derivatives regulator said on Monday.
SGX launches SGX America with office opening in Chicago
Singapore Exchange (SGX) today announced that it has expanded its international footprint with the opening of SGX America in Chicago. Building on its existing international connectivity, SGX’s presence in the U.S. will enable it to better serve a growing client base in this region and meet the rising international investor appetite to access and risk manage Asian exposure.
How big is the risk of another Black Monday equities crash?
Nicole Bullock, Robin Wigglesworth, John Authers and Christian Pfrang – FT
Art Cashin recalls the heady atmosphere that dominated the New York Stock Exchange for much of 1987. After five or six straight days of the market rallying, senior partners at brokerage trading desks would instruct the junior partners [traders] to “lighten up a little bit”, Mr Cashin says. “When they did, the market just went higher.”
Silicon Valley Vs. Wall Street: Can the New Long-Term Stock Exchange Disrupt Capitalism?
Alexander Osipovich and Dennis K. Berman – WSJ
Silicon Valley’s high-tech denizens complain the public stock markets are marred by a narrow focus on short-term earnings and profits.
Now they are actually doing something about it, by launching a new framework for corporate governance, investing and trading called the Long-Term Stock Exchange. http://jlne.ws/2ysnBBW
Frankfurt Doesn’t Want London’s Bankers; Residents of the sleepy city are wary of the cash and glitz a Brexit exodus would bring.
Steven Arons and Alessandro Speciale – Bloomberg
In the scramble to lure financial jobs from London in the wake of Brexit, Frankfurt is leading the packóat least nine banks have said they’ll move positions there. That could ultimately mean 10,000 new jobs and well over $100 million annually in new tax revenue for the German financial capital, auguring an economic and cultural rebirth. Micha Hintz hates the idea.
Meet the other 1%: The City’s black fund managers speak out
Elizabeth Pfeuti – Financial News
During the financial crisis, the Occupy Wall Street movement identified an uber rich group as “the 1%” who had all the wealth and, as a result, all the power. They were, the movement said, emblematic of all that was wrong with capitalism and the imbalance needed addressing.
Goldman Sachs Says Gold Is Better Than Bitcoin
Ranjeetha Pakiam – Bloomberg
Precious metals are ‘neither a historic accident or a relic’; Bitcoin has surged more than fivefold in ’17; gold’s up 12%
Gold wins out over cryptocurrencies when assessed on the majority of the key characteristics of money, according to Goldman Sachs Group Inc., which adds that fear and wealth are the core drivers of bullion.
TMX Group and Shenzhen Stock Exchange Sign Memorandum of Understanding
TMX Group Limited [TSX:X] (TMX Group) and the Shenzhen Stock Exchange (SZSE) are pleased to announce the execution of a non-binding Memorandum of Understanding (MoU) pursuant to which TMX Group and SZSE agree to explore opportunities for economic cooperation with a specific focus on the technology and innovation sectors, areas that are experiencing rapid growth in both Canada and China.
Exchanges, OTC and Clearing
CBOE and Bats Europe undergo rebrand; Rebrand will see CBOE become Cboe Global Markets and Bats Europe become Cboe Europe Equities.
By Hayley McDowell – The Trade
CBOE and Bats Europe have rebranded and unveiled new corporate identities following the completion of their $3.4 billion merger earlier this year.
Wedbush Futures Joins Eris As A Clearing Firm; Eris Exchange extends execution and clearing to Wedbush Futures’ network of professional traders and institutional clients.
Eris Exchange (Eris), a U.S.-based futures exchange that offers swap futures as the leading alternative to traditional over-the-counter (OTC) swaps, and Wedbush Futures jointly announced today that Wedbush Futures is the latest Futures Commission Merchant (FCM) to join Eris Exchange, and offer execution and clearing of Eris Swap Futures.
Regulatory compliance, costs could turn firms away from SGX; Alternative platforms like crowdfunding are giving the stock exchange a run for its money
Stephanie Luo – Business Times
Singapore is a leading financial hub, ranking third globally just behind London and New York, but its stock market is another story.
Buy-side owned block trading venue sees record quarter; Dark pool led by the former head of equity trading Americas at Blackrock sets quarterly record for total shares traded.
Hayley McDowell – The Trade
Luminex Trading & Analytics has set a quarterly record for total shares traded within its block trading venue, while leading the ATS industry for average trade size in August.
Nasdaq Clearing establishes direct clearing client model; New model introduces direct relationship between client and CCP for cost efficiency.
Hayley McDowell – The Trade
Nasdaq Clearing has confirmed the launch of a direct clearing client model aimed at minimising client driven costs and increasing clearing member default protection.
AIM stocks ready to trade on Turquoise; First day of trading saw 21 Turquoise members trade 31 AIM securities.
Hayley McDowell – The Trade
Turquoise has announced the FTSE AIM UK 50 index is now available to trade on its platform, with 21 members having traded 31 AIM securities in the first day of activity.
Turquoise makes AIM stocks available for trading
London Stock Exchange Group
Turquoise, a leading pan-European MTF today announces that the constituents of the FTSE AIM UK 50 index are now available to trade on its platforms. This follows the successful application by Turquoise to become an approved AIM Secondary Market Registered Organisation (ASMRO). The FTSE AIM UK 50 is made up of the fifty largest UK stocks quoted on AIM, LSEG’s international growth market. The move comes as a result of demand from Turquoise customers and reflects a growing appetite for efficient access to trade small and mid cap stocks from the institutional investor community.
Euronext Growth welcomes tech company Adeunis; EUR7.4 million raised with a market capitalisation of over EUR22 million
Adeunis, a French tech SME specialised in wireless connected objects, celebrated its listing on the Euronext Growth Paris market today during a ceremony at the Paris stock exchange attended by management, contributors and advisers.
TNS to provide managed hosting in ASX’s Australian Liquidity Centre]
DTCC Unveils Framework For Assessing Fintech’s Impact On Financial Stability In New White Paper
As experimentation and development of new fintech applications continues to grow, The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today unveiled a new framework of nine key factors to assess when considering its impact on financial stability.
How Google’s Quantum Computer Could Change the World
Jack Nicas – WSJ
The ultra-powerful machine has the potential to disrupt everything from science and medicine to national securityóassuming it works
Nobel-winning economist Shiller calls bitcoin a fad
Thomas Franck – CNBC
Bitcoin is a fad, just like bimetallism before it, according to one Nobel Prize-winning economist.
Authoritarian Cryptocurrencies Are Coming; Russia and China see a new way to completely control their financial systems.
Leonid Bershidsky – Bloomberg
With Russia and China both embracing the idea of sovereign cryptocurrencies, it’s time to ask a simple question: Why is a technology threatening to decentralize money so attractive to highly centralized, authoritarian regimes?
Wall Street’s dismissal of bitcoin becoming harder; ‘Fomo’ forces mainstream finance to pay heed to cryptocurrencies
Miles Johnson – FT
Fear of missing out, or “fomo”, is often said to be one of the most powerful psychological forces in finance. As retail investor interest in bitcoin and other cryptocurrencies has surged, investment professionals have often cast confused and disapproving looks towards what many believe is a wild and speculative bubble.
The 140-character president; Donald Trump’s Twitter feed has become a news service for political junkies. It’s also raised a tangle of new ethical and legal questions for reporters covering the White House.
Mathew Ingram – Columbia Journalism Review
During his time as president in the 1930s, Franklin Delano Roosevelt used a revolutionary new medium called radio to talk directly to the American people. For John F. Kennedy in the 1960s, the new medium was television. For Donald J. Trump in this decade, the new medium is Twitter, whichóless than a year inóhas already remade his presidency.
This Website Scores Companies on Their Conservative Values; David Black, husband of Republican Representative Diane Black, has spent more than $1 million on 2ndVote.
Jeff Green – Bloomberg
David Black says his aha! moment came in the grocery store parking lot after church one day in 2011, when his wife criticized him for impulsively agreeing to give a dollar to March of Dimes. Didn’t he know the group supports Planned Parenthood?
Wells Fargo brokerage to return $3.4 million for risky products
Elizabeth Dilts – Reuters
A brokerage industry regulator on Monday ordered Wells Fargo & Co (WFC.N) to return $3.4 million (2.56 million pounds) to customers after selling them inappropriate investment products, the latest sign that a culture of problematic sales practices has bled into areas outside its consumer bank.
Regulator to check financial health of securities firms aspiring
Yonhap – Korea Herald
The head of South Korea’s financial regulator said Monday that financial health is one of key requirements in allowing five leading securities firms to start investment banking businesses.
SEC seeks authority to access bank records
Doris Dumlao-Abadilla – Inquirer.net
The Securities and Exchange Commission (SEC) has appealed to Congress for authority to access and scrutinize bank records as needed to boost investor protection, prevent scams and improve cross-border coordination on securities regulation.
ASIC seeking financial literacy feedback
Darin Tyson-Chan – Financial Observer
ASIC has called for feedback from several different sectors to allow it to shape the 2018 national strategy for financial literacy.
Steven Maijoor on the State of European Financial Markets
Steven Maijoor, Chair of the European Securities and Markets Authority (ESMA), has spoken this morning at ESMA 2017 about the challenges facing European financial markets.
ESMA conference examines the state of European financial markets
The European Securities and Markets Authority (ESMA) will host its first conference, entitled The State of European Financial Markets, today at the Westin Grand Paris – VendÙme. Over 350 participants from across the European financial sector, including political decision makers, regulators, consumer and industry representatives and financial media will discuss the key issues facing Europe’s capital and securities markets.
FINRA Reminds Firms of Sales Practice Obligations for Volatility-Linked Exchange-Traded Products
Volatility-linked exchange-traded products (ETPs) are designed to track Chicago Board Options Exchange Volatility Index (VIX) futures, rather than the VIX itself. For the reasons explained further below, many volatility-linked ETPs are highly likely to lose value over time. Accordingly, volatility-linked ETPs may be unsuitable for certain retail investors, particularly those who plan to use them as traditional buy-and-hold investments.
FINRA Orders Wells Fargo Broker-Dealers to Pay $3.4 Million in Restitution and Reminds Firms of Sales Practice Obligations for Volatility-Linked Products
The Financial Industry Regulatory Authority (FINRA) announced today that it has ordered Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC to pay more than $3.4 million in restitution to affected customers for unsuitable recommendations of volatility-linked exchange-traded products (ETPs) and related supervisory failures. FINRA found that between July 1, 2010, and May 1, 2012, certain Wells Fargo registered representatives recommended volatility-linked ETPs without fully understanding their risks and features.
Monthly Disciplinary Actions October 2017
Monthly Disciplinary Actions September 2017
ISDA Publishes Common Domain Model Concept Paper as First Step to Realize Potential of New Technologies
The International Swaps and Derivatives Association, Inc. (ISDA) has today published a conceptual version of its ISDA Common Domain Model (CDM), which sets out the required elements to achieve a single digital representation of trade events and actions – an important precursor to realize the full potential of new technologies, such as distributed ledger and smart contracts.
Investing and Trading
Some Clarity on Risk Parity
Victor Haghani and James White – Bloomberg
Google “risk parity” and you’ll see a grab bag of conflicting results: articles and posts trying to explain what it means, why it reduces stock-market volatility, why it increases stock-market volatility, why it’s less risky than a traditional portfolio, or why it’s more risky, among other things. We’ll try to cut through this confusion to show that risk parity and traditional portfolios are closely related in philosophy.
Friend or foe? The remarkable growth of passive investing
Mary Fjelstad, senior research analyst – FTSE Russell Blog
The word “passive” is probably one of the most innocuous words in the English language. One might, therefore, assume that investments described as passive would not be considered dangerous in any way. However, a quick Google search on “the dangers of passive investing” yields 300,000 links and over 10,000 from 2017 alone. Focus on this topic has been driven by the enormous growth of passive investments over the last 18 years. In this and a subsequent blog post we will explore how passive investments have grown and the potential benefits and disadvantages this growth might present to the market and the economy overall.
Just own the damn robots.
The Reformed Broker
There’s something insidious going on in the psyche of investors that deserves a lot of the credit for today’s bull market, and almost no one is talking about it. But I will.
Capitalization and Its Discontents
Craig Lazzara – S&P Dow Jones Indices Indexology Blog
Last week, readers of the Financial Times were regaled by suggestions that capitalization-weighted index funds were “hugely biased,” “undiversified,” and “too trusting of the market’s judgment on a handful of very large stocks.” Criticisms of cap weighting aren’t new, of course, and at least in the near term seem not to have been very effective at deterring flows into passive strategies. Nonetheless it may be worth asking how cap weighting achieved its prominent role in the investment firmament.
Hedge Funds Can’t Resist This Volatility Trade That’s Been Losing Money
Klaus Wille and Simone Foxman – Bloomberg
Global Sigma, BTG Pactual among firms adding volatility funds; Bets on higher market turbulence have backfired this year
Does the lack of worry in global financial markets worry you? A growing number of hedge fund managers are counting on it.
State Street Global Advisors Launches Suite of Ultra-Low-Cost SPDR Portfolio ETFs
State Street Global Advisors
State Street Global Advisors (SSGA), the asset management business of State Street Corporation (NYSE: STT), today announced the launch of SPDR Portfolio ETFs, a suite of 15 ultra-low-cost ETFs that provide access to a wide range of equity and fixed income asset classes to help investors meet their goals.
The Energy Industry Plots a Complex Path in the Midst of Disruption
By STANLEY REED – NY Times
The last three years have been difficult for the oil and gas industry, as it struggled to cope with lower prices. Are the skies clearing at last?
An Old Fracking Hot Spot Makes a Comeback; The Haynesville Shale in Louisiana is being reborn, with the number of active drilling rigs tripling in the past year
By Lynn Cook – WSJ
One of the early centers of American shale drilling is roaring back to life, boosted by a building boom of petrochemical plants, fertilizer factories and gas-export terminals along the Gulf Coast.
How to invest like … the man behind the Dow Jones index
James Connington – Telegraph
Charles Dow started life on a Connecticut farm and never received a formal education in the world of finance. But by the time of his death in 1902 at the age of 51, he had founded financial publisher Dow Jones, established The Wall Street Journal, and given birth to the famous indices that still bear his name.
Lloyds Can’t Shake Troubled Past in Suit Over HBOS Takeover
Jeremy Hodges and Stefania Spezzati – Bloomberg
Lloyds facing 600 million-pound lawsuit from 6,000 investors; Ex-CEO Eric Daniels, former chairman Victor Blank to testify
Lloyds Banking Group Plc will be forced to relive a turbulent period in its 252-year history as former executives line up to testify at a London investor trial over its decision to take over the ailing HBOS Plc in 2009 at the height of the global financial crisis.
Credit Suisse targeted for break-up by activist hedge fund; RBR aims to exploit impatience with turnround progress and press for three-way split
Patrick Jenkins in London and Laura Noonan in Hong Kong – FT
A Swiss hedge fund is poised to launch an activist campaign to break up Credit Suisse, tapping into investor impatience with the progress of the bank’s turnround under chief executive Tidjane Thiam.
Gorman’s Brokerage Play Lifts Morgan Stanley to Higher Profits
Hugh Son – Bloomberg
Unit reports third straight quarter of record pretax earnings; Bond-trading revenue falls 21% to $1.17 billion in period
This is why James Gorman wanted Smith Barney. While Morgan Stanley suffered the same bond-trading slump that afflicted rivals, the firm’s wealth management business carried it to improved profit last quarter. That division — which Gorman made a central part of the bank’s future as a driving force behind the crisis-era acquisition of Citigroup Inc.’s Smith Barney brokerage — posted its third straight quarter of record pretax earnings.
Goldman beats forecasts despite bond trading slump; Investment banking offsets drop in fixed-income, currencies and commodities
Ben McLannahan in New York – FT
Goldman Sachs’ investment bankers have bailed out the bond traders, delivering a forecast-busting quarter despite a big drop in revenues from trading fixed-income, currencies and commodities.
BNY Mellon and HSBC join forces with Algomi for bond liquidity; Partnership means dealers will be able to tap database of custodians on behalf of buy-side clients.
By Hayley McDowell – The Trade
BNY Mellon and HSBC have signed up to Algomi’s Honeycomb network in a bid to boost their respective clients’ access to fixed income liquidity.
China’s Greatest Challenge; The country’s financial system has fueled its debt-driven growth and reforming it may be Xi Jinping’s toughest task
Anjani Trivedi – WSJ
Ending China’s dependence on debt-fueled growth may be the easy part of Beijing’s financial reform. Dismantling the complex and opaque system that grew up to satisfy the country’s insatiable demand for borrowing will be harder and more dangerous.
Broker Behind World-Beating Rally Stirs Kazakh Controversy
Nariman Gizitdinov – Bloomberg
Timur Turlov plans U.S. share sale to silence skeptics; Local-market ‘wizard’ builds positions funded by repos
As Kazakh stocks staged a world-beating rally since the end of 2015, few have benefited more than Timur Turlov.
Takeover deals that ‘jeopardise national security’ face Government scrutiny
The Government has announced proposals that would allow it to intervene in mergers and takeovers that raise national security concerns.
Brexit Timeline Pushed Back as May’s Late Push Comes Up Short
Robert Hutton, Tim Ross and Ian Wishart – Bloomberg
Joint statement affirms existing negotiating framework; Some hope in pledge to ‘accelerate’ talks in ‘months to come’
Last-minute efforts by U.K. Prime Minister Theresa May to unblock stalled Brexit talks came up short with European Union officials now looking to December to move negotiations on to discussions about the future EU-U.K. relationship.
Value of Brexit Transition Deal Is Waning by the Day, City Says
Alex Morales – Bloomberg
The value of Britain securing a transition deal to smooth its departure from the European Union is “disappearing by the day” until the details are nailed down, according to TheCityUK, which lobbies for financial companies.
Carney Makes Financial Case for Strong Brexit Transition Deal
John Glover – Bloomberg
Two-year deal must ensure continuity of cross-border services; BOE governor speaks in Treasury Committee hearing on Brexit
Bank of England Governor Mark Carney said the two-year Brexit transition agreement advocated by the U.K. government would be long enough to provide continuity for banks and investment firms as long as it ensures no break in cross-border services.
BOE’s Carney Issues Stark Warning on Brexit Risks;’ Transition deal for U.K. is in the interests of the EU, Carney says
By Jason Douglas – WSJ
Bank of England Gov. Mark Carney on Tuesday issued his clearest warning yet that a disorderly Brexit would pose a major risk to the European economy and not just the U.K.