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Are Chicago trading firms losing out in consolidation?; Hackers target weakest links for insider trading gain

First Read

Hits & Takes
By JLN Staff

As part of the sponsorship of the MarketsWiki Education Recruiting event, some sponsors get a one-minute video produced to tell the story of their internship program. Here is the one from HC Technologies titled, “HC Technologies Talks About Shaping the Next Generation of Derivatives Traders.”~JJL

Congrats to Adrienne and Stuart Muir, Alison Hood, Cathy Lyall, Wendy Deguara, Clive Furness, Clare Black, Katy Birch, Jo Sullivan, Rob Alexander, Jo Shannon and Julie Carruthers, who raised £9,748.75 for NICU at Evelina on September 30th. Ibuprofen and heat/ice help.~JK

From MarketsWiki: The Indian Energy Exchange is the largest energy market in India. It plans to go public on October 9, 2017, selling 6.06 million shares , making it the third Indian exchange to go through an IPO after Multi Commodity Exchange of India and Bombay Stock Exchange. ~JK

We have created a MarketsWiki page for Daniel Gorfine, the CFTC’s chief innovation officer and head of the agency’s LabCFTC initiative, appointed in July.~SR

Yesterday was the day scheduled for the ICE Benchmark Administration to take over the LBMA Silver Price from CME Group and Thomson Reuters. The takeover had been postponed to that date from a week earlier.~SR

CBInsights’ FinTech 250 firms included names like Algomi, Digital Asset Holdings and Quantopian.~JK

Cathryn Lyall, Co-Founder, Seismic Foundry has been named to the 2017 Brummell’s list of the most inspirational women in the City.~JJL

Yesterday, CME Group kicked off their 3rd annual Pink for a Purpose campaign, in which they partner with Bright Pink and Cancer Research UK, to fight the most common and devastating cancers affecting women.~JJL

So you got nothing to do on Thursday? Come out to one of the best charity events of the year here in Chicago – the ALTSO Rocktoberfest. Great cause, great bands, great time. Still some tickets left HERE.~JK

Yesterday’s Asia Pacific Financial News from John Lothian News is available HERE.~JJL


World Investor Week Brings Together Securities Regulators on Six Continents to Promote Investor Education and Protection; Joint Investor Bulletin Issued With CFTC, FINRA and NASAA on Tips for Smart Investing
The Securities and Exchange Commission, along with the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA), is leading efforts in the U.S. to raise awareness about the importance of investor education and protection as part of a global effort. World Investor Week, promoted by the International Organization of Securities Commissions (IOSCO), takes place October 2-8, 2017, marking the first time securities regulators on six continents are joining together to highlight what it means to be a smart investor as well as ways to avoid fraud.

***** Think of this as a big regulatory sandbox for them to experiment working together.~JJL


CME Group Reached Average Daily Volume of 17 Million Contracts in September 2017, up 13 Percent from September 2016
CME Group
CME Group announced that September 2017 average daily volume (ADV) reached 17 million contracts, up 13 percent compared with September 2016. CME Group September 2017 options volume averaged 3.6 million contracts per day, up 25 percent versus September 2016, with electronic options averaging 2.4 million contracts per day, up 36 percent from the same period last year. Open interest at the end of September was 114 million contracts, up 11 percent from the end of September 2016.

**Interest rate volumes average 8.2 million contracts per day, with electronic Eurodollar options jumping 129 percent to 545,000 contracts daily.~JK


Monday’s Top Three
Yesterday’s top read story was about love and marriage, in Bloomberg’s piece Rich Men With Extreme Politics Have the Happiest Marriages. Second went to The Wall Street Journal’s Hudson River Trading Is Exploring Possible Deal to Buy Sun Trading. We had a tie for third most read with the Financial Times’ Nex warns on key division’s profitability and The Wall Street Journal’s SEC Data Center Storing Market-Moving Information Had Security Flaws, Watchdog Says


MarketsWiki Page of the Day: Intercontinental Exchange
Intercontinental Exchange announced record monthly notional value cleared for credit default swaps (CDS) in September, with over $1.75 trillion in gross notional and a daily record of over $450 billion cleared on September 20.


MarketsWiki Stats
108,610,518 pages viewed; 22,835 pages; 209,775 edits
MarketsWiki Statistics


Lead Stories

Are Chicago trading firms losing out in consolidation?
Lynne Marek – Crain’s Chicago Business
Trading firm consolidation may ultimately favor New York businesses over Chicago’s pioneers, according to one longtime industry consultant. In the latest possible merger, New York-based Hudson River Trading is reportedly bidding for Chicago’s Sun Trading. Both firms are private; neither returned calls seeking comment.

Hackers target weakest links for insider trading gain; Cyber security experts say the recent SEC breach fits a pattern
Hannah Kuchler in San Francisco – FT
Cyber security experts believe the US Securities and Exchange Commission was the latest victim of cyber criminals on the hunt for market-moving corporate secrets, following a series of attacks seeking to steal unpublished press releases, deal negotiations and economic data.

BOE Sees ‘Substantial’ Brexit Threat to Derivatives Clearing
John Glover – Bloomberg
Relocation option might not be available in all markets; Some European firms not focused on threat to wholesale banking
The U.K.’s withdrawal from the European Union poses a “substantial risk of disruption” to cross-border clearing of financial contracts, according to the Bank of England.

Time is running out for Deutsche Bank as investors get twitchy; Blaming chief executive John Cryan for the German bank’s woes is too simplistic
Patrick Jenkins – FT
Over the weekend one of the country’s biggest asset managers, Union Investment, told the Sunday Times that if there was no improvement over the next six months, “pressure will mount” on management.

Bank of England says reliance on Libor poses risk to stability
Huw Jones – Reuters
Reliance on the Libor interest rate benchmark in setting mortgages, credit card loans and other contracts across the world poses a risk to the financial system, the Bank of England said on Tuesday.

SEC Says Hackers Accessed Two People’s Personal Information; SEC previously said it didn’t believe 2016 Edgar system hack let intruders access personally identifiable information
Dave Michaels – WSJ
Hackers who broke into a U.S. regulatory database that stores market-moving corporate information also accessed personal details about two people, including their names, dates of birth and Social Security numbers.

Wells Fargo CEO Sloan to Apologize, Explain Bank’s Accountability in Congressional Hearing
Andrew Ackerman and Emily Glazer – WSJ
Wells Fargo WFC 0.58% & Co. Chief Executive Timothy Sloan is expected to apologize for the bank’s phony account scandal Tuesday and tell Senate lawmakers that his firm has rehired about 1,800 employees who left over shortcomings with its sales practices, according to written testimony reviewed by The Wall Street Journal.

Hedge Funds Flip ICOs, Leaving Other Investors Holding the Bag
Olga Kharif – Bloomberg
SEC chairman warns of ‘pump-and-dump schemes’ in offerings
Instead of speculating on bitcoin, the smart money has figured out that one of the surest way to get rich quickly with cryptocurrencies is to be in early on initial coin offerings.

This Cryptocurrency Gained 695% on a Deal With Visa That Didn’t Happen
Jennifer Surane and Brandon Kochkodin – Bloomberg
A form of digital money known as Monaco gained as much as 695 percent in value since May 17, when its issuing company tweeted that it would offer a Visa Inc.-branded payment card.

Fidelity International reshapes cost model as active managers face rising pressure
Attracta Mooney – FT
Fidelity International, the £233.4bn asset manager, has radically overhauled its charging model by cutting ongoing fees and introducing a performance fee model, as active fund managers come under pressure to justify their charges.

Venture capital investors urged to wake up to ICOs; Industry veteran warns sector will be sidelined as start-ups turn to cryptocurrency tokens
Martin Arnold, Banking Editor – FT
A leading European venture capital investor has warned that his industry must wake up to the potential of “initial coin offerings” or it will find itself sidelined as the most promising start-ups fund themselves by issuing cryptocurrency tokens.

Exchanges, OTC and Clearing

ICE Announces Record Notional Cleared For Credit Default Swaps
Intercontinental Exchange announced record monthly notional value cleared for credit default swaps (CDS) in September, with over $1.75 trillion in gross notional and a daily record of over $450 billion cleared on September 20.

LSEG Technology firm Gatelab becomes approved vendor for Bombay Stock Exchange
London Stock Exchange Group
Gatelab, the financial software company, part of London Stock Exchange Group, has become an approved provider of risk gateway services for third party clients accessing the Bombay Stock Exchange (BSE). The solution enables users to send orders to the BSE currency derivatives segment in ultra low latency, if all the pre-trade risk checks are met

Shares plunge in Michael Spencer’s Nex Group after profit warning on key unit
Lucy Burton – Telegraph
Shares in Nex Group, the electronic trading business run by City veteran Michael Spencer, plunged on Monday after it warned that profits in one of its key divisions would be rattled by a rejig ahead of Mifid II.

CBOE Holdings Announces Date of Third-Quarter 2017 Earnings Release and Conference Call
CBOE Holdings, Inc. (BATS: CBOE | NASDAQ: CBOE) will announce its financial results for the third quarter of 2017 before the market opens on Tuesday, November 7, 2017. A conference call with remarks by the company’s senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Time (ET).

Ex-clients of FXCM accuse broker of breaking laws of five States
Finance Feeds
The amended complaint filed by former customers of FXCM who claim to have suffered damages as a result of the misleading claims concerning its “NDD” model features 14 counts, including 5 counts of breaching State laws.

Moscow stock exchange starts bidding options for pairs of “pound-dollar” and “dollar-Japanese yen”
From October 2, 2017, participants in trading on the futures market of the Moscow Stock Exchange will be able to trade options for futures contracts for currency pairs “pound sterling – US dollar” and “US dollar – Japanese yen.”

Nasdaq is shaking up one of its legacy units
Frank Chaparro – Business Insider
Nasdaq has launched a new cloud-based portal for the C-Suite, and it points to a broader shake-up within the company.


Vela Picks BSO to Enhance DMA Platform Connectivity
Finance Magnates
BSO, the global Ethernet network, cloud and hosting ?provider, was selected by New York-based Vela Trading Technologies to provide clients of its Direct Market Access (DMA) platform, Object Trading, with low-latency connectivity and reliable access to the world’s biggest exchanges

Fintech 250
Who are the emerging fintech companies that will change the face of financial services? The Fintech 250 identifies and recognizes the 250 most promising, private fintech companies from around the world.

BRIEF-Broadridge Financial Solutions says CEO Daly’s 2017 total compensation was $9.2 mln vs $8.3 mln in 2016
Broadridge Financial Solutions Inc – CEO Richard J. Daly’s 2017 total compensation was $9.2 million versus $8.3 million in 2016 – SEC Filing Source

The Great Bank Bitcoin Divide
Stephen Gandel – Bloomberg
Bitcoin traders can breathe a sigh of relief. If JPMorgan Chase & Co.’s CEO Jamie Dimon fires them for trading the cybercurrency, Goldman Sachs Group could welcome them with open arms.

Equifax puts silence down to fear of ‘copycat’ cyber attacks; Credit reporting company says concern led it to delay reporting massive data breach
Alistair Gray in New York and Hannah Kuchler in San Francisco – FT
Equifax, the credit reporting company where hackers accessed personal details of tens of millions of Americans, has defended waiting to disclose the attack by saying it feared “copycat” raids — but the claim was immediately disputed by cyber security experts.

Equifax Says 2.5 Million More Americans May Be Affected by Hack
Credit report company Equifax said Monday that an additional 2.5 million Americans may have been affected by the massive security breach of its systems, bringing the total to 145.5 million people who had their personal information accessed or stolen.


Top Democrat suggests Wells Fargo should be shut down entirely
Matt Egan – CNN Money
A powerful Democrat in Congress says regulators should consider shutting down Wells Fargo for abusing the trust of millions of its customers.

Equifax Is Taking Over From Wells Fargo as the Financial Industry’s Villain
Elizabeth Dexheimer , Jesse Hamilton , and Jennifer Surane – Bloomberg
Ex-Equifax CEO will testify before House committee on Tuesday; Wells Fargo chief also will speak with lawmakers about scandal
Wells Fargo & Co. is wrapping up one of its worst years ever by passing a baton to Washington’s new favorite financial-industry villain: Equifax Inc.


Senate panel sets hearing for agriculture trade negotiator nominee
P.J. Huffstutter – Reuters
The Republican-led Senate Finance Committee on Thursday set an Oct. 5 confirmation hearing for Gregory Doud, President Donald Trump’s nominee for the top agricultural negotiator job at the U.S. Trade Representative.

Yellen: Why AIG is no longer ‘too big to fail’; Fed chair explains her vote as behind-the-scenes acrimony is laid bare
Alistair Gray in New York
Janet Yellen has defended her vote to free AIG from “too big to fail” regulation even as other top Washington officials questioned the legality of the process.

FCA grants ARM approvals as MiFID II looms; Bloomberg, the London Stock Exchange Group, MarketAxess and NEX Group received approval to operate ARMs under MiFID II.
Hayley McDowell – The Trade
Several major financial services firms have gained regulatory approval from the Financial Conduct Authority in the UK to operate approved reporting mechanisms (ARMs).

Chairman Clayton Provides Update on Review of 2016 Cyber Intrusion Involving EDGAR System
SEC Chairman Jay Clayton today provided an update on the status of the agency’s review and investigation of the 2016 intrusion into the EDGAR system. In addition to updating previous disclosures, today’s announcement also includes additional information on the agency’s efforts to strengthen its cybersecurity risk profile going forward.

ESMA publishes latest updates to MiFIDII/MiFIR investor protection Q&As Q&AS
The European Securities and Markets Authority (ESMA) has added 12 new Q&As to its Questions and Answers (Q&A) document on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

ESMA updates its EMIR and CSDR Q&As
The European Securities and Markets Authority (ESMA) has today updated two of its guidelines regarding two pieces of post-trading regulation.

ESMA publishes translations for MiFID II guidelines on transaction reporting, order record keeping and clock synchronisation
The European Securities and Markets Authority (ESMA) has issued today the official translations of its Guidelines on transaction reporting, order record keeping and clock synchronisation under the Markets in Financial Instruments Directive (MiFID II).

FINRA Promotes World Investor Week 2017; Securities Regulators Around the World Are Shining a Spotlight on Investor Education and Protection
The Financial Industry Regulatory Authority (FINRA) today announced its participation in the first World Investor Week, Oct. 2-8, to increase awareness of investor education and protection tools and information.

Make the Most of World Investor Week with These Tips
Throughout the world, people of all walks of life make countless investment decisions every day. That’s why a global campaign to raise awareness about the importance of investor education and protection makes sense—and it’s happening right now.

Filing instructions and webinar announcement regarding swap valuation dispute notices and monthly swap dealer risk data reports; Submission of standardized data for swap valuation dispute notices
In January 2016, the CFTC issued an order authorizing NFA to receive, review, maintain and serve as the official custodian of swap valuation dispute notices that swap dealers (SD) are required to file pursuant to Regulation 23.502(c). Given NFA’s experience with these notices, NFA determined that they would be more useful for SD monitoring, risk profiling and providing periodic reports to the CFTC, if they contained standardized information that could be tracked and monitored across SDs and the industry. The CFTC approved NFA’s Interpretive Notice to NFA Compliance Rule 2-49 which, among other things, specifies the types of swap valuation disputes that must be reported and standardizes the information that SDs are required to report to NFA. The Interpretive Notice will be effective for dispute notices required to be filed on or after January 2, 2018. See Notice I-17-13.

The Feds Just Collected $48 Million from Seized Bitcoins
Jeff John Roberts – Fortune
The U.S. Justice Department has claimed the proceeds from the sale of 144,336 bitcoins, valued at just over $48 million, that it obtained after shutting down the notorious online drug market Silk Road in 2013.

The SEC and the ICO
March Schorr – TABB Forum
The SEC has taken a measured approach in warning potential ICO sponsors and online platforms that support trading of tokens that they might be subject to US securities laws, which they have pretty much ignored to date.

Investing and Trading

Stock market winners of 2008’s crash had one thing in common; A high return on invested capital links companies as diverse as Hasbro and AutoZone
Miles Johnson – FT
When people ponder how certain investors made double-digit annual returns in 2008 — a year when US stocks tumbled almost 40 per cent — they think back to daring and contrarian hedge funds betting against failing banks and subprime mortgages. They do not tend to rush to celebrate the wisdom and insight of those who happened to own shares in the maker of My Little Pony and GI Joe action figures.

The Most Important—And Least Understood—Thing in the Market: Taxes; Investors must confront their own view of the odds that Trump’s tax plan will pass
James Mackintosh – WSJ
Investors always face two big unknowns: They don’t know what will happen, and they don’t know how the market will respond. Making it even harder, there is no way to be sure afterward why the market did what it did. And the tales investors tell themselves as a way of explanation are often too simplistic.

Haven currencies are not always a safe bet; Carry trade behaviour often a better explanation for currency moves
Roger Blitz – FT
When North Korea launched missiles over Japan in recent months the currency market quickly bought the yen. Such seemingly perverse behaviour has analysts having to explain to investors the rudiments of that peculiar foreign exchange conundrum, the haven currency.

Opinion: Why your neighbor’s stock buying should worry you; U.S. household equity ownership is at near-record levels
Mark Hulbert – MarketWatch
U.S. households’ equity exposure — perhaps the broadest-based sentiment measure available — has risen to near-record levels.

Opinion: Six similarities between today and 1987, when the Dow plummeted 23% in one day; Are we headed for another crash in stocks? We could be, so here’s a way to protect yourself while remaining invested
Nigam Arora – MarketWatch
It was 30 years ago this month. I had millions of dollars of my own money invested in the stock market. Other investors did too, and everyone was making money.


Goldman Sachs Explores a New World: Trading Bitcoin; Move would make it the first big Wall Street firm to deal directly in the growing yet controversial cryptocurrency market
Paul Vigna, Telis Demos and Liz Hoffman – WSJ
Goldman Sachs Group Inc. GS 1.46% is weighing a new trading operation dedicated to bitcoin and other digital currencies, the first blue-chip Wall Street firm preparing to deal directly in this burgeoning yet controversial market, according to people familiar with the matter.

How UBS Became Home to Half the World’s Billionaires
Elisa Martinuzzi and Joel Weber – Bloomberg
The CEO of UBS, Sergio Ermotti, is a trader at heart. Yet the most recent chapter of his career begins with the investment banker overhauling an investment bank. It’s 2011, and he’s just been named interim chief executive officer of a Swiss bank that’s no longer quite so secretive, that’s still reeling from the financial crisis, and that’s been tarnished by a rogue trader’s $2.3 billion loss.

Ex-SocGen Trader Charged Over Euribor Sues Bank for $9.4 Million
Gaspard Sebag – Bloomberg
Stephane Esper asks for damages and money to cover legal fees; Case to be heard in full in July at Paris employment tribunal
Former Societe Generale SA trader Stephane Esper, who faces U.K. charges for rigging a key interest-rate benchmark, is suing the bank at a French employment tribunal for more than 8 million euros ($9.4 million).

Barclays taps Reid Marsh to run banking outside of the Americas
Arash Massoudi – FT
Barclays has appointed a senior industrials investment banker to oversee its banking activity outside of the Americas.

BNP Paribas CIB prepares business to go beyond transactions; BNP Paribas’s head of artificial intelligence is helping lay the foundation for a new business model in corporate and investment banking.
A young team of artificial-intelligence experts is setting the stage for BNP Paribas to expand its business strategy for corporate and investment banking (CIB) beyond transactions.

Goldman Sachs fund arm to absorb cost of research under Mifid II
Reuters Staff
Goldman Sachs Asset Management said on Monday it would pay for external research used by its European investment managers under new European Union rules due to go into force in January 2018.


Egypt Considers Bond Sale Delay as It Eyes Market Conditions
Ahmed Feteha and Mirette Magdy – Bloomberg
Government could begin with U.S.-dollar bond issuance; Foreign holdings of Egypt T-bills up to $17.9 billion
Egypt may delay a planned sale of 1.5 billion in euro-denominated bonds to early 2018, as the government pushes ahead with a sweeping reform program that has boosted foreign inflows but sent prices soaring in the nation of 95 million.

Abu Dhabi and Jordan seek buyers of dollar bonds; Countries join Saudi Arabia among latest Middle Eastern issuers to tap strong investor demand
Thomas Hale in London and Simeon Kerr in Dubai – FT
Abu Dhabi and Jordan both launched 30-year dollar debt sales on Monday, becoming the latest Middle Eastern issuers to tap strong investor demand for a region that has borrowed record amounts on international markets this year.

U.K. Treasury Chief Defends Free-Market Capitalism Against Resurgent Opposition; Hammond urges Conservative activists to confront the policies of the opposition Labour head on
Jason Douglas – WSJ
MANCHESTER, England—U. K. Treasury chief Philip Hammond on Monday offered a staunch defense of free-market capitalism in Britain, in a speech that underscores the disquiet in the ruling Conservative Party over the rise of the country’s left-wing opposition leader.

Banks to start trade in commodity derivatives soon, eye exchange membership; Begin feasibility study, even as Sebi and commexes start work on evolving new set of trading members and new group of products
Dilip Kumar Jha – Business Standard
Following the Reserve Bank of India (RBI)’S decision allowing banks to participate in commodity derivatives last week (except on their own account), both private and public sector banks have started feasibility study of the business and are also exploring taking membership on commodity exchanges.

Financial education crucial to plan for the future, says BNM deputy governor
The Star
Financial education is crucial to encourage consumers to better manage their finances, plan for the future and manage risks associated to financial matters, says Bank Negara Malaysia deputy governor Abdul Rasheed Ghaffour .

One in three unicorns is now being born in China
Michael J. Coren – Quartz
October 02, 2017In 2010, almost every new billion dollar company that entered the market called US or Europe home. Times are changing.

PBOC’s Stock Bullseye
Shuli Ren – Bloomberg
The Xi Jinping put is alive and well.Late Saturday, the People’s Bank of China said it will reduce the amount of cash reserves required for banks that engage in “inclusive financing,” a new phrase for Beijing that refers to loans issued to farmers, small businesses, students and poverty-alleviation programs.


Bank of England warns European banks are not ‘sufficiently focused’ on Brexit risks
Jasper Jolly – City AM
Bank of England officials are concerned European banks are underestimating the risks from Brexit of a disruption which could threaten as much as 10 per cent of lending to British companies, according to minutes of their latest meeting on financial stability.

Positioning for Brexit, France asks finance industry where it can simplify rules
Reuters Staff
France has launched a public consultation over how financial service regulations can be simplified, the finance ministry said on Monday, stepping up its campaign to lure London bankers after Britain’s vote to leave the European Union.


Chernin to Court Sports Bettors With New Data and Analysis Service; Technology firm sees potential even as betting on sports remains illegal in 46 states
By Chris Kirkham – WSJ
Betting on sports isn’t legal in most of the U.S., but that isn’t stopping entrepreneurs from building a new digital media platform that will be solely dedicated to the practice.

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About Author

Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.