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SEC Approves Chicago Stock Exchange’s ‘Speed Bump’ for Trading; Trading Firms Fear Mutiny on MiFID Passport Data

First Read

Hits & Takes

ICE has made the inaugural Fortune Future 50 list, their ranking of companies best positioned for breakout growth.~JJL

The FIA Expo panel on the geography of fintech was a draw regarding which city is best – London, Frankfurt/Berlin, Chicago, Boston or New York. But noted places of envy were the fintech sandboxes in Ontario and London.~JK

Quote of the day comes from Kyle Zasky, partner at the investment bank SennaHill Partners, who said large banking institutions are at risk of being disrupted by fintech start-ups if they do not embrace and invest in them. “What you are calling a rarity could be a necessity.”

If one thing was made clear at FIA Expo, it is that Bitcoin is indeed a real market many traditional futures participants believe in. Trading Technologies’ Rick Lane mentioned in his recent blog a new effort with Mike Unetich to develop a cryptocurrency strategy for the firm.

NYSE FANG+ futures will begin trading on ICE Futures U.S. on November 8, 2017, subject to regulatory review.~JJL

Asia Pacific Financial News from John Lothian News – October 19, 2017~JJL

A question that came up at a couple of panels yesterday was how to define liquidity. Participants agreed to make a distinction between market liquidity and collateral liquidity and quoted the Fed’s Stanley Fischer that liquidity is basically the ability to execute sizeable transactions in a low cost environment rapidly with limited impact on prices. That is made difficult these days, however, by the supplemental leverage ratio, which has contributed to the reduced number of FCMs, which in turn reduces market liquidity. Also, some of the rules pertaining to bank capital are detrimental to liquidity, particularly in options. ~SR

In the first 50 minute section of the equity options panel at FIA Expo yesterday, there was not one passing reference to volatility (or lack thereof). Subjects covered included: BOX’s opening of a trading floor, concerns regarding the Consolidated Audit Trail, longstanding complaints about what some consider the unnatural subsidizing effect of the ORF, and the potential for industry collaboration on options market structure (an OPSAC if you will).~SD

Supporting the November 9 LaSalle Street Trading Tech Awards event not only helps underserved Scouts earn merit badges, but more importantly, it inspires them. Through the Trading Tech 300 program Scouts earn STEM-focused merit badges with the assistance of professionals in the financial district. Please consider investing some of your charitable giving budget in a program that is educating and positioning our next generation of talent. Then, join me to honor those who partnered with the Boy Scouts to provide merit badge clinics throughout the year at the LaSalle Street Trading Tech Awards in the iconic Chicago Board of Trade Building. Register HERE ~JJL

Three firms have agreed to hold Trading Tech 300 merit badge workshops in New York City. They will be announced at the November 9 LaSalle Street Trading Tech Awards event.~JJL


Adi Agrawal is Optionus Prime
By John Lothian – JLN
Adi Agrawal is Optionus Prime, the chief transformer of the Options Clearing Corporation. More formally he is not a child’s toy or the star techno-actor of a hit movie series, but rather the Chief Transformation Officer of the OCC. He is the chief transformer in my book.

As Optionus Prime, Agrawal has a new role at an organization that is trying to reinvent itself based on the challenges of Dodd-Frank.

For the rest of the story, go HERE


Deep Dive: The Boom In Big Data Could Mean Democracy For All

The global financial markets are facing perhaps the biggest technological cycle in their history, with the growth of faster technology, the adoption of the cloud and now new data mining tools. JLN’s Jim Kharouf spoke with Drew Shields, chief technology officer at Trading Technologies, and Julie Armstrong, executive director, global head of market technology services at CME Group, about the latest trends in data and how they are reshaping the industry.
Watch the video and read the rest here »

Sponsored Content
IFM Smart Financial Regulation Roundtable


FIA launches FIA Training for industry professionals
FIA announced the launch of FIA Training this week, a program of in-person and online learning opportunities that cover important topics like market conduct and compliance.


TellusLabs Named FIA Innovator of the Year
FIA announced that TellusLabs has been named the FIA Innovator of the Year at FIA Expo. TellusLabs will receive more than $20,000 in cash and other resources.


Thursday’s Top Three
Yesterday’s top read piece was from Bloomberg, The Opioid Addict on the Wall Street Trading Floor. Second went to the new JLN video series Deep Dive: The Boom In Big Data Could Mean Democracy For All. Third went to the Wall Street Journal’s SEC Names J.P. Morgan Executive as Top Regulator of Exchanges


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Lead Stories

SEC Approves Chicago Stock Exchange’s ‘Speed Bump’ for Trading; SEC’s decision comes as several other exchanges have experimented with such delays
Alexander Osipovich – WSJ
The Securities and Exchange Commission has approved a plan by the tiny Chicago Stock Exchange to introduce a new “speed bump,” a person familiar with the situation said.

Few Illinois congressmen show eagerness to aid Chicago Stock Exchange sale
Lynne Marek – Crain’s Chicago Business
Illinois Gov. Bruce Rauner urged the Securities and Exchange Commission recently to approve the sale of the Chicago Stock Exchange to a group that includes Chinese buyers, but his support may be too little too late.

Trading Firms Fear Mutiny on MiFID Rule Demanding Passport Data
Will Hadfield – Bloomberg
MiFID II forces investors to submit personal data in trades; Data demand risks clash between exchanges, funds, regulators
A potentially explosive battle is brewing over a seldom-discussed aspect of the looming MiFID II laws, which will force traders of any European asset class to hand over personal identification such as passport numbers to every venue they trade on.

U.K. Lawmaker Calls for Probe Into ‘Dark Money’ Role in Brexit
Alex Morales – Bloomberg
The U.K. should investigate whether “dark money” played a role in the 2016 Brexit referendum, a Labour Party lawmaker said on Thursday, citing a series of reports on the OpenDemocracy website about Arron Banks, who helped bankroll the ‘Leave’ campaign.

A Social Network Credit Union? Regulator Asks, ‘Why Not?’; National Credit Union Administration chief says Congress should consider a change ‘bankers might not be totally in love with’
Ryan Tracy – WSJ
Congress should consider allowing credit unions to serve communities that exist only online, the industry’s top regulator saidóremarks that could stir ire in the banking industry, which competes with credit unions and is fighting their ability to expand their fields of membership.

Incoming SEC section chief faces calls to overhaul trading rules; Former JPMorgan executive to oversee broker deals, high-speed traders and exchanges
Nicole Bullock in New York – FT
The Securities and Exchange Commission has named a JPMorgan executive to head up the division that oversees broker dealers, high speed traders and exchanges following calls to revise core rules governing trading in the largest equity market in the world.

Leaders in Trading editor’s choice awards – the nominees part 4
Editors – The Trade
Eze Software – Eze’s execution management system is often recognised as one of the most popular by the buy-side. It provides multi-broker trading platform providing access to liquidity venues for execution and various other functions. It also integrates OMS’s and portfolio accounting modules to allow for more efficient workflows. Throughout 2017, Eze has added various new tools to its investment product suite in preparation for MiFID II, including transaction reporting, trade reporting and best execution support

FCA: London doesn’t need EU membership to keep investment industry booming
Catherine Neilan – City AM
The UK’s booming investment industry does not require EU membership to keep motoring, the head of the Financial Conduct Authority has said.

E*Trade to buy custody firm in growth push as profits remain dull
Elizabeth Dilts – Reuters
E*Trade Financial Corp (ETFC.O) plans to spend $275 million to acquire a firm that provides custody services and technical support to financial advisers, the discount brokerage firm said on Thursday.

Exchanges, OTC and Clearing

Xavier Rolet to leave London Stock Exchange Group by the end of December 2018
London Stock Exchange Group
As Xavier Rolet approaches nine years of extraordinary success, London Stock Exchange Group (LSEG) announces that he will leave the Group by the end of December 2018.

Tough times loom for LSE after Rolet bows out; Successor CEO will inherit challenges of adapting to Brexit and new technology
Philip Stafford in London – FT
Xavier Rolet transformed the London Stock Exchange Group from a share-trading venue to a global data and clearing powerhouse, delighting shareholders with its hugely-enhanced value.

Names in the frame to lead the London Stock Exchange
Samuel Agini – Financial News
Xavier Rolet has announced his decision to step down as chief executive of the London Stock Exchange before the end of 2018. His will be big shoes to fill. The former Lehman Brothers equities trader has helped diversify the iconic exchange beyond its traditional capital markets business, placing a huge emphasis on post trade and information services.

Fixed Income Market Briefing
Looking back on the third quarter of this year, I’d say that global markets have held up well. Although we have seen implied volatility remain range bound, volumes across the board increased year-on-year (YOY). Periphery futures and options contracts have benefited from regional geopolitical and event risks, together with short-term spikes in volatility. The September sell-off saw strong volumes across the core benchmark products including futures and options. Bund volatility continues to trade in the 4%-6% corridor and open interest (OI) is +20% YOY.

A Chinese Pipe Dream for Manila
Shuli Ren – Bloomberg
Opposites attract. China’s billions are already flowing into the Philippines via online gaming and infrastructure spending. Hot portfolio flows could be next. Philippine Stock Exchange Inc. is in talks with its Shenzhen counterpart on a possible investment, CEO Ramon Monzon told Bloomberg News. The Southeast Asian exchange wants a Shenzhen-Manila connect, Monzon said, referring to the special trading links established between China’s stock markets and Hong Kong.

Single Stock Futures: Introduction of 25 SSFs
The Management Board of Eurex Deutschland and the Executive Board of Eurex Z¸rich AG took the following decisions with effect from 25 October 2017:

IChange of partition ID and multicast addresses for 15 equity options and weekly options products
Eurex Deutschland and Eurex Z¸rich AG (collectively: the Eurex Exchanges) are planning to make configuration changes for a total of 15 equity options/weekly options products to optimise access to the respective market data. For the affected products, the Eurex Exchanges will re-assign the partition IDs and the multicast addresses for the dissemination of market data.

Clearstream’s monthly report; Brexit: Clearstream ensures reliable custody
Deutsche Bˆrse Group
As part of the Deutsche Bˆrse Group, the international central depositary Clearstream will support market participants regardless of the outcome of the Brexit negotiations with reliable custodians.

HKEX Announces Plans for more Long-dated Contract Months in its Derivatives Market
Hong Kong Exchanges and Clearing (HKEX) announced today (Friday) that it plans to introduce long-dated contract months for its Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) Futures and increase the long-dated contract months for its HSI and HSCEI Options, with maturities up to 5.5 years, on Monday, 4 December 2017, subject to regulatory approval.

Bitcoin ETF May Be Next Big Thing on US Exchanges
Bitcoin exchange-traded funds are coming, helped by the emergence of derivatives on the digital currency, according to industry executives.


Colt to provide direct connectivity for Japan Exchange Group to Chicago
Colt Technology Services is announcing that it will provide direct connectivity between trading venues in Tokyo and Chicago for the Japan Exchange Group’s new inter-exchange service dubbed “JPX-Chicago Co-Location Direct”.

GuavaTech colocates services at ASX’s data centre, the Australian Liquidity Centre
Press Release
GuavaTech, a provider of global multi-asset trading infrastructure and managed services, will expand its service offerings to include colocation and connectivity services at the Australian Liquidity Centre (ALC), ASX’s state-of-the-art data centre.

Anova Technologies Improves Its Wireless Backbone Between NASDAQ, BATS and the New CFE Home at NY5, With 100% Data Delivery Guarantee
Anova Technologies, a leading optical wireless carrier and engineering firm, has recently constructed a new path connecting the NASDAQ exchange at NY11 (1400 Federal Blvd, Carteret, NJ) and the BATS exchange at NY4/5 (755 & 800 Secaucus Rd, Secaucus NJ).

eClerx Markets and FIA Technology Services (FIA Tech) Announce Successful Launch of EGUS Document Digitization Solution for The Global Futures Industry
PR Newswire
The first initiative stemming from the eClerx Markets and FIA Tech’s Strategic Partnership is a centralized, EGUS (Electronic Give-Up Agreement System) Agreement Rate Schedule Digitization Solution. By combining eClerx Markets’ significant brokerage experience and process delivery expertise with Semantic Evolution’s technology for extracting unstructured data, the solution quickly and accurately digitizes pdf rate schedules into an electronic rate format (eRate) for upload into EGUS.

Nasdaq Awarded Patent for Blockchain Data Matching System
Nikhilesh De – Coindesk
The U.S. Patent and Trademark Office has awarded exchange operator Nasdaq a patent for a proposed blockchain-based data matching system.

UK fintech startups are on track for a record-breaking year of investment in 2017
Lynsey Barber – City AM
Fintech startups in the UK are on track to attract a record amount of investment in 2017 new figures reveal, bucking concerns that Brexit could derail the star sector.


Rage, Rocket Man and the price of Donald Trump’s vanity; US allies’ policy of working to minimise the president’s impact is running out of road
Philip Stephens – FT
The rage in the White House is unbounded. North Korean leader Kim Jong Un ó “Little Rocket Man”, the US president calls him ó must be destroyed. The international nuclear agreement with Iran is the worst deal ever. Free trade is a conspiracy against the US. America’s allies are freeloaders. It is a struggle not to conclude the real and present danger to international peace and security now sits at the point of collision between Donald Trump’s narcissism and the limits on US power.

Why Donald Trump needs to read Dow 36,000; As Trump cheers equity milestones he faces the risk of owning a market downturn
Tom Braithwaite – FT
With hindsight, it is easy to mock Dow 36,000. But that’s no reason not to do it. Especially since co-author Kevin Hassett now sits in the White House, as chief economic adviser to a US president who loves to cheer stock market milestones.


Former Dean Foods Chairman Sentenced to Two Years in Prison for Insider Trading
Nicole Hong – WSJ
A federal judge on Thursday sentenced Thomas C. Davis, the former chairman of Dean Foods Co., to two years in prison for engaging in a long-running insider trading scheme with legendary Las Vegas gambler William “Billy” Walters.

The Only Fed Rule Is That There Are No Fed Rules; Monetary policy is too much of a political balancing act to burden it with a strict template.
Tyler Cowen – Bloomberg
One of the most frequent recommendations for monetary policy is that the Federal Reserve should be subject to a rule. Milton Friedman proposed money-supply-growth rules in the 1970s, and since then we have seen calls for interest-rate rules, nominal GDP rules, inflation rules, price-level rules and Taylor rules, among other options. Often I’m sympathetic, but the very nature of American government makes such rules impossible to implement.

Full Federal Court dismisses broker’s appeal
The Full Federal Court of Australia has dismissed former Victorian finance broker Rudy Noel Frugtniet’s appeal against his permanent banning from engaging in credit activities.

ASIC releases update to evidence metrics for performance reporting
ASIC has released updated evidence metrics to report against six common key performance indicators (KPIs) in the Australian Government’s Regulator Performance Framework (Framework).

Adairs pays penalty for alleged continuous disclosure breach
ASX-listed company Adairs Limited (Adairs) has paid a penalty of $66,000 after ASIC issued an infringement notice alleging it had not complied with the continuous disclosure obligations.

FCA statement on judicial review of PPI complaints measures
On 3 October 2017 the Court of Appeal refused We Fight Any Claim permission to appeal the decision by Mr Justice Singh (as he then was) in the Administrative Court on 4 August 2017 to refuse We Fight Any Claim permission to bring a claim for judicial review of the FCA’s new package of measures in relation to PPI complaints (including a 29 August 2019 deadline for making new PPI complaints).

Financial Conduct Authority Outlines Lessons Learned In Year One Of Its Regulatory Sandbox
The Financial Conduct Authority (FCA) has today published a report outlining how the regulatory sandbox (sandbox) has met its objectives over the first year of operation.

New CFTC commissioners take aim at market, technology risk
Rick Baert – Pensions & Investments
The two newest commissioners on the Commodity Futures Trading Commission said their focus will be on risk.

Keynote Address of Daniel Gorfine, Director of LabCFTC and Chief Innovation Officer before the 33rd Annual FIA Futures & Options Expo, Chicago, IL
FinTech Innovation: Building a 21st Century Regulator
Good afternoon everyone and thank you to the FIA for having me here today

Investing and Trading

Two Sigma has taken on KCG quant head as Virtu fallout continues
Paul Clarke – efinancialcareers
Maybe it was the chance to jam in its in-house recording studio, play air hockey or a plethora of other board games, but Two Sigma has just picked up a major new hire from the fallout at KCG Holdings.

Palladium steals gold’s thunder at industry gathering; Price of metal used in catalysts for petrol cars has jumped 40% this year
Henry Sanderson – FT
In the ranks of metals, gold shines brightest for most investors. But this week’s gathering of the gold industry in Barcelona was dominated by palladium, the hottest metal for many at the moment.

Bull Market Is Too Big for This Barn; Stock analyst’s depiction of Dow’s climb at a Minnesota farm runs out of room
Erik Holm – WSJ
With 51 record highs this year, it sometimes feels like the Dow Jones Industrial Average is going through the roof. On the side of Ralph Acampora’s barn, it actually is.


E*Trade acquiring custodian Trust Company of America
Mark Schoeff Jr. – Pensions and Investments
E*Trade said Thursday it is buying Trust Company of America for $275 million in cash. Josh Pace, president and chief executive of Trust Company of America, said in a letter to the firm’s investment-adviser clients that the transaction will close by the end of the second quarter of 2018.

Hedge fund Red Kite files $850m suit against Barclays
Martin Arnold, Neil Hume – FT
Red Kite, a hedge fund specialising in metals investments, has filed an $850m lawsuit against Barclays, accusing the UK bank of causing it vast losses by front-running its trades in the copper market.


Switzerland’s Old-Money Problem: One Billion in Expiring Francs; 1970s-era bank notes will become expensive wallpaper in a couple of years
Brian Blackstone – WSJ
One of the world’s most coveted currency notes, the Swiss franc, includes a feature that runs at odds with its reputation as a safe store of value: It has an expiration dateóand for some notes, that is fast approaching.

Japan equity funds suffer record outflows ahead of election; Investors opt not to trust forecasts of Shinzo Abe victory after other polling snafus
Nicole Bullock in New York – FT
Japan equity funds suffered record outflows in the past week as traders and investors turned defensive after a stirring run up for share prices ahead of the country’s snap elections on Sunday.

SoftBank preparing sequels to $100bn Vision Fund; Japanese tech giant wants to invest in 1,000 companies in 10 years
SoftBank Group Chairman and CEO Masayoshi Son on Thursday revealed his intention to create another technology investment fund, just months after establishing a roughly $100 billion fund.

Kobe Steel scandal escalates with probe into copper plant
Peter Wells – FT
Kobe Steel has confirmed that one of its copper plants in Japan is being investigated by authorities for a possible breach of industrial standards, in an escalation of its data falsification scandal that has dragged in more than 500 companies.

Fitch predicts correction in ‘highly overvalued’ London office market
Nicholas Megaw – FT
A profit warning from IWG on Thursday highlighted the impact that Brexit uncertainty is already having on office space in the capital, and the situation is only likely to get worse, according to Fitch Ratings.


Blankfein heaps pressure on May over Brexit as he praises Frankfurt; Goldman chief lauds German financial hub as UK PM seeks EU summit breakthrough
Martin Arnold in London and George Parker in Brussels – FT
Goldman Sachs’ chief executive has praised the attractions of Frankfurt in a Twitter message that heaped more pressure on Britain’s prime minister Theresa May as she kicked off crucial Brexit talks at this week’s European summit.

Theresa May asks EU not to back her into corner on Brexit; PM seeks green light for transition talks but bloc expected to say progress not sufficient
George Parker, Alex Barker and Jim Brunsden – FT
Theresa May has implored European leaders not to back her into a corner on Brexit, saying that there was a “clear and urgent” need to move exit talks to the next phase as her Eurosceptic critics began to mobilise.


Former Fed Chair Paul Volcker Writing Memoir; ‘The American century has deteriorated a bit. It’s been an interesting arc of history.’
Jeffrey A. Trachtenberg – WSJ
Former Federal Reserve Chairman Paul Volcker is at work on a memoir he says will address the larger themes that have dominated his life of public service.

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Graduate of University of Minnesota School of Journalism and Mass Communication