FANG+ Puts the UMPH Back into the Markets and Exchange Competition
By John Lothian – JLN
Hallelujah! The magical power of innovation from exchange competition in Chicago is alive and well after a noticeable absence. The NYSE FANG+ index at ICE Futures US is the most innovative and timely new contract I have seen since the Cboe introduced the VIX.
Besides the FANG+ contract, we have the expectation of the CME Group and Cboe slugging it out later this year with competing bitcoin futures offerings. Earlier this year we had the CME Group reclaim the Russell index complex from ICE, returning the contracts to the CME where they were in 2007.
The FANG+ sprang from this exchange competition, but also from the exchanges listening to customers clamor for products to trade with a little more UMPH in them. The FANG+, which is made up of 10 stocks including the FANG initial components of Facebook, Apple, Netflix and Google, has the requisite umph in its megatrends, story, media exposure and volatility.
The FANG index was coined by CNBC carnival barker and occasional genius Jim Cramer. Dave Goone, chief strategy officer for ICE, had FANG this and FANG that pounded into his head listening to CNBC early one morning while trying to do his strategy mojo for ICE. That sparked the idea for a new equity index product for ICE Futures US clients to trade, which was needed after the CME absconded with its Russell liquidity. The result was FANG+, the FANG four plus some other global technology wunder-stocks.
For the rest of the commentary, go HERE
Hits & Takes
By JLN Staff
Thomas Peterffy’s open letter to CFTC Chairman Christopher Giancarlo regarding the dangers of clearing crypto derivatives in the same clearing house as other products is out on IB’s website. From the letter: “…Even clearing members who do not wish to clear cryptocurrencies because they judge the risk to be too great cannot isolate themselves and their customers from a potentially catastrophic loss from cryptocurrency risk at the clearing organization.”~SD
Speaking of ICE’s new FANG+ contracts (see John’s column above), today’s press release from ICE has some numbers: “ICE…launched the NYSE FANG+ Index futures contract on ICE Futures U.S.(R) on November 8, 2017. The new contract had over 2,000 contracts trade in the first week.”~SR
The T4Youth: Table Tennis Tech Tournament was held last night at SPiN Chicago and by all reports it was the largest turnout yet. The event is held every year to support the Chicago Tech Academy. There were teams from Chicago’s trading community including DRW, IMC, Trading Technologies, Belvedere, the Chicago Stock Exchange and more. ~SD
Join The University of Chicago Booth School of Business at Economic Outlook 2018 to learn where the economy is headed 10 years after the financial crisis. The event is on January 17, 2018 and features professors Austan D. Goolsbee, Randall S. Kroszner, and Raghuram G. Rajan in Chicago.~JJL
John Davidson to speak at November 30 SIFMA Listed Options Symposium in New York
On November 30th, industry experts, representing various roles across the market segment, will examine the state of the options market and the challenges and opportunities facing investors and market participants at SIFMA’s Listed Options Symposium. The program will include a data-driven look at recent trends and current issues in today’s options markets, followed by interactive discussions on what’s impacting market activity, such as liquidity, regulation, fragmentation, clearance and settlement issues, CAT, competition, the mix of market participants, and more. OCC’s President and Chief Operating Officer, John Davidson, will join the Regulation and Risk panel to discuss the various regulations, complexity in the markets, as well as the necessary changes to legacy systems and rules, including an initiative to revamp the CMTA platform. Register to join the industry dialogue on critical issues, and network with sell- and buy-side market participants.
***** John Davidson is a man to keep an eye on as OCC moves forward.~JJL
CQG Announces Strategic Leadership Changes to Support CQG China Launch; Rod Giffen Named President, CQG APAC; Ryan Moroney Appointed President, CQG Europe and the Americas
CQG has had a focused effort to add China to its global network of data and execution. With the imminent launch of this initiative, the firm announced today that Rod Giffen, President, CQG, has relocated to China and will serve in the newly created position of President, CQG APAC. Ryan Moroney will return to CQG to assume the new role of President, CQG Europe and the Americas.
***** Rod Giffen is now the second most interesting man in the world.
CFTC and Kansas State University Announce 2018 Agricultural Commodity Futures Conference
The Commodity Futures Trading Commission (CFTC) and the Center for Risk Management Education and Research at Kansas State University will jointly host, “Protecting America’s Agricultural Markets: An Agricultural Commodity Futures Conference,” on April 5 – 6, 2018, in Overland Park, Kansas. This first-of-its-kind conference will include robust presentations and discussions on current macro-economic trends and issues affecting American agricultural futures markets and the importance of these markets for managing risk and protecting participants from manipulation, fraud, and other unlawful activities.
***** To my friends at the CFTC, may I be of help at this conference?~JJL
Wednesday’s Top Three
Our top story of the day on Wednesday was Barron’s piece on Thomas Peterffy’s take on Bitcoin, in Why Interactive Brokers Founder Fears Bitcoin Futures. Second was the FT’s Virtu’s Viola warns of ‘systemic risk’ from clearing houses. Third went to the ICE management announcement Intercontinental Exchange Announces Management Team Promotions
|MarketsWiki Statistics Sponsored by Level Trading Field|
US Treasury dealers accused of collusion by big investors; Public pension funds and insurers join forces with claim about access to electronic trading venues
Joe Rennison and Alexandra Scaggs in New York – FT
A group of 17 US public pension funds and insurers have filed a lawsuit in New York alleging that their access to some electronic trading venues in the world’s biggest government bond market was blocked by a group of banks.
Bitcoin futures face safeguards to tackle wild gyrations; Exchanges insist on higher collateral and price caps amid calls to ringfence trades
Gregory Meyer and Nicole Bullock in New York and Joe Rennison in Florida – FT
Traders eagerly awaiting the debut of bitcoin futures will face tougher risk standards says the chief executive of the CME Group as the exchange operator plans to launch contracts on the highly volatile cryptocurrency.
***** Quotes from John Lothian, Terry Duffy and Carl Gilmore in this story.
EEX acquires 100% of Powernext
The European Energy Exchange (EEX), the leading energy exchange in Europe, has acquired the remaining 12.3% shareholding in French based Powernext from 3GRT and EDF. In doing so, EEX becomes the sole owner of Powernext with immediate effect.
Wall St. bankers secretly used chat rooms to rig Treasury bond trades: suit
Kevin Dugan – NY Post
Wall Street banks secretly shared client information in online chat rooms in order to rig auctions for the $14 trillion US Treasurys market, according to an explosive lawsuit filed in Manhattan federal court on Wednesday.
The Bitcoin Exchange That CME Plans to Use for Futures Is Down
Camila Russo – Bloomberg
This is exactly what the bitcoin futures naysayers have been warning about: One of the exchanges which CME Group Inc. would use to price the contracts is having serious issues.
How Bitcoin Futures Will Work
Tod Skarecky – Clarus Financial Technology
A couple weeks ago, we released an article about the evolving infrastructure in the OTC derivatives industry to support Bitcoin, with the conclusion that much of the plumbing was coming together for institutional sized investment. In industry parlance, this involves swaps, SEF’s, DCO’s, custodians and liquidity providers.
Futures products, probably the most readily understood derivative, was only a side-note. We mentioned CBOE’s vague plans for a Bitcoin future some time in 2018, but I didn’t have much confidence, given the lack of details provided at the time. I did do some thorough googling at the time, but only press releases and murmurings.
Greenlight’s Einhorn Says Issues That Caused the Crisis Are Not Solved
By Nishant Kumar and Suzy Waite – Bloomberg
Greenlight founder cites too-big-to-fail, few rating agencies; At Oxford Union, Einhorn stands behind struggling short bets
Hedge-fund manager David Einhorn said the problems that caused the global financial crisis a decade ago still haven’t been resolved.
`Warren in a Box’ to Pick Stocks for First Nordic AI Fund
By Kati Pohjanpalo – Bloomberg
FIM is launching the first Nordic AI investment fund on Monday; AI to pick 50 stocks based on decades of financial data
Finnish fund manager FIM is introducing the first investment fund in the Nordic region, where a self-learning algorithm gets to pick all the stocks.
The Reclusive Financier Moving From Weapons to German Banking
By Sarah Syed – Bloomberg
Stephen Feinberg, the reclusive American financier, is probably best known for his connection to President Donald Trump, his firm’s brief ownership of Chrysler, its investments in distressed debt, and its involvement in weapons, from pistols to military aircraft.
Regulators making headway in standardised swaps reporting; CFTC says common transaction identifiers close to completion, with product identifiers not far behind
Narayanan Somasundaram – Risk.net
Global regulators are making progress in aligning swap data reporting requirements, with at least one of three standards expected to be finalised within months.
LIBOR: The End of The World As We Know It (And I Feel Fine?)
A few months ago, the head of the UK’s Financial Conduct Authority announced that it will stop requiring the reference banks to submit sterling quotes for LIBOR, the interbank lending rate, by the end of 2021. The acronym refers to the London-based unsecured wholesale market rates for jumbo deposits between major banks that are denominated in certain designated currencies. LIBOR is the most commonly used floating interest rate at which banks lend to each other, and is incorporated in several trillions of dollars of U.S. commercial loan products, including commercial mortgages, guaranties, derivatives, securitized and packaged consumer loans and other credit support documents.
Exchanges, OTC and Clearing
FX Clearing – the $750bn market that keeps growing
Chris Barnes – Clarus Financial Technology
When we last looked at NDF Clearing in June 2017, we saw that LCH were dominating volumes. Open Interest had risen to $600bn+ and monthly volumes were up over $400bn, with March 2017 pushing $500bn. Has anything changed since?
Eurex launches new FI hedging tools
Following the introduction of corporate bond futures, Eurex – a part of Deutsche Bˆrse Group – once again acts as first mover in the fixed income derivatives markets. To further support the financial industry in hedging their portfolios, Europe’s leading derivatives exchange launches options on fixed income ETFs. As of November 20, Eurex will offer options on three products:
TRADEcho’s smart report router links up to Cboe’s APA; Connection means firms can report trades to Cboe Europe Equities’ approved publication arrangement under MiFID II.
By Hayley McDowell – The Trade
TRADEcho’s smart report router (SRR) is now connected to Cboe Europe Equities’ approved publication arrangement (APA) ahead of MiFID II.
Launch of US exchange surveillance system hits pothole; Tool designed to compile details of orders and trades for shares and options
Nicole Bullock in New York and Hannah Murphy in London – FT
The launch of a long awaited surveillance system to monitor trading in the world’s largest equity market was thrown into confusion as negotiations continued between regulators and exchanges.
LSE cancels meeting with investor TCI as dispute deepens; Fund seeks to remove chairman Brydon while extending chief Rolet’s contract
Philip Stafford in London – FT
The dispute between the London Stock Exchange Group and an activist investor trying to remove the chairman has escalated after the bourse cancelled a meeting intended to diffuse the tensions between the two parties.
HKEX Announces Results of Annual Review of Trading-fee Tiers for Stock Options
Annual reviews conducted for possible reclassification within 3 trading-fee tiers; 14 Stock Option classes to be reclassified from 2 January 2018
Hong Kong Exchanges and Clearing Limited (HKEX) will change the trading-fee tier of several of its Stock Option classes from 2 January 2018 based on its latest annual review of the classifications.
Chicago exchanges embrace crypto-currency; Exchanges’ interest piqued, but regulators and some market participants hesitant
James Rundle – Risk.net
Chicago seems to have caught crypto fever. Both major exchange groups have announced plans to develop products based on bitcoin, even as digital currency exchanges and others seek to improve their operations.
Ex-UBS fintech star launches new firm
The former head of UBS’s financial technology innovation lab ó and a member of FN’s list of the most influential people in European fintech ó has launched his own start-up. – Alex Batlin spent more than a decade at UBS, including heading up its lab in Canary Wharf’s Level39, where a team worked with early stage companies around technologies including blockchain. Batlin left UBS in 2016 and joined BNY Mellon, where he was global blockchain lead. Now, Batlin has left BNY Mellon and set up his own blockchain firm named Trustology, according to his LinkedIn profile.
Hundreds of people reject tech jobs after Brexit vote; Start-ups say Britain’s reputation as a centre for innovation is being damaged
Aliya Ram in London – FT
Hundreds of people have rejected technology jobs in Britain since the UK voted to leave the EU, according to a survey of entrepreneurs who say an intensifying skills shortage has already damaged the country’s reputation as a centre for innovation.
Metamako’s APAC Presence Gets Major Boost With Chinese Certification Of Its Low-Latency Network Devices
Metamako, the leading provider of ultra-low latency, FPGA-enabled network platforms, today announced the completion and award of its China Compulsory Certification (CCC). This marks a significant milestone for fast-growing Metamako, as it now allows the company to deliver on its aggressive strategy of expansion in Asia.
Singapore puts fintech in spotlight with AI investment, global partnerships
Singapore has announced a slew of initiatives aimed at driving the development and adoption of new technologies in the financial sector, including a S$27 million (US$19.85 million) investment in artificial intelligence (AI).
30 Under 30 Finance: The Top Young Traders, Dealmakers And Big Money Innovators
By Antoine Gara, Lauren Gensler, Kristin Stoller and Nathan Vardi – Forbes
The Wall Street landscape is becoming younger, digitized and more entrepreneurial. Technological and innovative forces are reshaping the world of money and they can be seen on this year’s Forbes 30 Under 30 Finance list.
Amex launches blockchain-based business payments using Ripple
Jemima Kelly – Reuters
American Express (AXP.N) has introduced instant blockchain-based payments using Ripple, a fintech start-up, for U.S. corporate customers sending funds to UK-based businesses that bank with Santander UK STN.SN, the companies said on Thursday.
Renovatio PR Announces Joint Venture with Vector Risk
Renovatio PR, a Puerto Rico-based fintech incubator has announced it will embark on a joint venture with Vector Risk, an Australian cloud-based risk software solutions company, to develop, operate and sell institutional-level risk management software for cryptocurrencies and tokens issued in initial coin offerings. The new software product is expected to launch in 2018.
Goldman Partner Says U.K. Would Be ‘Like Cuba Without Sun’ Under Corbyn
Simon Clark – WSJ
A Goldman Sachs Group Inc. partner made a rare political swipe on Wednesday, calling the weakness of the U.K. government “scary” and warning it could trigger an election win for left-wing opposition leader Jeremy Corbyn that would be a “disaster.”
US Senate drops stock options tax change; Original plan to charge tax as soon as options vested caused outcry in Silicon Valley
Richard Waters in San Francisco – FT
The US Senate has dropped a proposed tax rule that Silicon Valley had warned would be disastrous for tech start-ups.
SEC Enforcement Division Issues Report on Priorities and FY 2017 Results
In its ongoing efforts to protect Main Street investors, the Securities and Exchange Commission’s Enforcement Division today issued a report highlighting its priorities for the coming year as well as a review of enforcement actions that took place during FY 2017.
Turkey asks U.S. about jailed trader: foreign ministry sources
Turkey has sent a note to U.S. authorities inquiring about the condition of gold trader Reza Zarrab, held in the United States awaiting trial on charges of evading U.S. sanctions on Iran, Turkish Foreign Ministry sources said on Wednesday.
Visible Alpha acquires Alpha Exchange ahead of MiFID II; Both firms will combine products and technology to establish an end-to-end research management solution.
By Hayley McDowell – The Trade
Visible Alpha has confirmed its acquisition of Alpha Exchange as it looks to create and end-to-end solution for research management ahead of MiFID II.
Wilbur Ross Sued Over Fees By Firm’s Former Executives; The lawsuit claims WL Ross & Co. collected at least $48 million in improper management fees
By Andrew Scurria – WSJ
Commerce Secretary Wilbur L. Ross and the firm he founded were sued by three of his former colleagues who say WL Ross & Co. pocketed management fees from the general partnerships that handled its private-equity investments.
Another MiFID Change for Banks Leaves Resort Jaunts in Jeopardy
By Julie Edde – Bloomberg
European rules may force firms to pay for research conferences; Bank of America introduces point program for corporate access
Every year in March, global investors and African companies gather at Sun City, a resort three hours by car from Johannesburg that features golf courses and a wave pool in a setting reminiscent of a lost paradise.
CFPB Head Cordray to Step Down, Paving Way for Change at Watchdog; Regulator says he will leave this month, without giving a reason
By Yuka Hayashi – WSJ
Richard Cordray, the first head of a consumer regulator created after the financial crisis, plans to leave at the end of November, ending a tumultuous six-year tenure and paving the way for President Donald Trump to restructure the agency.
Caloundra man charged for insider trading
Mr Jin Xi Li, 54, of Caloundra, Queensland, appeared in the Maroochydore Magistrates Court today charged with 88 insider trading related offences.
ASIC releases guidance for the Financial Services and Credit Panel
ASIC has today released regulatory guidance on the newly established Financial Services and Credit Panel (FSCP).
Bell Potter Securities Limited pays $358,000 in infringement notice penalty
Bell Potter Securities Limited (‘Bell Potter’) has paid a penalty of $358,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel (‘the MDP’).
Monthly Disciplinary Actions November 2017
Virtu Financial Capital Markets LLC (CRD #45986, New York, New York)
September 8, 2017 – An AWC was issued in which the firm was censured and fined
$175,000. A lower fine was imposed after considering, among other things, the firm’s revenue and financial resources. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to maintain electronic brokerage records related to approximately 46 million market-making transactions in “write one, read many” (WORM) format.
Wedbush Securities, Inc. (CRD #877, Los Angeles, California)
September 27, 2017 – An AWC was issued in which the firm was censured and fined a total of $470,000, of which $400,000 is payable to FINRA. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to transmit ROEs to OATS
Changes to FINRA Advisory Committees: Phase 1
In March 2017, FINRA issued a Special Notice on its engagement programs as part of FINRA360, its comprehensive review of its operations. In response to the Special Notice, FINRA received a number of comments and suggestions regarding the usefulness of some advisory committees, their membership and their effectiveness as a vehicle for dialogue between FINRA and member firms. After carefully reviewing and analyzing the comments, FINRA is taking a number of actions to address the comments and suggestions.
SEC Approves the CAT Fee Dispute Resolution Process
Rule Implementation Date: December 1, 2017 (Note: the CAT Fee Dispute Resolution Process will not be in effect until CAT fees are operative.)
TRAQS Logout Feature
On Monday, December 4, 2017, FINRA will be enhancing its TRAQS secure website logout procedures for all products available via TRAQS. This includes TRACE, the Over the Counter Reporting Facility (ORF) and the Alternative Display Facility (ADF).
FINRA Unscripted: A Leader’s Perspective with Executive Vice President of Board and External Relations Marcia Asquith
Listen to FINRA’s Executive Vice President of Board and External Relations Marcia Asquith, talk with FINRA’s head of communications, Josh Drobnyk, about the first phase of changes to FINRA’s advisory committees to improve transparency and the committees’ effectiveness.
FCA Slow To Grasp Implications Of Approved Persons Register Abolition – And Complacent On Updating Training And Competence Rules, Says CISI
The CISI has reiterated its concerns around the abolition of the Financial Conduct Authority’s (FCA) Approved Person’s Register, and the impact to the consumer, in its latest response to an FCA consultation.
Investing and Trading
Vanguard’s 2017 Prediction: A Record $350 Billion In New Cash; Vanguard benefiting from shift away from money managers who specialize in handpicking winners
By Sarah Krouse – WSJ
Vanguard Group quadrupled in size over the last eight years. It is about to get even bigger.
Treasury’s New Approach to Debt: Go Short; As demand rises, Treasury Department plans to increase share of shorter-term debt issued
By Nick Timiraos – WSJ
The Treasury Department has unveiled a new strategy for managing federal debt that could ease pressures set to push up long-term interest rates and reduce a potential drag on the economy.
How Companies Are Pushing Ahead on Climate-Change Targets; More global firms pledge to cut carbon emissions to cut costs, draw investment and get ahead of new laws
By Zeke Turner in Bonn, Germany and Sarah Kent in London – WSJ
More of the world’s biggest corporations are taking the fight against climate change into their own hands, aiming to cut their energy costs, pre-empt regulation or burnish their reputations with investors and customers.
Pleasing the Rich to Give to the Poor; Hedge fund managers face a big tax deadline. One charity is here to help.
By Katherine Burton and Peggy Collins – Bloomberg
The closing of a giant tax loophole has been looming over U.S. hedge funds. A 2008 law required money managers who earned fees offshore and parked them there to declare the money and pay the taxes, but gave them until the end of this year. Although tax attorneys hunted for ways around this, they mostly came away empty. For many big-time investors, giving the cash away and getting a tax deduction may be the most attractive option.
The Bond That Really Asks You To Bet on the Future of The Planet
By Christian Wienberg – Bloomberg
Danish company built on North Sea exploration targets wind; May issue more green bonds in future as pricing not an issue
Orsted A/S, the Danish company built on oil and gas extraction, will issue its first green bonds as it moves toward completing a transition to renewable energy.
Stock Market Rings Alarm Bells on Rising Corporate Leverage
Dani Burger and Cormac Mullen – Bloomberg
Companies with weaker balance sheets underperforming all year; Uptick in investor aversion to corporate debt a global theme
Cracks in high-yield credit may have only started to emerge, but equity investors have been signaling growing preference for stronger balance sheets throughout the year, amid tightening monetary policies and booming debt issuance.
BNP Paribas teams up with market maker for US Treasuries; BNP Paribas and GTS will work together to improve liquidity and pricing for clients trading US Treasuries.
By Hayley McDowell – The Trade
BNP Paribas has teamed up with electronic market maker GTS to provide its clients with better liquidity, tighter spreads and improved pricing in US Treasuries.
BNP Paribas and GTS team up for US Treasuries trading; French bank taps group’s platform to help it boost market share
Joe Rennison and Nicole Bullock in New York – FT
French bank BNP Paribas and market maker Global Trading Systems are teaming up to trade US Treasuries, adding to a string of deals in which banks have tapped the computing power of high frequency traders rather than face the costly task of revamping their own systems.
The Hedge Fund Love Affair With Tech Is Souring
By Dani Burger – Bloomberg
Live by technology shares, die by technology shares. Unless you can guard against declines.
UBS, Deutsche Remain Skeptics on India Company Earnings Rebound
By Nupur Acharya – Bloomberg
Indian company earnings showed signs of recovery in the September-quarter, but analysts aren’t impressed.
Saudi Crackdown Chills Bankers Tending Kingdom’s Riches
By Dinesh Nair , Sonali Basak , and Archana Narayanan – Bloomberg
Many are urging wealthy clients to sit tight amid probe; Saudi authorities say at least $100 billion siphoned off
In London, New York, Zurich and beyond, the answer from international bankers is the same: we don’t want to talk about the Saudis and their billions.
Chinese developers dive back into offshore debt issuance
Gabriel Wildau – FT
Bank of China’s Paris branch priced a triple-currency “climate bond” worth $1.5bn on Thursday, the bank’s third green bond issued to international markets over the last 18 months.
Goldman Sachs Create Frankfurt Holding Company Ahead of Brexit
By Eyk Henning – Bloomberg
Holding company said to house German, Spanish businesses; This doesn’t mean jobs leave London yet, people familiar say
Goldman Sachs Group Inc. is creating a Frankfurt-based holding company to prepare for Brexit, according to people with knowledge of the plan.
U.K. Chemicals at Risk From Brexit-Driven Investment Cuts
By Andrew Marc Noel – Bloomberg
Boston Consulting executive sees threat to spending in U.K.; Chemical companies operating in the U.K. have worst-case plans
The U.K.’s $50 billion chemicals industry is at risk of withering away if Brexit isn’t handled properly, according to an industry expert.
Inside Google’s Struggle to Filter Lies from Breaking News; The company is revamping the way it displays breaking news search results
By Mark Bergen- Bloomberg
Facebook has a fake news problem. Google has an evil unicorn problem. “Evil unicorns” ó a term some Google engineers once coined, according to a former executive ó are unverified posts on obscure topics, full of lies. They pop up from time to time on the web and find their way into Google’s search results. In an ideal world, Google’s search algorithm should force these fake, pernicious creatures so low in search results that they are buried deep in the web where few can find them.