Breaking News

Robinhood Is Making Millions Selling Out Their Millennial Customers To High-Frequency Traders

Observations & Insight

Monster’ Hurricane Florence to pummel U.S. Southeast for days
Ernest Scheyder – Reuters
Hurricane Florence, on track to become the first Category 4 storm to make a direct hit on North Carolina in six decades, howled closer to shore on Tuesday, threatening to unleash deadly pounding surf, days of torrential rain and severe flooding.
/goo.gl/J6r6DL

Lead Stories

Robinhood Is Making Millions Selling Out Their Millennial Customers To High-Frequency Traders
Logan Kane – Seeking Alpha
Robinhood is marketed as a commission-free stock trading product but makes a surprising percentage of their revenue directly from high-frequency trading firms.
It appears from recent SEC filings that high-frequency trading firms are paying Robinhood over 10 times as much as they pay to other discount brokerages for the same volume.
Robinhood needs to be more transparent about their business model.
goo.gl/66GZY1

****SD: The folks at Themis Trading have made this point for some time. In January 2016, their blog had Robin Hood – The Legend Of Internalization and then in September 2017 they had https://goo.gl/o1KqYE|Robin Hood – The Legend of Internalization – Part II. If you check out those posts, you will notice that the assortment and volumes has changed over time – for instance Instinet used to have a larger chunk of the pie. (I would like to think that millenials realize that “there’s no such thing as a free lunch.”)

Robinhood Is Not The Villain It’s Been Made Out To Be
Seeking Alpha
A recent article here on Seeking Alpha claimed to expose shady tactics within the SEC disclosures by Robinhood versus other brokerages. The Author claims Robinhood is making millions off of “selling out” their investors – who are particularly millennials. This was painted as shady and underhanded – Robinhood isn’t living up to its name since its getting kickbacks from High Frequency Traders, HFTs!
This article continues a fatal flaw, it seems to misunderstand, or misrepresent the flow in which brokerages will process orders to extract profits from them. Robinhood does not claim it will not flow the same processes that E-Trade (ETFC), TD Ameritrade (AMTD), or Charles Schwab (SCHW) follow.
bit.ly/2NCzptz

****JB: Given the above article I found it interesting a rebuttal was posted to the same news source shortly after.

Vela Completes Rollout Of Latest Version Of Its Market Data Ticker
Vela
Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading, announced the successful rollout of the latest version of SMDS, its flagship ticker plant software, to all clients globally. This marks a significant milestone in Vela’s 2018 roadmap, delivering a number of key client-driven enhancements across the full Vela Stack. Vela’s Ticker Plant is a software-based feed handling solution providing ultra-low latency, normalized access to over 250 venues, with global coverage and support for all major asset classes. This also includes Vela’s fully-managed European Best Bid Offer (EBBO) solution, US Options Consolidated Book (US OCB) and National Best Bid Offer (NBBO) solution.
/goo.gl/c1hHev

Traders Seek German Shelter While Tiptoeing Into Italy Debt
Todd White and James Hirai – Bloomberg (SUBSCRIPTION)
Options on German two-year bond futures flash bullish sign; Hedging Italy risk via ‘Schatz’ was popular trade in August
Traders are being tempted back to Italy’s $2.4 trillion sovereign-bond market, but this time they are buying more protection.
/goo.gl/qAZZ7o

ICE Brent/NYMEX spread crosses $10/b amid Brent volatility ahead of Iran sanctions
Avantika Ramesh and Ada Taib – S&P Global
The front-month ICE Brent/NYMEX futures spread crossed the $10/b mark at the Asian close on Tuesday for the first time since June, as the uncertainties surrounding the impact of US sanctions on Iran has started to inject volatility into Brent crude prices.
/goo.gl/XBXHc5

Brent Crude Trades Near Two-Month High on Stockpile Drop
Grant Smith – Bloomberg
Brent crude traded near a two-month high as shrinking oil inventories pointed to an increasingly tight global market.
Futures in London were up 0.5 percent after surging 2.2 percent on Tuesday. Industry data showed U.S. inventories slid 8.64 million barrels last week. The U.S. government cut its outlook for oil production due to pipeline bottlenecks. Meanwhile, Hurricane Florence threatens to disrupt fuel supplies as it moves toward North Carolina.
/bloom.bg/2NBhpjj

How Bank Workers Emerged From the Crash $12.5 Billion Richer
Anders Melin – Bloomberg (SUBSCRIPTION)
Goldman options granted in December 2008 have soared in value; BofA, Citi among those whose options expired out of the money
Stock options granted at the depths of the financial crisis have yielded billions of dollars for employees at some of the biggest U.S. banks, while others saw the promise of massive payouts vanish as shares of their firms languished.
/goo.gl/eo26br

BOE May Support Pound Amid Brighter Data, Brexit Deal Hopes
Anooja Debnath – Bloomberg (SUBSCRIPTION)
More risk of hawkish policy signal from BOE this week – MUFG; Front-end yields ‘well anchored’ amid Brexit uncertainty – HSBC
The pound’s fortunes are being dictated by Brexit and signs of optimism over a deal could lead to a more hawkish-sounding Bank of England driving the currency higher.
/goo.gl/EzdRtd

As Trump embraces more tariffs, U.S. business readies public fight
Ginger Gibson – Reuters
After months of waging a behind-the-scenes war against President Donald Trump’s trade tariffs that have escalated far beyond what business groups once imagined, more than 60 U.S. industry groups are launching a coalition on Wednesday to take the fight public.
/goo.gl/8qprjg

ETF market myth dispelled, why tech employees will benefit most from expansion
Joe Ciolli – Business Insider
The exchange-traded fund industry has made a lot of people very wealthy over the past decade. But it has also caught a great deal of flak.
Perhaps the most common argument is that the proliferation of ETFs — and the overall concept of grouping stocks into indexes — has distorted markets.
/read.bi/2NEtXX6

Exchanges and Clearing

‘Flash Boys’ Exchange IEX Wins First Listing
Alexander Osipovich – WSJ
Upstart stock exchange IEX Group Inc. won its first listing, a victory in its efforts to enter a key business of the New York Stock Exchange and Nasdaq Inc.
Online brokerage Interactive Brokers Group Inc. said Wednesday it would switch its listing to IEX, becoming the first company to jump ship for the new exchange, which was made famous by Michael Lewis’s 2014 book “Flash Boys.” The Greenwich, Conn.-based brokerage is currently listed on Nasdaq.
/on.wsj.com/2ND5kdp

LSE in talks to rejoin global stock exchange lobby
Samuel Agini – Financial News
The London Stock Exchange is in talks to return to the World Federation of Exchanges roughly five years after unexpectedly quitting the global industry trade association. The move marks a fresh approach for the LSE under its new chief executive David Schwimmer and could give the exchange a prominent platform through which to wield influence at a time of significant change for the world’s market infrastructure providers.
/goo.gl/LfRFtU

CME Group Announces Special Meeting of Shareholders
CME
CME Group Inc. (NASDAQ: CME), the world’s leading and most diverse derivatives marketplace, today filed its definitive proxy statement for a special meeting of shareholders to be held at 10:00 a.m. Central Time on Wednesday, November 5, 2018, at CME Group headquarters, located at 20 South Wacker Drive, Chicago, Illinois.
/goo.gl/S7ZHMv

New Paper Identifies Post-Crisis Opportunities to Further Strengthen Global Financial Stability & Resiliency
DTCC
In its latest white paper, The Next Crisis will be Different: Opportunities to Continue Enhancing Financial Stability 10 Years after Lehman’s Insolvency, DTCC identifies a series of actions to tackle new challenges that have emerged related to the macroeconomic environment, market-related risks and the advent of new technologies, including:
Expanding central clearing for both cash and derivatives markets to more fully take advantage of the risk management benefits provided by central counterparties.
bit.ly/2MmJtm7

ICE Data Services and OneMarketData to Offer Real-time Streaming Tick Data and Analytics
ICE
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced that ICE Data Services will offer an on-demand tick data and analytics service, utilizing OneMarketData’s OneTick platform. This service will be provided over the ICE Consolidated Feed, which delivers aggregated real-time data and content from over 600 global sources. ICE Data Services will be the exclusive third party distributor for this hosted service.
/jlne.ws/2CP8nLD

Building A Trustless Exchange For The New Derivatives Paradigm
Yoav Vilne – Forbes
The emergence of cryptocurrencies as a new asset class, has heightened expectations for the eventual transition of other financial assets on to the blockchain. Derivatives, security tokens, and non-fungible assets can all benefit from the transparency and trustless execution environment of distributed ledgers. However, some critical hurdles need to be overcome to foster further adoption of the technology.
/goo.gl/zT2biM

Technology

QuantHouse announces global access of QuantFEED for Cboe market data
Valentina Kirilova – LeapRate
QuantHouse, the independent global provider of end-to-end systematic trading solutions including innovative market data services, algo trading platform and infrastructure solutions, has announced its QuantFEED and QuantLINK will provide optimized direct access to Cboe market data.
With this new service, QuantHouse now provides clients access to all asset classes traded by Cboe from all QuantHouse data centers via a single API. This ensures connectivity to the exchange is optimized, and reduces the cost of trading for QuantHouse clients. The US-based QuantFEED Cboe low-latency market data feeds, including options, futures, equity options, global equities and FX, are delivered to clients in either native or normalized format, directly from the exchange.
bit.ly/2Nz0Wwh

Strategy

10 years after crash, one trader has a strategy for protection
Keris Lahiff – CNBC
Ten years ago this week, Wall Street was facing the worst stretch of one of the biggest financial crises in its history.
Over just two days, Lehman Brothers filed for bankruptcy, Bank of America saved Merrill Lynch with a $50 billion buyout, and the Federal Reserve lent $85 billion to AIG to prevent it from collapse.
/cnb.cx/2NB2pSE

Miscellaneous

This Top Silicon Valley Advisor Managing $1 Billion Beats The Bull Market By Trading Options
Jonathan Ponciano – Forbes
Summer’s winding down and Morgan Stanley wealth advisor Cheryl Young has taken a rare break from market-watching to attend Burning Man. She’s in the middle of a bike-ride excursion in the Nevada desert when called to discuss her 20-year career.
“There’s a huge dust storm around me,” Young says as soon as she’s put on the line. “I wish I could take a picture. It’s amazing.”
bit.ly/2NEPkHO

Carbon Traders Beware: Here Are the Risks as Prices Triple
Mathew Carr and Jeremy Hodges – Bloomberg (SUBSCRIPTION)
Futures open interest may show speculative nature of rally; European Commission monitors market, intervention ‘not needed’
European carbon futures may be trading at decade highs and outperforming every other major commodity, but the rally has its pitfalls.
/goo.gl/EjMojY

JPMorgan: defying attempts to end ‘too big to fail’ Jamie Dimon has led the biggest winner of the post-crisis decade, but is there a convincing succession plan at the US bank?
Laura Noonan and Patrick Jenkins – FT (SUBSCRIPTION)
A decade ago, Jeffrey Kindler, then chief executive of US drugs giant Pfizer, was plotting an audacious $68bn acquisition of rival Wyeth. But when the financial crisis hit and one of his lenders pulled out at short notice, the deal was thrown into doubt.
/goo.gl/6TWAe2

‘They see it the same way they see the VIX and gold:’ the 25-year-old cofounder of a crypto trading platform explains why billion-dollar hedge funds are getting interested in the market
Frank Chaparro – Business Insider
Seed CX, a crypto trading firm in Chicago, has hedge funds knocking on the door to use its platform, according to cofounder Edward Woodford.
The firm, which announced Wednesday a $15 million series B fundraising round, is currently in the process of onboarding clients to trade on its spot and derivative trading platform. Woodford, 25, who co-founded the firm in 2015, told Business Insider that most of the cash will be used to double its staff to 40 people. The funding round was led by Bain Capital and OKCoin.
/read.bi/2NETwr8

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About Author

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