All posts by MarketsMuse Curator

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NYSE Top DMMs Aim to Defect? MEMX To Be Sprecher’s Mutiny On The Bourse?

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NYSE DMM Citadel Securities started as a HFT prop trading firm

Something funny happened on the way to the floor of the New York Stock Exchange last week; Citadel Securities and Virtu Financial, two of the three biggest NYSE “Designated Market-Makers” aka “DMM”) –also domain experts in leveraging high-frequency trading technology—and now control trading in nearly 40% of NYSE listed stocks, announced they formed a consortium and raised $70 million to create an electronic stock exchange called Members Exchange, aka” MEMX” that aims to compete directly with NYSE as well as NASDAQ to list and trade shares of public companies. The news release likely didn’t sit well with NYSE Chairman Jeff Sprecher, as the announcement reads like a script that could be titled “Mutiny on the Bourse.”

 

 

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A familiar scene..but not from the NYSE..yet.

Citadel Securities and Virtu Financial are not merely NYSE designated market-makers, an exclusive role granted by the exchange where the quid pro includes the DMM’s commitment to put their capital at risk while they maintain fair and orderly markets in the stocks they are assigned. Not your father’s NYSE specialists, Citadel and Virtu are also financial industry behemoths. Citadel is a global ‘alternative investment firm’ with $25b AUM and a high-frequency trading (“HFT”) domain expert. One of the original flash boys, the firm’s proprietary trading arm mints money using HFT tactics and strategies and is overseen by hedge fund billionaire Ken Griffin, whose net worth is estimated at $9.8bil.

Virtu Financial is also a $multi-billion platform. Firm co-founder Vinnie Viola is a former NYMEX Chairman, who became a high-frequency trading czar in the early 2000’s. Where Citadel’s Ken Griffith is a Harvard graduate, Virtu’s Viola hails from the US Military Academy at West Point. Now the owner of Florida’s professional ice hockey league franchise, Viola was on a Trump short-list to be nominated for US SecDef. Viola’s net worth of nearly $3bil might pale in comparison to Griffith’s pocketbook, but, what’s a billion here and billion there? Unlike Citadel, Virtu is a publicly-traded company ($5bil market cap), albeit the company’s shares are inauspiciously listed on NASDAQ (ticker: VIRT).  In addition to its ‘seats’ at the NYSE, Virtu has a membership presence on nearly 125 exchanges around the world.

So, both of those boys are billionaires, both of their firms are high-frequency trading Goliaths that have multi-asset, market-making presence across a spectrum of electronic trading centers, and both became NYSE top DMMs by gobbling up old-line specialist firms. Virtu secured its initial spot on the NYSE floor in 2011 and Citadel joined the party with its Pac-man strategy of NYSE specialist firm acquisitions shortly after Intercontinental Exchange “ICE” bought out the NYSE in 2014.

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Specialist traders work at a Virtu Financial booth on the floor of the New York Stock Exchange April 16, 2015. Shares of electronic trading firm Virtu Financial Inc rose as much as 24.6 percent during their IPO, valuing the company at about $3.23 billion. REUTERS/Brendan McDermid – RTR4XMJS

According to the launch announcement put out by MEMX, the $70 million in first round funding came from among others, Morgan Stanley, UBS, Charles Schwab, E*Trade Financial and TD Ameritrade. A total of nine firms are included in the initial business. There is only minor speculation as to why NYSE DMM GTS Securities is not currently involved in the new initiative-or at very least- they were not mentioned in the news release. Perhaps the simple reason is that GTS, which is also counted within the ranks of of multi-asset electronic market-makers, are NYSE loyalists and as relative newcomers to the NYSE, they are leery of aligning themselves with their sharp-elbowed tenants Virtu and Citadel in a yet-to-be-proven initiative and one that will certainly provoke the ire of Jeff Sprecher, the Chairman of the NYSE, and more importantly, the Chairman & CEO of NYSE owner Intercontinental Exchange (“ICE”) (NYSE:ICE). If you missed the memo, ICE is the global icon in the universe of financial exchanges; they own 12 other venues.

Why yet another stock exchange?! Does the equities market really need even more fragmentation?! Well, it’s all about the money. Duh.

According to insiders familiar with the MEMX initiative, the owners of Citadel and Virtu -as well as their sell-side partners, have long lamented the escalating cost of fees, both market data fees and the ‘extra fees’ imposed on “market on close” or “MOC” orders-the latter of which now represent the largest bulk of NYSE daily trading volume. Its no secret that those accessing the NYSE have increasingly pointed the egregious pricing to the point where those fees impede the ICE-owned venue’s ability to attract more order flow and better compete with other electronic exchanges that also trade in NYSE-listed companies.

One personal familiar with the MEMX’s pitch deck suggested, “These guys are tired of ICE taking in big market data fees and transaction fee revenue that they believe they are entitled to because they’re the ones making markets and providing liquidity. Their view is if were they to own their own exchange and offer lower fees, they could pocket it all themselves.” More telling as to the motivation is the narrative published on MEMX’s website: “As the only member-owned equities trading platform, MEMX will represent the interests of its founders….. and their collective client base..[comprised of retail and institutional brokerages] on U.S. market structure issues.”  Sounds like a line straight out of Gordon Gekko’s playbook.

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As cited in the WSJ coverage of the story, MEMX website suggests their model is to “be more simplistic.”  They state: “We will include a limited number of order types to promote simple and transparent interactions,” as well as “no speed bumps” to potentially hold up the trading process.” That ‘no speed bump” feature might sound like a slap at the upstart IEX exchange, owned by IEX Group and the ‘anti-flash boys’ equities exchange venue whose shareholders include major buy-side institutional investors. The IEX value proposition is to be ‘fairer to institutional investors’ and it limits access by “exploitative HFT trading firms” whose trade strategies include predatory, nano-second order entry and order cancellation.

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ICE Chairman Jeff Sprecher (r) Benedict Arnold(l)

Or, the MEMX marketing message could be “click bait” when considering that they have purportedly approached IEX with a proposal to ‘take-over’ the nascent-stage and still-struggling-for-market-share equities exchange venue. Even flash boy fintech billionaires know that when it comes to trading technology, it is often cheaper to buy than it is to build. And, despite MEMX claims they can “easily replicate the NYSE technology and infrastructure at a low price point”, they know the $70mil they’ve put together is merely a seed round when comparing to the 7 year old IEX. which has taken in nearly $200mil since its formation and has only achieved less than 3% market share and the only company listing it has secured is electronic brokerage Interactive Brokers (IEX:IBKR). If MEMX can do a ‘take-under; of IEX, they’d have a ready-made exchange that its founders could pitch to the biggest NYSE-listed corporations.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com

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Stock Price Implosion Puts HFT Firms Under Attack, Again

Stock Price Implosion Leads Some to Challenge Current Market Structure; HFT Firms Are Under Attack, Again…

Heads Up to High-Frequency Firms: Time to Hire a PR Crisis Manager Again, Call Your Lobbyists, Book Your Plane Tickets to Washington DC.

Before “bidding on” to the anti-HFT and anti-ETF remarks circulated by the assortment of market pundits appearing on Bloomberg, Reuters or the financial media megaphone channel, CNBC, you should know that SecTres Mnunchin has already weighed in. So has the SEC’s favorite tech entrepreneur, Mark Cuban. So has icon stock investor Leon Cooperman, who has the ear of Mnuchin and others. There’s a whole ‘hang-em-high’ crowd assembling to lay blame on high-frequency trading for the latest market routs. According to CNBC, Trump favorite Mike Flynn was overheard shouting to Mnuchin and Trump: “Lock them up!”

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NYSE DMM Citadel Securities started as a HFT prop trading firm

But, unless you’ve been investing in or trading in the equities markets for at least 20 years, you probably have no conception of a simple premise: markets go up and markets go down. Blame games are easy to play, equities investing is not always easy.

Traditional drivers to stock price movements include simple, time-tested fundamentals: the interest rate environment, the economic cycle, the value of the US dollar vs. other currencies, corporate revenue and profit, corporate debt levels, consumer debt levels, trends in residential real estate prices and other consumer optimism metrics. Yes, you can throw in the degree of confidence in the current government administration and a bunch of other geopolitical stuff (including tariff wars, Brexit event, and total uncertainty in many countries’ leadership–including the US) into the mix. We’ve all grown accustomed to the minute-to-minute chaos caused by the current president. His impact on stock prices is powered by his Twitter comments about China, the Federal Reserve Chairman, and blaming the latest government shutdown on democrats. Beyond that, institutional investors can only make investment decisions based on reality within context of  company earnings reports and not easily-fudged economic data. Investors should NOT make decisions based on a reality TV show produced in Foggy Bottom.

But, we should agree on one thing: the combination of complacent investing, a belief that prices of company shares will go up year after year is a fool’s view. The topic of debate in this post is whether the evolution of high-frequency trading (aka HFT) weaponry has contributed (yet again) to the large (downward) percentage moves in stock prices during the recent weeks. The sell-off, which arguably began during the first week of October, has led to an approximate 20% decline in the leading stock indices from the record highs. Many individual share prices have suffered bigger mark-downs, most notably tech sector stocks. Before asserting that high-frequency trading algorithms are the culprit, one need to ponder whether those same HFT tools also contributed to the nearly 50% gains the stock market has enjoyed since the 2016 US presidential election (two years ago)?

Whatever black swans have been flying over head for the past 6 months, now that equity prices have suffered multiple-day declines of 1%-3% (and the interim 1%-2% “dead cat bounce”) we need to blame someone!! After all, our very own president has been unwavering in his leadership mantra: “When the shit hits the fan, blame someone else for the problem!”

Let’s say you want to blame HFT firms for the slide. Considering the fact that today, the 3 largest NYSE market-makers are better known

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Specialist traders work at a Virtu Financial booth on the floor of the New York Stock Exchange April 16, 2015. Shares of electronic trading firm Virtu Financial Inc rose as much as 24.6 percent during their IPO, valuing the company at about $3.23 billion. REUTERS/Brendan McDermid – RTR4XMJS

for their legacy as high-frequency trading outfits, its easy to be cynical. These are ‘not your father’s NYSE specialist firm’, these are young quant jocks who made a ton of money as HFT prop trading shops starting back in the early 2000’s, and more recently, used some of that cash to purchase the legacy NYSE market-maker firms; the firms responsible for maintaining fair and orderly markets in NYSE listed companies. Now known as NYSE “DMMs”, they (actually their computers) also have the “first look” at orders to trade shares in which they are now the designated market-maker for. Instead of old-fashioned auction markets, these folks utilize algorithmic trading tools to match buyers and sellers and also trade for themselves. As a consequence, there is circumstantial evidence these firms are, to some extent, culpable for the rapid reflex moves in share prices.

Keep in mind, the flip-side is that these ‘HFT black boxes’ are also providing instantaneous liquidity, price transparency, and facilitate exiting or entering a investment position in less time than it takes to hit a ‘send’ button (until someone unplugs the machine after realizing they’ve risked the entire firm’s capital). Further, because everything happens in nano-seconds, one can argue that bear market cycles –periods that typically reflect recessionary pressures and in turn, signals that lead to a negative impact on the value of a company’s equity shares—are now much shorter in duration when compared to cycles going back 60-70 years.

To the first question, who can forget the May 2010 ‘Flash Crash’—an event that was certainly connected to HFT computers plugged into the walls surrounding the NYSE and NASDAQ computer server farms–and then became unplugged by humans when markets cratered due to a “fat finger” episode. We’ll tell you who cannot remember that event (other than having read about it years later): upwards of 1/3 of current ‘senior’ Wall Street quant jock HFT programmers who code the HFT machinery. Many of them were mining bitcoins in their MIT dorm rooms back in 2010. How many of the current generation of ‘systematic traders’ who now oversee billions of dollars were beyond high school in 2004? How many current trading desk wonks were around during the dot com bubble? How many folks who worked on trading desks in 1987 are even still alive, no less working in the business? Have you gotten the point, yet?

Because our pundits have accurately predicted this latest market down draft, allow us to further predict that we want to be “long on” private jet services to Washington (NYSE: BRK.A) and we’d love to invest in engagement contracts issued by PR Crisis Management gurus who represent these folks; they are presumably getting calls already by the best-known HFT honchos, starting yesterday.

Let’s be clear, the fundamental economic underpinnings that power equity prices have been sending mixed (warning) signals for months. OK, employment figures have been good, but Trump told us while campaigning for president that “US Employment figures are fake and fraudulent.” Yes, corporate earnings have met expectations, but nobody has delivered out-sized reports, and many companies have been sweating to provide realistic expectations, not wild-ass projections. According to recent polls, nearly 50% of Fortune CFOs are anticipating a recession will hit the US economy in 2019. 80% of CFOs believe a recession will be upon us before the end of 2020. Many multi-nationals based in the US are lamenting “Tariff Man” tweets. He says ‘US companies with US employees that make/sell products to US consumers will benefit, and the big companies have plenty of money to cushion the blows..” Really?!

So, fundamentals have been weakening during the past 2 quarters (unemployment figures aside). Even for those who subscribe to technical analysis and historic charts, the writing has been on the wall for months: “Caution Mr. Robinson, Caution!”

High-flying tech company shares started cracking in the 2nd quarter of 2018. They’ve been under an assortment of pressures that range from severe government and shareholder scrutiny to simple supply/demand obstacles impacting their business models (e.g. FB down nearly 40%, GOOG down 30% from its high, AAPL down 40%, AMZN down etc etc.) Bank stocks have been pummeled for the most part, even if GS’s latest beating is connected to yet another multi-billion dollar scandal. Big ticket corporate acquisitions made in the past 2 years have resulted in transition management problems. Corporate balance sheets have become increasingly overly-bloated with debt, thanks to folks on Wall Street who came up with a new pitch to corporate treasurers starting back in 2011: “We’ll float your bond offering (and get a big fee), you use the proceeds to repurchase outstanding shares, and you’ll make your EPS numbers look fantastic; everyone wins!!” Until the music stops, of course.  Corporate share repurchases have been credited with keeping equity prices stable and moving higher for upwards of seven years; the brokers are making nice commission on executing those buybacks and all is good with the world, until its not.

Stock market chartists started raising red flags in October. Corporate debt issuance came to a crashing stop in the last 6-8 weeks. That was a big signal. Less than two dozen Fortune companies have actually been buying back debt in the past quarter in preparation for the next shoe to drop; the one with the word ‘recession’ stamped on the bottom of each shoe. The notion that corporations should unwind the ‘sell debt, buy shares’ trade –by issuing new shares and using the proceeds to balance the balance sheet and repurchase outstanding debt is an idea that no investment bank would even suggest in his sleep, no less in an office. It would be professional suicide for a corporate CFO to even suggest that idea makes sense. Geopolitical impact re Trump’s tariff war is hitting US companies and US workers, even if not the Trump Hotel enterprise. The corporate tax cut was a short shot of heroin that stimulated the stock market, but increased the Federal deficit by nearly $1trillion. (Let’s not forget that Trump campaigned on reducing debt, not increasing it–but so does every other candidate). Now people are coming off the sugar high and that’s how/why stock prices revert to the mean.

Tariff Wars, Brexit and the assortment of geopolitical catastrophes have all been thrown into the mixing bowl. Crude oil prices have been crushed–along with the share prices of companies that drill, process and sell oil-based products. Yes, we’ll repeat: employment figures have been great, but as Donald Trump said throughout his presidential campaign, “Nobody can believe government employment figures, they’re all fake news!”

When weighing the assortment of fundamental signals that have been brightly broadcast throughout the past 9-12 months—and certainly since October of this year, anyone who had not re-balanced or pared down exposure to equities has no business investing in stocks. Its easy to say “Ok, 20-20 hindsight is great..blah blah blah..” For those following @marketsmuse, there’s no 20-20 hindsight; our resident pundits (with trading market pedigrees that go back to the 1980’s) have been shouting “Caution Ahead!!” for at least 4 months. (see the pinned tweet).  But, who wants to listen to experienced (if not cynical) professionals who have lived through multiple market cycles, especially when prices keep going up? Who wants to risk taking a profit and paying taxes on those gains when the asset value keeps going up, with or without fundamental justification? The answer: people who are (i) naïve (ii) overly-optimistic (iii) financially irresponsible (iv) not old enough to appreciate that what goes up, must go down.

Whatever black swans have been flying over head for the past 6 months, now that equity prices have suffered multiple-day declines of 1%-3% (and the interim 1%-2% “dead cat bounce”) we need to blame someone!! After all, our very own president has been unwavering in his leadership mantra: “When the shit hits the fan, blame someone else for the problem!”

Before the ink was dry on the famous Michael Lewis book “Flash Boys,” which profiled the May 2010 stock market crash, everyone knew who to blame. Before the first 1000 copies of that book left Barnes & Noble, government officials and regulators were busy sending out outlook meeting invites to the primary suspects-the heads of HFT proprietary trading firms that had come to dominate the trading of shares in US companies listed on public exchanges (and ‘dark venues), as well as stock index futures traded on electronic venues in Chicago.

Rules were introduced. Market structure lobbying groups were formed. Exchange executives pilot tested uptick rule changes. Fintech firms that provided ‘better solutions’ now represent more than just a cottage industry as evidenced by the fact, three of the leading HFT firms have through acquisition, become the three largest NYSE DMMs. For old folks, DMM is the contemporary phrase for ‘floor specialist’-the folks who are responsible for maintaining fair and orderly markets in the companies the NYSE assigns to market-makers on the floor of the NYSE. Pay-to-play and maker-taker rebate schemes advanced by brokers and exchange venues have flourished. Blah Blah Blah. Along the way, the US equities market, spurred by improving economic circumstances, and the last 10 years have been pretty much one long wet dream for traders and stock investors. The evolution of high-frequency trading morphed even more.

Irrespective of bull vs. bear views on individual stocks and stock indices and the 1500+ Exchange-Traded Funds that provide thematic investing styles, more than a carload of institutional investment managers still agree on one simple fact:  share price movements in individual companies and ETFs are exacerbated by high-powered black boxes that spit out millions of orders per minute. Those orders are often based on what has transpired in the markets during the past few seconds. This algorithmic approach to trading causes educated investors to scratch their heads when observing the value of shares in public companies can gyrate so violently in the course of an hour or a day, despite the fact those companies haven’t made any earnings report nor announced any positive or negative news as to the health of their business or the industry they sit in.

How does a company’s enterprise value move 10% down one day, then 5% up the next? Are there so many investors with differing views who are expressing these views constantly via buying and selling millions of shares? No. Honest electronic trading industry experts will estimate that at least 80% of the time, transactions taking place at the NYSE or NASDAQ are between two ‘transformers’; computer bots that are set on auto-trade. These black box powered bots do not represent investors, they don’t smoke (unless the computer is overheated and not residing in a freezer), they don’t curse and they don’t sweat—they simply spit out–orders based on algorithms.

Put more simply, actual investors are not involved in upwards of 90% of the trades taking place. Bottom line: the exaggerated changes in publicly traded corporate enterprise values that take place from second to second are even more pronounced as prices move lower. That’s a real fact, not a Kelly Ann Conway or Sarah Huckabee-style “alternative fact.” More than a handful of objective market observers and participants have long argued that Wall Street has evolved into a Battle of the Transformers”; price moves and volatility are powered by computers, not by momentary sentiment changes on the part of real investors.

But, we live in a blame game world, as best evidenced by our so-called leaders (yes, we’re referring to the current occupant of the White House) who, when faced with obstacles or after making stupid decisions, automatically blame others for the disaster that occurred recently.  And those blames are applauded by the blind mice and sheep who go along with the stupid decisions made for them.

Because our pundits have accurately predicted this latest market down draft, allow us to further predict that we want to be “long on” private jet services to Washington (NYSE: BRK.A) and we’d love to invest in engagement contracts issued by Wall Street-friendly PR Crisis Management guru. Those folks will be on speed dial for the best-known HFT honchos, starting yesterday.  Caveat Emptor: PR crisis management should be advanced by smart folks, not those trained in the art of jibber jabber and deflection. If there is a fundamental flaw, acknowledge it and implement transparent steps that will appease the plaintiffs and provide real solutions to the ‘problem’ .

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com

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Corporate Bond e-Trading: “It’s like déjà vu all over again.” The Latest Effort…

The never ending battle to electronify the secondary market for corporate bonds has yet another new entrant that aims to disintermediate corporate debt dealers that ‘control’ the trading in what has morphed from a $2trillion market to a $9 trillion marketplace during the last decade alone. As profiled by CNBC last week, the platform is called Wave Labs and its led by former Nordea Asset Mgt head trader and “fintech quant wonk”. Miles Kumaresan.  Wave Labs purportedly as a new sauce that distinguishes itself from the current generation’s e-bond trading platforms; its powered by AI and algorithms that select corporate bonds based on buyer’s criteria. How Wave Labs helps to address the needs of sellers –which is arguably a crucial feature for any electronic trading platform–wasn’t addressed in the CNBC story

As best said by MarketsMuse Senior Curator Jay Berkman, who was credited with being a co-founder and head of business development for the 1990’s era “BondNet” and arguably the first electronic trading platform for corporate bonds, “At risk of infringing on any copyright that Yogi Berra might have,  “It’s Deja Vu All Over Again.”

While BondNet may have had the best technology, its business model was flawed, according to Berkman. “The business was positioned as an inter-dealer broker when it should have been positioned as a utility owned by a consortium of dealers, who would otherwise have an incentive to provide liquidity. When attempting to move to the buy-side, the dealers put the company into the penalty box.”  MarketAxxes, which started after BondNet, had the right approach-which explains how/why it grew to what is now a multi-billion market cap company, even if its niche is mostly matching small size trades (under $5mil notional). That typical trade size

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Miles Kumaresan, CEO of Wave Labs

metric is illustrative of the obstacles that face any electronic platform that hopes to secure a presence in the corporate bond market. As one industry veteran pointed out, “Stocks are bought and [corporate] bonds are sold (by a salesman); if there’s a new black box that can actually pick the precise bonds that an institutional buyer wants, without having to deal with a salesman, that’s the holy grail.”

During the last 3-4 years, newbie disruptors who have sought to be the new kids on the bond block seeking to displace the role of bank trading desks have included among others, Liquidnet (whose pedigree is more tied to equities trading),Trumid, Electronifie, OpenBondX,  and EMBonds. Their respective value propositions are the same: since the crisis of 2008, when bank balance sheets were forced to scale down inventory holdings, bank trading desks have not been able to address the liquidity needs of the marketplace. Each of the new generations of bond trading platforms has cute features, the most common being peer-to-peer trading, “RFQ” (request-for-quote) and also, scheduled auctions, as opposed to continuous bid-offer actionable price streaming. Electronifie and Trumid -both represented by fintech merchant bank SenaHill Partners, combined within two years of their respective start-up phase, as both struggled to get past B Rounds for funding in the course of trying to get a foothold in the marketplace.

Per the CNBC coverage by Hugh Son (@hugh_son), “Leaning on his quirky charm and the bravado of a true believer, Kumaresan says he has gotten meetings with some of the world’s biggest asset managers. He mentions their names — giants in the industry — and then requests that they stay out of print. As he tells it, the demonstrations of his prototype usually end abruptly as executives gush over its potential.”

One could argue those conversations end abruptly because Wave Labs is just the latest wave. As Berkman suggests, “Kumaresan might be better off tuning into Kevin O’Leary, the CNBC pundit and notorious Shark from ABC’s “Shark Tank”, and consider licensing his technology to MarketAxxes or TradeWeb–as they’ve already got the most important two elements: credibility and customers.”

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com

 

For the full story about Wave Labs, “This quant says his tiny start-up is about to blow up Wall Street’s $8 trillion bond trading monopoly” click here

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GTS, NYSE Top DMM Now Joins Forces With Boutique Investment Bank

Trifecta Month for GTS; NYSE DMM, Quant-Trading Powerhouse and Fin-Tech Think-Tank Now Aligned With Investment Bank Specializing in Primary Debt & Equity Capital Markets

GTS, the NYSE’s Top DMM, and one of the global trading market’s leading multi-asset electronic market-makers, is on a strategic deal-making binge. On the heels of GTS co-founder and CEO Ari Rubenstein’s November 2 announcement that his firm acquired Cantor Fitzgerald’s 35-member ETF market-making and institutional broking crew, last Thursday while in London, Rubenstein announced that GTS is expanding its collaboration with BNP Paribas to now include live-streaming US equities pricing, on top of already delivering GTS’s UST price feed through BNP’s platform. Making November a hat-trick month for GTS, Rubenstein today announced that his firm is joining forces with boutique investment bank Mischler Financial Group (“Mischler”), a specialist in primary debt and equity capital markets and institutional brokerage providing secondary market execution for equities and fixed income.

Founded in 1994, Mischler Financial is also the industry’s oldest diversity firm owned and operated by service-disabled veterans; a designation that enables GTS to advance a Diversity & Inclusion (D&I) value-add to its armory of new solutions and client experience that GTS will bring to investment managers and issuers of debt and equity across the listed-company landscape.

Below is the opening extract of the press release.

New York, NY – November 19, 2018 – GTS, the New York Stock Exchange’s largest Designated Market-Maker (“DMM”) and a leading electronic trading firm, and Mischler Financial Group, Inc. (“Mischler”), the financial services industry’s oldest minority broker-dealer owned and operated by service-disabled veterans, today announced a strategic alliance that will establish a best-in-class offering for primary debt and equity market underwriting as well as secondary market best execution across the capital markets.

The partnership, which is anchored by a technology-powered offering for public companies and a broad universe of capital markets participants, will yield a low-cost, more efficient and more effective trade execution experience. Mischler will become a “forward operating base” for the growing GTS capital markets franchise, affording clients access to technology and sources of liquidity that are generally only available to the world’s most sophisticated investors.

Founded in 2006 as a proprietary, quantitative trading firm, GTS is now a recognized thought-leader in market structure and proudly oversees trading for more than one-third of NYSE-listed companies. The firm has an extensive track record developing and deploying proprietary, industry-best technology to bring better price discovery, trade execution and transparency to the markets.

“This is a high-tech, high-touch partnership designed to meet the needs of a new generation of issuers, asset managers, and trading and investment professionals seeking low-impact market liquidity and best-in-class execution,” said Ari Rubenstein, Co-Founder and Chief Executive Officer of GTS. “Clients are rightfully demanding innovation in the marketplace, and this alliance is uniquely designed to provide that and much more.”

Mischler, established in 1994, is an active underwriter across global equities, corporate and municipal debt, government securities and structured products. In the last three years alone, Mischler has played a role in almost 700 primary debt and equity market transactions. The firm also provides conflict-free share repurchase services for corporate treasurers as well as secondary market trade execution in equities and fixed income for a discrete universe of public plan sponsors and institutional investment managers.

Continue to the entire news announcement here

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com

 

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Attention! Veterans Day + USMC Birthday Salute to Veteran Owned BD Mischler

In Honor of Veterans Day and the USMC 243rd Birthday, MarketsMuse Curators extend our appreciation to all US Military Veterans, Happy 243rd Birthday and Semper Fi to all US Marines, a special salute to the battalion of sell-side broker-dealers owned and operated by Service-Disabled Veterans, and a Special Shout Out to Mischler Financial Group’s “Mischler Marine Expeditionary Force”, comprised of Managing Director, Public Finance Rick Tilghman; Senior Analyst, Capital Markets Jonathan Herrick; and Director, Portfolio Strategies Jason Klinghoffer, CFA.

OORAH! & SEMPER FII

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com

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Mischler Financial Group Marine Expeditionary Force

 

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NYSE DMM GTS Securities Buys Cantor’s ETF Market-Making Business

Breaking News: GTS Securities, the NYSE’s biggest specialist firm aka Designated Market Maker (“DMM”) and one of the electronic market-making world’s biggest players in the FX and rates markets is now aiming to become the ETF industry’s biggest market-maker the old-fashioned way, by buying into the space. After several months of speculation and rumors of a pending deal, GTS formally announced today they have acquired the entire team of ETF brokers and traders from Cantor Fitzgerald. According to the press release issued by GTS, the deal to acquire Cantor’s ETF team of approximately 35 ETF sales traders led by ETF industry veteran Reginald Browne is expected to close in February 2019. Terms of the transaction were not disclosed.

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(l)Reginald “ETF Godfather” Browne (r) Ari Rubenstein, co-founder GTS Securities

GTS was established by former NY Merc floor traders Ari Rubenstein and David Lieberman, who looked to Amit Livnat, a top-of-class graduate from the world famous Israel Institute of Technology to serve as the firm’s resident tech wonk. Of the three, Rubenstein is the camera-facing thought-leader, who first cut his teeth in the trading business as a runner on the floor of the New York Mercantile Exchange and later became a floor trader on the New York Cotton Exchange. Aligning with fellow floor trader David Lieberman and Livnat, GTS was first positioned as a quantitative prop trading firm that leveraged in-house trading technology and home-grown algorithms to peel incremental profits by executing tens of thousands of transactions per day across US equities, rates and FX markets. GTS levered its high-frequency trading domain expertise and morphed into its current role as a global trading powerhouse once the firm took control of the NYSE’s biggest specialist firm operated by a unit of Barclays Bank.

“For the first time on a scale never seen before, the most sophisticated Wall Street technology is being deployed for mainstream investors, be they institutional or retail,” said Ari Rubenstein, CEO and co-founder of GTS. “Investors around the world can now leverage the very best in machine learning, artificial intelligence and execution technology to help them save money whenever they trade and invest. This is an unprecedented opportunity for investors that unites unrivaled innovation with pioneering client service – while enhancing the capital raising opportunities for listed companies.”Stacey Cunningham, president of the New York Stock Exchange said, “The NYSE and our partners embody the synthesis of technology and human judgment, leading to the best possible outcome for investors and issuers.”

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For the full press release, click here

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This Broker-Dealer Gives Back & Pays Forward

Broker-Dealer

Newport Beach, CA & Stamford, CT – November 1, 2018 — Each year, Mischler Financial Group, Inc. (“Mischler”), the securities industry’s oldest investment bank and institutional brokerage owned and operated by service-disabled veterans, pledges a percentage of the firm’s profits to veteran and service-disabled veteran philanthropies as part of its annual Veterans Day charitable initiative. This year, Mischler is proud to announce that Army Ranger Lead The Way Fund will be the recipient of the Mischler 2018 Veterans Day Month pledge.

lead-the-way fundEstablished in 2007, Army Ranger Lead The Way Fund, Inc. (“LWTF”) is a 501c3 Non-Profit created in honor of Sgt. James J. Regan (“Jimmy”) who served with Charlie Company, 3d Battalion, 75th Ranger Regiment. Jimmy was killed in action while serving in Baqubah, Iraq on February 9, 2007, at the age of 26. Since its formation, the organization has been dedicated to raising funds to support disabled U.S. Army Rangers and the families of Rangers who have died, have been injured or are currently serving in harm’s way around the world. LTWF provides spouses and children of deceased, disabled or active duty Rangers with assistance for acute medical care, recovery and wellness programs, warrior transition programs and other services determined to be vital to the family’s well-being, beyond what the government can offer.

Dean Chamberlain, Chief Executive Officer of Mischler and a graduate of the US Military Academy at West Point who served as a Captain in the U.S. Army 4th Infantry Division from 1985-1990 stated, “We are grateful to the many clients of our firm who provide us with the opportunity to demonstrate our capabilities and in turn, afford us the ability to pay back and pay forward to carefully-selected philanthropies throughout the year. When paying tribute to Veterans Day, in particular, we believe that Army Ranger Lead The Way Fund meets and exceeds the objectives of our firm’s philanthropic mission.”

broker-dealer-mischler-veteransAbout Lead The Way Fund, Inc.

Army Ranger Lead The Way Fund, Inc., A 501c3 Non-Profit, Is An Active Duty, Casualty Assistance, Recovery, Transition And Veterans Organization That Provides Financial Support, Beyond What The Government And Veterans Affairs Can Offer, To U.S. Army Rangers And The Families Of Those Who Have Died, Have Been Disabled Or Who Are Currently Serving In Harm’s Way Around The World. The organization website is https://www.leadthewayfund.org/.

About Mischler Financial Group, Inc.

Mischler is a federally-certified Service-Disabled Veteran-owned Small Business (SDVOSB). Established in 1994, the firm is FINRA’s oldest investment bank and institutional brokerage owned and operated by Service-Disabled Veterans. Within the primary capital markets, Mischler provides investment banking, underwriting, and distribution of corporate debt and equities, and municipal debt issuance. Mischler’s secondary market, conflict-free capabilities extend across the U.S. and global equity markets, exchange-traded funds and the U.S. fixed income markets. Mischler also provides asset management for liquid and alternative investment strategies. Clients of the firm include leading institutional investment managers, Fortune corporate treasurers and municipal officials, public plan sponsors, endowments, and foundations. The firm’s website is located at www.mischlerfinancial.com.

Media Contact:

Jay Berkman

The JLC Group

www.thejlcgroup.com

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Class Action Lawsuit Aims at TD; Broker Rebates from Exchanges & HFT Firms Under Fire

Broker Rebates From Exchanges and HFT Firms May Be Securities Fraud, Says Federal Judge

Broker Rebates, Payment-for-Order-Flow (“PFOF”) and “Pay-to-Play” have become synonymous with new world order in which exchanges, dark-pool operators and high-frequency trading (“HFT”) firms, (the so-called “flashboys”) dominate the world of stock trading. While many Wall Street geniuses will argue “the genie is out of the bottle”, it doesn’t mean this practice is right-minded, no less legal-and it hasn’t stopped naysayers from arguing that customers’ best interests are clearly not part of the equation. A Federal judge in Nebraska seems to agree, based on his ruling last week that allows a class action lawsuit aimed at TD Ameritrade in connection with their receiving payment-for-order-flow rebates from high-frequency trading (“HFT”) (and not even sharing those rebates with customers!) to proceed. The plaintiff argument is that TD has violated best execution guidelines. Should anyone be shocked?! After all, the topic of payment-for-order-flow and barely-disclosed rebates paid to brokerages by exchanges and electronic market-making firms in consideration for routing orders to them has been a topic of spirited debate for more than several years.

payment-for-order-flow-rebatesHere’s the excerpt from WSJ reporting by Cezary Podkul:

Mom-and-pop investors who think their brokers are prioritizing high-frequency traders over them may soon have a chance to try to prove their case in court.

A federal judge in Nebraska this month ruled a class-action lawsuit could proceed against TD Ameritrade Holding Corp. AMTD -1.09% , one of the nation’s largest discount brokerages. In his ruling, the judge cited “serious and credible allegations of securities fraud” stemming from the company’s order routing practices.

Plaintiffs allege the discount brokerage prioritized its profits over their best interest on stock transactions

The TD Ameritrade customers who brought the suit alleged the company, which provides investing and trading services for 11 million client accounts, prioritized its profits over their best interests. They claim it did so by accepting incentives from stock exchanges and large electronic trading firms to route customer orders to them without ensuring the customers would get the best prices available – an obligation that along with related factors is known as “best execution.”

A spokeswoman for TD Ameritrade said the company disagrees with the judge and will appeal his ruling.

Judge Joseph Bataillon’s ruling, delivered Sept. 14 in federal court in Omaha, Neb., marks the first time a court has allowed customers to pursue a class-action lawsuit on the grounds a retail brokerage breached its duty to provide best execution, according to the ruling and the plaintiffs’ attorneys.

The decision comes at a time of growing focus on how brokerages handle customer orders. In its Oct. 2017 blueprint for streamlining financial regulations, the U.S. Treasury Department said it is concerned payments to brokerages “may create misaligned incentives” for brokers and their customers. It urged the Securities and Exchange Commission to boost regulation of such payments and require more disclosure.

In March, the SEC proposed a study that would impose temporary restrictions on stock exchanges’ fee and rebate payments and measure the impact on order routing behavior and trade execution quality. On Wednesday, an SEC commissioner called on the agency to move ahead with the study and faulted it for not doing more to ensure transparency and fairness in the stock market.

Keep reading, the story is only going to get better, but not necessarily for brokers. Then again, the current SEC leadership is likely to put their own dog in the game, given their views toward re-defining the concept of fiduciary within the context of broker-dealer guidelines.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

Here’s the link to the WSJ coverage

 

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NYSE Floor Broker Lauren Simmons Breaking Records & Glass Ceilings

MarketsMuse Curators extend our thanks for the excerpt below, courtesy of Aug 1 feature story by Philly Inquirer Reporter, Erin Arvedlund. Follow Erin on Twitter via   @erinarvedlund  or email  EArvedlund@phillynews.com

NYSE Floor Broker Lauren Simmons is breaking records and glass ceilings. She’s the youngest female and only the second African American woman to ever work at the NYSE in its 226-year history. On December 5, 2017, she signed her name alongside that of John D. Rockefeller in the constitution of the NYSE.

She’s what most traders aren’t — a millennial, a woman, and a minority.

At 23, Lauren Simmons is the youngest and only current full-time female trader on the floor of the New York Stock Exchange.

Simmons, a native of Marietta, Ga., graduated from Kennesaw State University with a degree in genetics and a minor in statistics, all of which helped her impress Gordon Charlop, partner at Rosenblatt Securities and a floor trader for twenty-five years. As a NYSE floor governor, he hired her to work on the floor of the New York Stock Exchange as an equity trader last year.

“He liked my stats background, and as a trader, you have to make quick decisions,” Simmons told the crowd. Rosenblatt is a specialist boutique brokerage firm that trades mostly exchange-traded funds, or ETFs, she said

While much of Wall Street trading is now automated and computerized, the NYSE is one of the last remaining trading floors with humans, she added.

“My orders from clients might move prices, and I can go to one of the market-makers in a stock in-person and ask them what the market’s looking like. Technology can’t do that.”

To continue reading the full story by financial industry veteran journalist Erin Arvedlund, please click here. Follow Erin on Twitter via   @erinarvedlund |  EArvedlund@phillynews.com

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor  or email: cmo@marketsmuse.com.

This 23-year-old is the only full-time female trader at the New York Stock Exchange from CNBC.

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Securities Regulations 3.0 Digital Token Offerings, ICO vs. STO

Digital Token Offerings & Securities Regulation: Are you an ICO or STO? (the following is courtesy of Prospectus.com LLC) 

A question that is harder to ask than whether asked if your product is butter or margarine. Blockchain token sales (aka initial coin offerings or “ICOs”) reportedly topped $5 billion in 2017, with approximately $1 billion ICO offerings originating in the United States, according to a December 2017 report by Ernst & Young. Blockchain technology has a variety of prospective applications, and blockchain tokens can have a variety of features and functionality. For example, some blockchain tokens may function as a virtual currency, or as a license or right to receive a good or service or to use certain software. Even traditional assets like real estate or stock in a company may be “tokenized.” That said, a token’s characteristics and the manner in which the token is sold drives the determination as to whether US securities laws –as well as a growing universe of securities regulations in other jurisdictions-may be applicable, explaining the more recent industry labeling:“securities token offering” , also known as STO.

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Evan Fisher, Prospectus.com LLC

While much has been said and much has been written on the topic of securities regulations within the context of digital token offerings, it would seem that many are still clueless (or perhaps have bananas in their ears and blinders on their heads). Evan Fisher, a finance industry veteran  and business plan consultant at Prospectus.com LLC stated, “Of the several dozens of initial conference calls between the staff at Prospectus.com LLC and crypto cool kids seeking white paper writing and/or investor offering document preparation for respective ICOs,  the take away is that many crypto entrepreneurs still suffer from blind eye syndrome and are advancing capital raises in direct violation of established law. ” Adds Peter Berkman, a US securities and real estate attorney who also advises clients of Prospectus.com LLC, “Regrettably, ignorance of the law is not a viable defense strategy for those charged with violating securities laws and/or anti-money laundering laws.” Added Berkman, “the popular argument held by many start-up entrepreneurs in ‘crypto land’ is that their token is not actually a security-which is fine-as long as they’ve set aside several hundred thousand dollars to defend that argument when they wind up wearing court order to appear.”

That said, there should be two rules of thought for those who aspire to advance digital token offerings and who believe they have a great, industry disrupting idea that leverages their fintech fluency and the blockchain ecosystem. First, consider the 3 Duck Rule-If it looks like a duck, walks like a duck and quacks like a duck, regulators will call it a duck and second, advancing the notion that your ‘token’ is a utility device and the pitch to investors is “the value of the token will increase as usage of the token increases”–hence the reason for investing in it-is a thesis that has been advanced by each of the 800+ digital token offerings that have died on the vine before reaching puberty.  Leading many investors to ask in retrospect, “What the f*&k happened to the money I invested?!”  In turn, leading this author to answer: “Your money has been carefully distributed to a variety of real world assets, including luxury homes, vacation homes, cars, NetJet contracts and other toys purchased by the folks who you sent your money to.” If you’re a crypto cool kid and your value proposition is “If we build it, they will come and they will play” and hence,  “its the balls and bats that we provide that will have value and the more folks play, the greater the value of the bat and balls,” we congratulate you for socialistic leanings.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

On the other hand, sophisticated investors are rapidly losing interest in pitches for digital token offerings that are based on the same premise advanced by dot-com busters–the one that suggested “if we get enough users, we’ll be profitable!” Yes, that proved true for whose business models were based on advertising sales and were able to attract enough eyeballs to appeal to advertisers. And yes, this model has worked beautifully for Alphabet Inc, FaceBook, YouTube and a select universe of others. Yes, you can also go to the dot-com graveyard and locate the thousands of others who never got enough users, or never got advertisers to pay those sites to install a click-able link. In the Software as a Service (SaaS) model, people pay for using a software application on a subscription basis. In the utility token construct, payment to use the software application and those who receive payments is often complex; but investors in the token are generally not sharing in that revenue. They can only look to a return on their investment if a whole bunch of people are using it and if a whole bunch of people are using it, they will need to procure more tokens for continued usage. If  there are a limited number of tokens available for using the application, the value of the token will therefore increase.  Not to suggest the ‘pay-to-play’ model is bad (its arguably a good business model), the rubber meets the road at the point where users don’t want or don’t need to play with your token–because nobody else cares to play with it.

To read the entire article from Prospectus.com LLC, please click here

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ETF View: What’s Next: Telecom-Media Merge Into XLC

Extra! Extra! XLC is the new ETF that ties telecom and media constituents into one exchange-traded fund! For those with a view towards latest and greatest ETF products, eyes and ears are on the Communications Services Select SPDR Fund (NYSEARCA: XLC) — “it tracks the Communication Services Select Sector Index and “seeks to provide precise exposure to companies from the media, retailing, and software & services industries in the U.S.”

etc-xlcWow. That’s a bucket full of precision when considering the constituents of XLC include among others, Facebook (NYSE:FB), Alphabet Inc (NASDAQ: GOOGL), Activision (NASDAQ: ATVI), Verizon (NYSE: VZ), Comcast (NASDAQ: CMCSA), Netflix (NASDAQ: NFLX) The good news is that ETF maestro Andrew McCormond, Managing Director ETF Solutions for WallachBeth Capital distills the appeal of XLC, the latest innovative exchange-traded fund and one that might be the FANG-style ETF for portfolio managers who have yet to find a one-stop product that meets their portfolio allocation needs.

New ETF merges tech and media from CNBC.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

If you’re on a path to raise capital for a new hedge fund, a fintech initiative or a blockchain-startup, the first step is packaging your pitch and presenting the opportunity within a properly-prepared Prospectus. The go-to firm to assist you? Prospectus.com LLC. Straightforward, Smart and Bespoke Services.

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Morgan Stanley Ratchets Up Electronic Bond Trading Team

Morgan Stanley Raises Its Hand and Appoints e-Trading Veteran to lead investment bank’s scheme for the Electronification of Fixed Income Markets. Electronic bond trading has long been a holy grail for certain folks in and around Wall Street. On the one hand, reducing head count and mitigating dependence on high-paid sales people as opposed to ‘electronifying’ the trade inquiry and execution process makes sense and save dollars. For buy-sider players, the notion of increased transparency for instruments that have historically traded ‘over-the-market’ has been widely embraced by institutional investors, albeit many buy-side bond traders have encountered logistical, cultural, and arguably, political challenges when it comes to utilizing electronic trading tools. Without counting the number of independent e-bond exchange initiatives launched (and languished) in both the US and Europe since the turn of the century (a number that extends into the several dozens), the major banks have long insisted that bond trading is their domain alone and the concept of a centralized exchange platform is generally counter-intuitive to sell-side bond traders. Other than select legacy platforms whose initial backing (and liquidity) came from a consortium of banks (such as Market Axess and prior to that, BrokerTec), the six-pack banks have been reticent to join hands and to better ‘normalize’ bond trading in an electronic manner similar to other asset classes. Instead, everyone, including established exchanges, including the NYSE have aimed at building their own playing fields.

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Phil Allison, “Captain Morgan’s” new Head of Automated Fixed Income Trading

(Bloomberg) — Morgan Stanley, which has recently thrown down its own gauntlet to advance electronic fixed income tools hired Phil Allison, previously of KCG Holdings Inc., to lead the automation of its fixed-income business. Allison will head fixed-income automated trading and report to Sam Kellie-Smith, according to a memo sent to staff Monday.

He was most recently the chief executive officer of KCG Europe, a high-speed trading business that was acquired last year by Virtu Financial Inc. Allison, who became chief executive of KCG’s European business in September 2014, purportedly received a golden parachute payment of up to $7m when he was tossed out the door when Virtu took over KCG. He was previously the global head of cash equities at UBS Group AG.

Automating bond trading is a “major priority” after Morgan Stanley succeeded in digitizing stock trades, helping it become the top equities shop globally, CEO James Gorman said earlier this month. Fixed-income businesses have been harder to switch, partly because of the market’s lower liquidity.

Morgan Stanley has been finding ways to incorporate its electronic-trading technology, known as MSET, into the bond- trading business. Kellie-Smith, who previously led equities, was picked in 2016 to revamp the fixed-income business after the bank reduced the unit’s headcount by about 25 percent.   Allison worked at UBS from 1997 to 2014, developing statistical models and playing a leading role in algorithmic trading and automated market-making.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

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Former NYSE Prez Farley Launches Fintech SPAC IPO

Tom Farley, the former top gun at the NYSE, has long advocated the benefits of raising capital via the construct of Special Purpose Acquisition Company aka “SPAC”, aka “Blank Check company.” Now he’s become the CEO poster boy for SPACs with the formal IPO and NYSE listing of Fintech SPAC Far Point Acquisition Corp., a financial technology-themed acquisition company, which is backed by activist investor and fintech aficiondo Dan Loeb.

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Tom Farley, Far Point Acquisition Corp

42-yearold Farley, a Georgetown University alum and former ICE senior executive and the second youngest person to serve as NYSE President when taking on that role in 2012, will serve as CEO of the ‘fintech buyout’ company. Farley is arguably one of the industry’s most fintech-fluent folks, given his role in helping to transform NYSE into a financial industry trading technology centerpiece.

Farley’s long-held view towards the future is evidenced by the fact  NYSE’s two most dominant designated market-makers aka “DMM” firms, GTS Securities and Virtu Financial are companies that are synonymous with the phrase fintech. Both firms started their journeys as prop trading firms specializing in ‘high-frequency-trading’ and their more recently attained NYSE ‘specialist’ roles are powered by next generation in-house algorithmic trading and artificial intelligence tool kits. GTS Founder Ari Rubenstein, whose NYSE DMM is responsible for maintaining fair and orderly markets in 1200+ companies and who also oversees one of the industry’s most robust, multi-asset liquidity-providing prop trading platforms, is also a founding member of industry trade group Modern Markets Initiative (MMI) 

Back to SPACs- For those who may have missed the multiple memos coming out of the biggest investment banks, the blank check company construct provides a means to create a publicly-traded ‘shell company’, whose use of proceeds is intended to acquire a private company (or companies) and seamlessly “jump the shark” by rolling the private company into the publicly-listed company without bearing the burden of the time and cost that is synonymous with taking a company public via the traditional IPO process.

First introduced in the early 1970’s, blank check companies were soon derided by securities regulators after a string of capital raises by companies that had notoriously little corporate governance, enabled unsupervised CEOs to empty corporate coffers for personal gain, leaving investors with nothing. In the early 1990’s, the construct was re-invented by small-cap investment bank GKN Securities’ founders David Nussbaum, Roger Gladstone and Robert Gladstone, who have been credited with introducing the SPAC construct (along with securing a trademark for SPAC), which is chock full of checks and balances. The GKN leadership team’s early success in floating ‘blank check’ companies led to their creating a new firm, EarlyBirdCapital which has become the thought-leader in SPAC offerings, as the SPAC template has since been emulated by the financial industry’s leading investment banks and endorsed by major exchanges across the globe.

In the past 10 years alone, tens of dozens of capital raises via the SPAC construct have delivered billions of dollars of dry powder for designated acquisition companies that have since effected tens of billions of dollars worth of ‘quick IPOs’ for companies in nearly every industry sector, including the cannabis industry,

Fintech industry veteran and startup industry consultant Jay Berkman, who coincidentally helped GKN introduce their first SPACs to institutional investors back in 1993, and now serves on the advisory boards of fintech merchant bank SenaHill Partners and investor document consultancy Prospectus.com LLC said, “Far Point Acquisition may not be the first Fintech SPAC, but its launch clearly reinforces a compelling approach to raising capital for the purpose of bringing established private companies into the publicly-traded ecosystem.”

Via video clip below, former NYSE top gun Tom Farley expresses his views on the SPAC construct and the fintech sector, and provides a glimpse at the prospective target acquisitions that Farley will be aiming for.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

Former NYSE president announces IPO for ‘blank check company’ from CNBC.

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Big Board Bets on former Bloomberg “Babe”: Betty Liu to Become Vice-Chair of NYSE

Bloomberg’s Betty Liu Moves to C-Suite Role at NYSE

(Original story from Traders Magazine – June 6- by John D’Antona Jr.)–The women’s movement continues at the U.S.’ NYSE, the oldest public stock exchange,  announced that former Bloomberg “babe” Betty Liu, who is also founder of financial content firm Radiate, Inc., will become Vice Chair of the NYSE, the global financial industry’s most famous bourse, a subsidiary of Intercontinental Exchange Inc. (MarketsMuse Senior Editor expresses warm note to Betty and re: the phrase used in quotes above is intended to be entirely respectful and complimentary –and not to be misconstrued as ‘not PC’ or to inspire a #MeToo moment)

Intercontinental Exchange, Inc., operator of the New York Stock Exchange, announced today that Betty Liu, an award-winning business journalist and entrepreneur, is joining the New York Stock Exchange as Executive Vice Chairwoman. Her appointment takes effect July 9. Liu will also join the NYSE Group Board.

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Betty Liu, NYSE Co-Chairwoman

Liu is the Founder and CEO of corporate leadership advisory Radiate, Inc. and a 10-year veteran of Bloomberg Television, where she most recently co-anchored Bloomberg’s “Daybreak Asia” and “Daybreak Australia.” In her new role at NYSE Group, Liu will bring her global experience working with thought leaders, newsmakers and C-level executives to the Exchange. Working with NYSE President Stacey Cunningham and NYSE COO John Tuttle, along with the senior leadership teams of the NYSE and Intercontinental Exchange, Liu’s mission will focus on strengthening and building the NYSE leadership network, cultivating connections through live events and creating valuable opportunities for organizations to connect across the NYSE’s unmatched listed community of 2,400 leading global companies.

Liu will be joining the NYSE alongside its acquisition of Radiate, Inc., the company Liu founded in 2016 to empower emerging leaders with expert advice. ICE’s acquisition of Radiate is subject to customary approvals. When the deal is complete, Radiate’s team and content will become assets of the New York Stock Exchange and will be scaled across NYSE platforms. Radiate offers a library of more than 2,000 short-length video lessons taught by over 100 global CEOs and thought leaders. The Radiate platform, when it becomes a part of the NYSE, will add to the Exchange’s broad array of content and events. The transaction is expected to close in June and will not impact ICE’s 2018 results or capital return plans.

“Betty is a valuable addition to our leadership team, bringing her unique experience and perspective gained through her global postings and firsthand experience as a media entrepreneur,” said Stacey Cunningham, President of NYSE Group. “By working directly with the leadership of emerging and leading companies, and leveraging the Radiate platform, Betty will help us offer our customers even more opportunities to tap the NYSE network to connect and share ideas on our global stage.”

Liu’s years of international experience working for major news organizations include CNBC, Dow Jones, and the Financial Times. She has been stationed in Atlanta, Hong Kong and Taiwan on assignments.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

For the TradersMagazine story, click here

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Boston Options Exchange to Launch Securities Token Mart

Securities Token Offering to Displace Initial Token Offering Fad; BOX in JV with digital broker-dealer tZero to Create Securities Token Exchange platform

(Redistributed with permission from BrokerDealer.com; story from Traders Magazine)-Well, Matilda, the Boston Options Exchange (BOX) is plotting to create the first regulated exchange to list and traffic in securities tokens as a means to legitimatize crypto-centric assets via a just-announced joint venture with Patrick Byrne’s digital-themed broker-dealer tZero. For those who haven’t gotten the memo, Securities Token Offerings aka STOs are the next generation approach to the now de-fangled initial coin offering (ICO) construct–which have been lambasted by securities regulators in nearly every corner of the globe.

Now that crypto cool kids are finally getting the memo: “These are Securities!” ,  the proposed first fully regulated Securities Token Exchange is coming to the US-via the Boston Options Exchange.

tZERO, the digital-themed broker-dealer created by Patrick Byrne and BOX Digital Markets LLC (BOX Digital)-a subsidiary of Boston Options Exchange, announced it has formed a joint venture to launch the industry’s first regulated security token exchange.

Lisa Fall, BOX Digital Exchange
Lisa Fall, Box Digital

On May 18, 2018, the two companies entered into a letter of intent to form an exchange to list and publicly trade security tokens for companies that issue, or convert existing stock to, security tokens. The proposed joint venture would be equally owned by tZERO and BOX Digital, with each having equal representation on the Board of Directors, together with one mutually agreed upon independent director. Lisa Fall, who currently serves as CEO of BOX Digital and as president of BOX Options Exchange LLC, would be the CEO of the joint venture.

“tZERO has proven to be a pioneer in the development and practical use of blockchain technologies for capital markets for a number of years,” said Ms. Fall. “tZERO’s track record and accomplishments in this innovative area, coupled with BOX’s expertise in operating a highly efficient and transparent equity options marketplace, made partnering together an easy decision and we look forward to building a world-class platform for listing and trading security tokens.”

tZERO plans to contribute cash and license tZERO’s blockchain technology for operation of the security token market. BOX Digital will contribute expertise and personnel toward obtaining regulatory approval and operation of the security token market. Approval of the U.S. Securities and Exchange Commission will be sought following execution of definitive documentation. Creation of the joint venture is subject to definitive documentation and customary conditions.

“Our partnership with BOX Digital Markets is a significant milestone that will create the first SEC-regulated exchange designed to efficiently trade crypto securities. Lisa Fall’s leadership, reputation and deep experience in the regulated securities exchange industry will be a major asset in achieving this objective,” said Saum Noursalehi, newly appointed CEO of tZERO. “Together, we will continue to work with the SEC as we develop a first-of-its-kind platform that will integrate blockchain capital markets into the current U.S. National Market System.”

According to electronic trading market veteran Jay Berkman, an Advisory Board member of fintech merchant bank SenaHill Partners and COO of investor documentation firm Prospectus.com LLC, “Now that pragmatic securities industry thought-leaders have figured out how to package crypto assets within the construct of a security so as to conform to the US regulatory regime, nobody can dispute the fact the genie is out of the bottle .  Added Berkman, “Securities Token Offerings (“STOs”) is a much more palatable approach, making way for a new mantra, “ICOs are dead, long live STOs”, until of course, another shoe drops.”

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For the full story from John D’Antona Jr. of Traders Magazine, click here

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Crypto Cool Kids Getting The Joke-Aim at Bank Licensing

What’s Next? CryptoCurrency Bank License; Crypto Cool Kids New Goal: Stay Inside Regulatory Goal Posts

Coinbase Inc. and another cryptocurrency firm talked to U.S. regulators about the possibility of obtaining banking licenses, a move that would allow the startups to broaden the types of products they offer.

Coinbase, which operates the largest U.S. cryptocurrency exchange, met with officials at the U.S. Office of the Comptroller of the Currency in early 2018, according to a person familiar with the matter. Meanwhile, ivyKoin, a payments startup, in recent weeks sat down with officials at the Federal Deposit Insurance Corp., this person said. IvyKoin President Gary Fan confirmed the meeting.

The discussions included other topics, such as the firm’s business models, this person said. The companies might not seek a bank charter, which would significantly ramp up regulatory scrutiny. Whether they do so will depend on whether they decide the benefits of becoming a bank outweigh the costs.

A federal banking charter would let the firms swap a hodgepodge of state regulators for one primary federal one. The companies would also gain the option of directly offering customers federally insured bank accounts and other services, rather than partnering with existing banks.

A Coinbase spokeswoman declined to comment on the meeting. She said the firm is “committed to working closely with state and federal regulators to ensure we are properly licensed for the products and services we offer.” An OCC spokesman declined to comment.

IvyKoin pitches itself as a payments platform for government-issued currencies and cryptocurrencies that uses “know your customer” technology to detect money laundering. In the near term, ivyKoin is working with banks rather than trying to become one, but it asked regulators about a banking license to understand what might be necessary if it decided to apply, Mr. Fan said.

At the meeting, they “talked about our business model, what we hope to accomplish, next steps for us, key risks and how we can help banks manage that,” he said. “Our experience was really positive and [regulators] actually encouraged the discussion.”

Evan Fisher prospectus.com
Evan Fisher, Prospectus.com

“The past 18 months has seen an explosion of interest in ICOs, too many of which are unconstrained and outside the goal posts of what makes sense,” said Prospectus.com’s Evan Fisher, a former sell side investment banking veteran now consulting fintech firms on ICO best practices. “And, having the proper documentation in place for both investors and regulators is the most important part of any successful fund raise.”

Fisher is experienced in helping startups frame their value proposition properly and stresses founders need to ensure that when regulators do start to take a closer look at ICOs and cryptocurrencies, that all the necessary documentation is on file and easily obtainable.

Keep reading via WSJ

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Goldman Sachs Goes Crypto; Opens Bitcoin Trade Desk

Goldman Sachs, the venerable investment bank and trading house, has been called lots of things, including “Squid.” But nobody on Wall Street can dispute the fact that $GS is uniquely innovative and perhaps, a firm that can smell the trail of money better than its peers and explains why Goldman is opening a bitcoin trade desk. While JPMorgan CEO Jamie Dimon has repeatedly said bitcoin and other cryptocurrencies are at worst, the foundation to a Ponzi scheme, and at best, a passing fad, Goldman’s CEO Lloyd Blankfein has a different, more open-minded view. As evidenced by last week’s announcement, Goldman is opening a digital asset trade desk to accommodate a growing spectrum of hedge funds, endowments and foundations that already own digital assets or intend to deploy funds to the alt currency asset class. The new digital asset desk will be led by a fellow named Justin Schmidt, an MIT quant jock who previously worked at several quantitative investment management firms, including a hedge fund connected to The Schoenfeld Group.

jason-schmidt-crypto-trader
Jason Schmidt, Goldman Sachs Crypto Trader

As reported by NYT reporter Nathan Popper, “…While Goldman will not initially be buying and selling actual Bitcoins, a team at the bank is looking at going in that direction if it can get regulatory approval and figure out how to deal with the additional risks associated with holding the virtual currency….Rana Yared, one of the Goldman executives overseeing the creation of the trading operation, said the bank was clear-eyed about what it was getting itself into…”

Ms. Yared said the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted Bitcoin millionaires and didn’t know how to handle them. The ultimate decision to begin trading Bitcoin contracts went through Goldman’s board of directors.

Whether your company is a fintech startup planning a private placement offering, a crypto concern with a custom token offering that is seeking to raise capital from qualified or accredited investors via an Initial Coin Offering (ICO), a Securities Token Offering (STO)or if you are fast growth firm setting the stage for an initial public offering (IPO), a properly prepared offering prospectus or offering memorandum is required by your investors and industry regulators that govern securities offerings. Issuers seeking expert, yet affordable investor document solutions rely on experts at Prospectus.com.

Goldman has already been doing more than most banks in the area, clearing trades for customers who want to buy and sell Bitcoin futures on the Chicago Mercantile Exchange and the Chicago Board Options Exchange.

In the next few weeks — the exact start date has not been set — Goldman will begin using its own money to trade Bitcoin futures contracts on behalf of clients. It will also create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients.

To read the full NYT story, click here.

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Fintech Startup Alpha Trading Labs Brings HFT to Retail Traders

Alpha Trading Labs, the Chicagoland fintech “crowd sourcing startup” has thrown the gauntlet down and threatens to democratize the sacred world of HFT wonks, those hoodie-wearing quant jocks who occupy $1mil per yr cubicles at high-frequency trading firms like Virtu, Citadel, Jones Trading, Hudson Trading, and Two Sigma (among others). You know who mean, those cool kid computer wizards who make their bosses billions (or at least tens of dozens of millions) using computer-generated trading schemes. That’s right, Matilda (and you Mark, Mary, Max, Moshe, Mel, and Melissa) and everyone else who aspires to be a Flashboy (or Flashgirl), can jump into the fray thanks to serial fintech entrepreneur Max Nussbaumer.

max-nussbaumer
Max Nussbaumer, Fintech Entrepreneur

While the criteria to be accepted into the new program sponsored by fintech startup Alpha Trading Labs is not nearly as simple “High Frequency Trading for Dummies“, if you’ve got a reasonable thesis as to trading strategy and are reasonably computer literate, each of you can become a quant jock now! No more merely dreaming about having command and control of the same HFT weapons deployed by those ‘secretive prop trading firms’ that make fractions of pennies tens of thousands of times per day while trading cross the electronified world of stock, options and futures trading.

Per excerpt from WSJ trading markets reporter Alexander Osipovich’s latest piece, “Alpha Trading Labs is throwing its system wide open, with a programming tool kit that anyone can use to access high-powered trading machines.The company, which launched its do-it-yourself platform in January, has invited anyone with a trading idea and coding skills to try it out. Those who craft successful algorithms can get a chance to run them and share profits with Alpha Trading Labs, whose owners have up to $100 million to allocate to crowdsourced trading strategies..”

Chicago-based Alpha Trading Labs says it will execute trades through computers housed in the data centers of Nasdaq Inc., the New York Stock Exchange and other markets, a practice known as “co-location.” For those not aware, HFT firms use co-location to execute trades without being slowed down by the need to transmit electronic signals over long distances.

Alpha Trading Labs’ main investor is CMT Group , a firm founded by two veteran traders in 1997, with businesses that now run the gamut from high-speed trading to venture capital to real estate. It was an early investor in Dollar Shave Club, the razors-by-mail service acquired by Unilever PLC for $1 billion in 2016.

Read the full story at the WSJ via this link

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