MarketsMuse blog update profiles iPhone company’s, Apple, lacking in sales even with the new iPhone 6 and the recent release of the iWatch, effecting the tech ETFs. This MarketsMuse blog update is courtesy of ETFTrends’ Todd Shriber’s article “Ahead of Earnings, no Love for Apple ETFs”, with an excerpt from ETFTrends below.
Apple (NasdaqGS: AAPL), the world’s largest company by market value, reports fiscal second-quarter earnings after the close of U.S. markets Monday with analysts expecting per share earnings of $2.16 on revenue of $56.1 billion.
Should the reported numbers be close to or in-line with those estimates, Apple’s second-quarter results will lag the $3.06 per share on sales of $74.6 billion reported in the fiscal first quarter, turning investors’ attention to iPhone 6 and iPhone 6 Plus sales, Apple Watch comments and the company’s plans to return capital shareholders.
Apple reinstituted its dividend in the third quarter of 2012 after a 17-year hiatus. Since reintroducing the payout at 37.8 cents per share per quarter, Apple’s dividend has grown at an impressive clip to 47 cents a share per quarter.
It is not a stretch to say few companies’ earnings reports are as closely monitored and scrutinized as Apple’s, but even with the fervor leading up to the iPad maker’s latest batch of quarterly results, investors have been shying away from exchange traded funds with hefty allocations to the stock.
To continue reading about the fall of Apple’s sales and the effects it has on tech ETFs from ETFTrends, click here.
MarketsMuse.com ETF update shines light on Pakistan, as the timing of the launch of the first Pakistan-focused exchange-traded fund in the U.S. is remarkably fortuitous. U.S.-based ETF provider Global-X is launching the ETF today on the New York Stock Exchange with ticker symbol NYSE:PAK. Below extract courtesy of WSJ Frontiers reporter Dan Keeler
The fund joins a growing list of single-country frontier-market ETFs, including Global-X’s Argentina and Nigeria funds, as well as Market Vectors’ Vietnam fund. Jay Jacobs, research analyst at Global X Funds, says: “With the launch of the Pakistan ETF, investors now have access to one of the largest, most liquid frontier-market countries.”
China’s launch on Monday of a massive infrastructure-spending plan in Pakistan has brought considerable attention to the South Asian frontier market. Chinese President Xi Jinping announced and launched a $28 billion package of infrastructure deals that will form part of the so-called China Pakistan Economic Corridor.
Last weekend, Pakistan’s Planning Minister Ahsan Iqbal said the total Chinese investment into Pakistan would reach $46 billion.
China’s recently-announced colossal investment plan is not the only potentially market-moving news for Pakistan this week. Investment Bank Renaissance Capital yesterday described the country as an “undervalued reform story”, noting that the government is living up to its privatization promises—including its recent record-breaking sale of its stake in private sector banking giant HBL—and delivering reforms that should enhance stock valuations.
The full report from WSJ can be found via this link
MarketsMuse.com Strike Price section profiles trading systems vendor Dash Financial algorithm-based approach to securing options market “best execution” in the ever-increasing world of options mart fragmentation and the wacky rebate schemes that have proliferated across the electronic options exchange landscape. Below is courtesy of extracted elements from MarketsMedia.com April 20 story “Parsing ‘Best Ex’ for Options Trades”
Achieving best execution in options trading can be far more complex than in equities because of exchanges’ multi-tiered pricing models, which results in hidden transaction fees that may negate the economics of a trade.
That’s according to David Karat, head of sales and marketing at algorithmic trading-technology company Dash Financial.
The equities world is complicated only by fragmentation, because the pricing schedule is based on whether one trades either as principal or agent, Karat explained. “You can go to an exchange and know what price tier your broker is at,” he said. “You know what the maker-taker fees or the rebates are.”
In options, pricing is dependent on a wider range of factors. Orders must be tagged whether they’re a customer, professional customer, broker/dealer or market maker. “All those capacities have different nuances, even the schedules for pricing,” Karat said. “It’s even got down to the point where you’ll have some basket of symbols that, based on certain criteria, if you traded it in a certain time, it will have a different rate structure.”
Dash Financial launched in 2011 to provide technology that would enable traders to gain a greater level of transparency into their orders. “The idea behind Dash was to build a firm that was completely transparent to the client using ‘best-of-breed’ technology and show the client everything that we did all the time,” Karat said. “We have a dashboard that shows every aspect of the routing as it’s happening. As the order trades, they’re seeing where we’re routing it, why we’re routing it that way and everything else.”
Dash Financial has launched Blitz, a trading algorithm focused on aggressive liquidity capture. One of the biggest issues facing the marketplace today is institutional traders’ inability to clear the screens as displayed on order arrival.
To continue reading the entire story from MarketsMedia.com, please click here
MarketsMuse.com ETF update profiles a less than tasty example of how not to select certain offerings from the menu of China ETF products with a snapshot of a seemingly sour taste investors might be left with after consuming Blackrock’s iShares FTSE A50 China Index (HKG: 2823). Below extract is courtesy of reporting by Bloomberg LP’s Elena Popina and Boris Korby “The 80% BlackRock ETF Return That Shortchanged China Stock Bulls.”
The $9.1 billion iShares FTSE A50 China Index ETF, an exchange-traded fund designed to track returns of the 50 largest companies traded in Shanghai and Shenzhen, has underperformed its benchmark by a whopping 29 percentage points on a total return basis over that span.
The cost to investors? More than $900 million in unrealized gains, according to data compiled by Bloomberg.
ETFs such as BlackRock’s, which popularized the use of complex derivatives as a way for foreigners to tap into China’s growth potential, are now becoming unintended casualties as the nation opens up its capital markets. As more foreigners gain direct access to yuan-denominated A shares on mainland bourses, demand for the derivatives has plunged. That’s unmoored the ETFs from their benchmarks and robbed investors of returns.
“It’s not providing what it advertised to do,” Ajay Mehra, the head of equities at Salient Partners LP, which oversees $27 billion, including FTSE A50 China Index ETF shares, said by phone from New York. “This tracking error has led to substantial underperformance over the past year, which makes it less attractive as an access vehicle.”
MarketsMuse.com ETF update profiles the embracement of exchange-traded funds on the part of one of the investment industry’s most intriguing mutual fund innovators, courtesy of excerpt from 18 April 19 story from InvestmentNews.com
Jeffrey Gundlach is no stranger to striking out on his own or launching new products. After an acrimonious split with the TCW Group Inc. in 2009, he did just that, building what has become a $63 billion business with 12 mutual funds.
But when it came to starting an exchange-traded fund, his Los Angeles-based firm, DoubleLine Capital, needed some convincing, according to David LaValle, head of ETF capital markets in the U.S. at State Street Corp.’s money management unit.
“Why would they want to be in this space when [they] have a successful franchise,” said Mr. LaValle, speaking at an industry conference in New York on April 1. Ultimately, though, ETFs access “a totally different investor base” than mutual funds, Mr. LaValle said.
Mr. Gundlach has said he remains ambivalent about just how popular ETFs will become. But, on the sidelines of a massive ETF industry conference he keynoted in Hollywood, Fla., in January, he said he wasn’t going to take any chances. “I want to be involved, certainly, and not left behind,” he told a reporter.
In little more than a month since the launch of his first actively managed ETF, in partnership with State Street, the SPDR DoubleLine Total Return Tactical ETF (TOTL) has become one of the largest ETFs of its kind. At $240 million, TOTL’s assets are still a pittance compared with the $117 billion in the world’s largest bond mutual fund, Pimco Total Return (PTTAX).
For the entire story from InvestmentNews.com, please click here
MarketsMuse blog update profiles the largest US health insurer’s stellar first-quarter and the effects it has on the market with ETFs such as iShares U.S. Healthcare Providers ETF (NYSEARCA: IHF) receiving a huge boost from the insurer. This MarketsMuse update is courtesy of SeekingAlpha’s article from Zacks Funds, “Play UnitedHealth Q1 Strength With This Health Care ETF” with excerpts from the article below.
The largest U.S. health insurer UnitedHealth Group (NYSE:UNH) reported blockbuster first-quarter 2015 results. It topped our estimates on both the top and the bottom lines as well as raised its full-year outlook.
UnitedHealth Q1 Results in Focus
Earnings per share came in at $1.46, well above the Zacks Consensus Estimate of $1.33 and 32.7% better than the year-ago earnings. Revenues rose 13% year over year to $35.76 billion, edging past the Zacks Consensus Estimate of $34.73 billion. The robust performance was driven by rising enrollments and strength in the Optum Health Services business.
Market Impact
The market has welcomed UNH’s earnings beat and its strong outlook. Shares of UNH jumped as much as 4.3% following its earnings announcement on elevated volumes, making it the biggest percentage gainer on the Dow Jones Industrial Average Index for the day.
Since UnitedHealth is the first insurer to report earnings and a bellwether, the result has spread optimism across the broad health insurance sector with stocks of other players in the space in green at the close on the day. Some of these players include Aetna (NYSE:AET) – up 3.2%, Anthem (NYSE:ANTM) – up 2.4%, Cigna (NYSE:CI) – up 2% and Humana (NYSE:HUM) – up 0.5%.
Given UnitedHealth’s strength to lift the health insurer corner of the broad health care space and the solid run up in its share price, one ETF – iShares U.S. Healthcare Providers ETF (NYSEARCA:IHF) – could be worth a look for investors seeking to ride out the recent surge. It has the largest allocation to this big giant and looks to be in focus in the coming days with room for upside.
Bottom Line
UNH’s earnings beat sent the stock higher on the day, thus becoming the cornerstone for other stocks in the space. A merger and acquisition frenzy and encouraging industry trends bode well for the health insurer stocks and the related ETFs.
Other ETFs like Health Care Select Sector SPDR Fund (NYSEARCA:XLV),Vanguard Health Care ETF (NYSEARCA:VHT), iShares U.S. Healthcare ETF (NYSEARCA:IYH) and Fidelity MSCI Health Care Index ETF (NYSEARCA:FHLC) also have a decent exposure to UnitedHealth in the range of 3-4%. These funds also have the potential to move higher on UNH strength in the coming days but with less momentum.
To read the entire article on health care ETFs from SeekingAlpha, click here.
MarketsMuse.com Strike Price update profiles the most recent plan for yet another Options trading platform on the part of BATS. Coverage is courtesy of TradersMagazine.
BATS Global Markets has announced they are opening a second U.S options marketplace, EDGX Options. According to BATS, EDGX Options will be based on a customer priority/pro rata allocation model. The new exchange will complement the BZX Options exchange, BATS’ first options market (previously called BATS Options), which is a price-time priority market.
The target date for the opening of the newest BATS marketplace is November 2015, pending SEC approval. The launch of EDGX Options will enable BATS to compete for a new segment of order flow that does not trade on the price-time markets that BATS currently operates, the exchange said in a release.
Bryan Harkins, BATS
According to Bryan Harkins, executive vice president and head of U.S. markets at BATS “With two-thirds of U.S. options market volume executed on exchanges with a pro rata model, we see a big opportunity to bring our innovative technology, operating efficiency, market leading pricing, and first-class customer service to help make markets better for participants in this segment of the market.” Added Harkins, “We are excited to build on our options momentum with the launch of EDGX Options, which we believe will complement our existing innovative BZX Options market.”
For the full coverage from TradersMag, please click here
In the past year alone, investors have invested more than $2 billion into ETFs that invest in China’s stocks. MarketsMuse update profiles the new ETF, The Direxion Daily CSI 300 China A Sharell 2X Shares (CHAU), this ETF is the first in China-focused ETF of its kind in the US. This MarketsMuse blog update is courtesy of Bloomberg Business’s Elena Popina and Boris Korby’s article “China Stock Frenzy Gets More Manic With First Leveraged ETF“, with an excerpt below.
Want to double down on China’s world-beating stock rally? Now there’s an exchange-traded fund for that.
Direxion Investments is starting the first ETF that seeks to provide twice the daily return of mainland Chinese stocks using leverage, according to Andy O’Rourke, chief marketing officer for the New York-based fund provider.
The CSI 300 Index, which the ETF will track, has climbed to a seven-year high amid a frenzy of stock purchases by Chinese retail investors as the government eased monetary policy to counter a slowdown in the world’s second-largest economy. The ETF will be the first in the U.S. to use derivatives to amplify the return of mainland Chinese stocks, or so-called A shares, a market to which foreign investors until recently only had limited access.
“It was only a matter of time before a leveraged China A-share ETF came out trying to capitalize on the increased interest and flows into the area,” Eric Balchunas, a Bloomberg Intelligence analyst, wrote in an e-mail on Tuesday.
To continue reading about this new ETF for China’s stocks, click here.
MarketsMuse blog update profiles the new ETF, iShares Exponential Technologies ETF (XT), impress start. The ETF XT has collected over $600 million since its start in March of this year, this feat something only a few other new ETFs have been able to do. This MarketsMuse blog update is courtesy of Zacks Equity Research’s article, “Why Is This New ETF Growing So Fast?“, with an excerpt from below.
The ETF industry has been growing by leaps and bounds since last year with issuers launching products with varied themes every now and then. While 2014 turned out a historic year for the ETF industry with assets hitting the $2 trillion (approximately) mark and over 180 ETFs being rolled out, 2015 took the story a step forward. A little over three months into the year, the industry has seen more than 65 launches with average market cap of the industry crossing $2.1 billion (read: 5 Very Successful ETF Launches of 2014).
However, investors should note that all products do not witness an equal share of success. Some stand to gain massively and generate assets within a short span while some fail to secure investor interest and finally succumb to a shutdown. Let’s take a look at which new ETF, launched this year, emerged out as the best asset gather.
Investors might be surprised to know that this ETF has amassed over $600 million since its debut in March this year. It is a standard many ETFs fail to meet even after three years of launch. Apparently, the ETF saw this easy, or rather unimaginable success due to its unique investing objective.
To continue reading about the success of the XT ETF, click here
MarketsMuse.com ETF update is courtesy of extract from 15 April Zacks.com article published at SeekingAlpha.com
Despite endless economic and financial woes, as well as geopolitical tensions in the Middle East, Israeli stocks have been on the rise and are clearly outperforming its neighboring countries and the broad world market.
This is particularly true given that the iShares MSCI Israel Capped ETF (NYSEARCA:EIS) and the Market Vectors Israel ETF (NYSEARCA:ISRA) have gained in double digits so far this year. This is compared to the gains of 3.9% for WisdomTree Middle East Dividend ETF (NASDAQ:GULF), 6.3% for the SPDR S&P Emerging Middle East & Africa ETF (NYSEARCA:GAF), 5.2% for the iShares MSCI ACWI Index ETF (NASDAQ:ACWI) and 2.6% for the SPDR S&P 500 Trust ETF (NYSEARCA:SPY).
The strong gains came from the easing policies adopted by the Bank of Israel (BOI) to guard against the recent appreciation of the shekel and pull the country out of deflation. The BOI surprisingly reduced its interest rate by 15 bps to a record low of 0.10% in February that will likely boost economic growth and the inflation rate to 1-3% within a year, while maintaining financial stability. The bank could introduce further measures, matching Europe to stimulate growth in the economy, if required.
Israel remains one of the stable countries in the Middle East amid endless territorial disputes and security concerns. The country’s economy has proven to be quite resilient and strong compared to those of its neighboring nations. Israel is the dominant leader in technological innovation, which is pulling solid capital into the country. Continue reading →
After pouring more than $6 billion into oil ETFs, investors are looking for a quick exit for two reasons: 1) the oil rebound might take much longer than originally expected and 2) the contango market is becoming an even bigger factor. This MarketsMuse blog update is courtesy of Reuters’ article “Look out OPEC! Oil ETF investors head for exit, risking new slump” with an excerpt below.
Oil investors who amassed a $6 billion long position in exchange traded funds, occupying as much as a third of the U.S. futures market, are now racing for the exit at a near record pace.
Outflows from four of the largest oil-specific exchange traded funds, including the largest U.S. Oil Fund (USO), reached $338 million in two weeks to April 8, according to data from ThomsonReuters Lipper. That is the first two-week outflow since September and the biggest since early 2014, marking a turnaround from heavy inflows in December and January on bets that oil prices would quickly rebound from six-year lows.
If the exodus gathers pace it could signal new pressure on crude oil prices that had begun to stabilize at around $50 a barrel this year following their 60 percent plunge, says John Kilduff, a partner at energy fund Again Capital LLC in New York.
Retail investors may have been “trying to bottom fish and got washed out with the recent new low,” he said.
To continue reading about the possibility of a new oil slump from Reuters, click here
TradeWeb’s Raazi is out after short stint pitching the merits of electronifying the corporate bond market.
MarketsMuse.com has made more than a few mentions about the recent decade’s corporate bond-centric electronic trading platform initiatives and those being spearheaded by the latest generation of altruistic sell-siders, buysiders, and the assortment of those in-between. Today’s MarketsMuse post within fixed income and trading tech sections profiling the surprise departure of e-trading giant TradeWeb’s recently appointed leader of their e-corporate bond strategy is a story that illustrates that even the seemingly smartest folks in the room are encountering the same obstacles that have derailed all but a very short list of ‘innovators’ in the electronic corporate bond trading space. The rapid rise and more rapid resignation of TradeWeb MD Mehra “Cactus” Raazi, who was appointed to the inglorious bastard role of Head of Credit just months ago, leads the rest of us [who are old enough] to hum one of George Gershwin’s great tunes made famous by Fred Astaire and Ginger Rogers .. “Lets Call The Whole Thing Off..” Continue reading →
MarketsMuse blog update profiles the record breaking year ETFs have had. As investors become more comfortable with the idea of using ETFs as an investment strategy, ETFs continue to become more and more popular. ETFs’ assets have grown at an exponential rate over last ten years. In fact, ten years ago ETF assets totaled $230 billion in the US and now we near the $3 trillion marker. This MarketsMuse update is courtesy of ETFTrends’ Tom Lydon’s article “ETF Industry Closing in on $3 Trillion” with an extract below.
Exchange traded funds are becoming a household name as investors have been piling into the investment vehicle, expanding the global ETF market toward $3 trillion in assets.
After attracting an additional $36.1 billion, global ETFs saw $97.2 billion in inflows over the first quarter, or almost triple the total for the same quarter year-over-year. [ETFs Haul in $36.1 Billion in March]
As of the end of February, assets invested in exchange traded products, which include both ETFs and exchange traded notes, globally reached a new record high of $2.919 trillion.
“The global ETF/ETP industry had 5,632 ETFs/ETPs, with 10,902 listings, from 245 providers listed on 63 exchanges in 51 countries,” according to ETFGI’s Deborah Fuhr. “We expect the assets to break through the US$3 trillion milestone in the first half of 2015.”
To continue reading the article from ETFTrends, click here.
What time is it? Time for you to a buy a watch, an Apple Watch that is. After the announcement of the Apple Watch this past Fall, consumers have been waiting to get their hands on this product. Understandably so, investors couldn’t wait the launch either. With prices for an Apple Watch ranging from $349-$17,000, it will most likely bring a good return on investment. However, as pre-orders have been coming in for the Apple Watch, the same can’t be said for ETFs heavy on shares of Apple. MarketsMuse blog update profiling the little excitement in Apple ETFs is courtesy of ETF Trends, Todd Shriber, with an extract from his article, “Apple Watch a Non-Event for Apple ETFs” below.
Apple (NasdaqGS: AAPL) is taking preorders for its much ballyhooed Apple Watch. Or was taking preorders.
Nearly of the models made available to U.S. consumers sold out in just six hours and it looks the April 24 availability date announced by the company at the Apple Watch unveiling event last month is getting pushed back. Perhaps as far out as the third quarter.
“Whether due to high demand or low supply, all models of Apple Watch have now almost entirely sold out with many slipping delivery date estimates in mere minutes of preorders opening. In the US, the 38 mm Stainless Steel Case with Black Classic Buckle is the only model still on offer with a ‘April 24th – May 8th’ shipping date,” reports9to5Mac.com.
Unveiling a new product with preexisting, pent-up demand is old hat for Apple and that might explain the lack of enthusiasm for the blowout preorders being displayed by exchange traded funds heavy on shares of Apple. Even shares of California-based Apple are trading slightly lower today.
To read the full article from ETF Trends’ Todd Shriber, click here.
MarketsMuse.com Strike Price update strikes at the heart of how the financial industry’s new regulatory regime is impacting liquidity across the institutional options market, courtesy of 09 April coverage by MarketsMedia.com.
Regulatory requirements that dealers keep more capital on their balance sheets is squeezing options liquidity for institutional traders, who buy and sell the equity derivatives to generate alpha and hedge long- and short-term exposures in their portfolios.
“The regulatory environment is affecting liquidity and pricing for investors in option markets,” said John Burrello, senior trader at Invesco. “Basel III, Volcker, and Dodd-Frank have made broker-dealer balance sheet capacity more expensive – and that is being passed onto investors through wider bid/ask spreads and less capital commitment.”
The introduction of the leverage ratio – which has a target ratio of 3.0% under Basel III – is a hallmark risk-based capital requirement. Starting in 2015, banks will be required to disclose the leverage ratio, with a view to migrating it to a Pillar 1 requirement by 2018 after a final calibration
Basel III will have a significant impact on banks and force changes in the way trading and prime brokerage desks operate. Although these measures are aimed at the banking sector specifically, repercussions will be felt throughout the network of market and counterparty relationships which make up the global financial system.
This is especially true for investors looking to hedge longer-term exposures, “because dealers have to tie up that risk on their balance sheets,” said Burrello. “It has also affected even short-term tail hedging, because dealer stress-tests account for potential capital needed to take the other side of downside tail events.”
At the same time, custodians and prime brokers have started asking clients to hedge tail risk more aggressively in order to avoid increased collateral requirements. “As in other markets, like treasuries and credit, equity options could potentially become less liquid as a result of decreased broker-dealer balance sheet capacity,” Burrello said.
MarketsMuse blog update profiles ETF providers pushing to level the playing field with their mutual fund competitors by pushing to gain more information on clients who invest in ETFs, just like mutual funds already do. A new initiative from the Canadian ETF Association is doing just that. An excerpt from The Globe and Mail’s article, “ETF providers want to know who’s buying” is below explaining more about the initiative.
Exchange-traded fund providers say they’re at a disadvantage compared to their mutual fund competitors and are aiming to level the playing field with a new lobbying effort to obtain data on the financial advisers who sell ETFs.
The initiative, which is being spearheaded by the Canadian ETF Association (CETFA), will provide ETF companies with information on the financial advisers who are selling exchange-traded funds, and the breakdown on which funds they are selling to their clients. Mutual fund companies already receive such information.
If implemented, it could result in a surge of ETF sales within the Canadian marketplace.
The lack of adviser information has plagued the rapidly growing ETF industry, which competes in a market where investors are heavily invested in mutual funds. Canadians hold more than $1.22-trillion in mutual funds compared to $80-billion in ETFs, as of February, 2015.
Currently, ETF providers may receive a report from an individual investment firm that shows the total number of ETFs held by their clients. But the reports are not sent on a regular basis and do not include information on the individual financial advisers who purchase the funds on behalf of clients.
To read the rest of the article from the Globe and Mail, click here.
While the title could be “Big Data Bags BrokerDealers”, MarketsMuse.com Tech Talk update is courtesy of extract from the 07 April Bloomberg LP story by Hugh Son profiling the recent initiative by JPMorgan (and presumably their bulge bracket brethren, and likely, a select band of black box-centric buysiders from the Hedge Fund world) to keep closer tabs on their respective ‘human assets’ via stealth “algorithmic” software designed to predict what’s going on inside the heads of traders, sales folks and well, everyone else that logs into a device monitored by JP’s surveillance sleuths.
We preface Son’s story with “Unless you’ve been asleep at your trading screen for the past 10 years, you already know that Algorithms aka Algorithmic Trading aka HFT are all the rage and that “algo-based trading” accounts for approximately 70% of daily US equity market trading, as well as increasing percentages across fixed income, FX and currency markets. Simply put, Wall Street quants were arguably the first to turn “big data” into big bucks via algorithmic models, which are now ubiquitous across an assortment of industries that are relying evermore on digital data to drive decisions that are neuroscience-based. Well, Wall Street is once again ahead of the curve, as we’re now in the Big Brother phase of this algo evolution..
With this new chapter, its safe to presume that whatever you type into a keyboard is not only going to be stored by compliance wonks, its going to be analyzed by predictive Surveillance Dept. software to determine if you are prone to crashing planes into the side of mountain or likely to pose an assortment of other risks to the enterprise.
Here’s the opening extract of Son’s report:
Hugh Son, Bloomberg LP
Wall Street traders are already threatened by computers that can do their jobs faster and cheaper. Now the humans of finance have something else to worry about: Algorithms that make sure they behave.
JPMorgan Chase & Co., which has racked up more than $36 billion in legal bills since the financial crisis, is rolling out a program to identify rogue employees before they go astray, according to Sally Dewar, head of regulatory affairs for Europe, who’s overseeing the effort. Dozens of inputs, including whether workers skip compliance classes, violate personal trading rules or breach market-risk limits, will be fed into the software.
“It’s very difficult for a business head to take what could be hundreds of data points and start to draw any themes about a particular desk or trader,” Dewar, 46, said last month in an interview. “The idea is to refine those data points to help predict patterns of behavior.”
JPMorgan’s surveillance program, which is being tested in the trading business and will spread throughout the global investment-banking and asset-management divisions by 2016, offers a glimpse into Wall Street’s future. An industry reeling from billions of dollars in fines for the actions of employees who rigged markets, cheated clients and aided criminals is turning to technology to police itself better. Failure to do so will provide ammunition for those pushing to separate trading operations from retail banks. Continue reading →
The senior curator for MarketsMuse.com Tech Talk section was so inspired by a recent article “A Cynic’s Guide to Fintech” by Dan Davies, the Senior Research Advisor at Frontline Analysts and published via Medium.com, we wanted to share the opening elements with our audience..For those of you following the various forays into fixed income electronic trading platforms, Davies has a pernicky point of view worth considering. Dan Davies’ twitter feed is worth following as well.
Dan Davies, Frontline Analysts
A Cynic’s Guide To Fintech
Several business models that are bound to fail — and a few that might have a chance.
A pal working in and around the VC industry asked me the other week what I thought about financial technology, or as the unlovely abbreviation has it, “fintech”. Here are my edited thoughts, from the point of view of someone who spent many years as a banks and diversified financials analyst, and who has some fairly strong prejudices about what works and what doesn’t work in financial services industry. In my view, the portmanteau term “fintech” groups together a number of different business models; I haven’t included “something something Bitcoin” in the list because that’s a slightly different debate. Here’s my partial list …
Fintech business model #1. Reinventing past mistakes of the banking industry because you don’t know about adverse selection
There are a lot of people out there who have expertise in data science, and who think that the incumbents in the industry don’t have sophisticated risk-based pricing because their technological skills aren’t up to the task of identifying risks. These people tend to think that they can go into the credit cards business, or the payday lending business or even the car insurance business, and pick up market share from the dumb old banks by using algorithms! and social media data! and so on.
This is not true. It is true that banking IT is generally terrible, but actually, if you look into the digital archives of any large incumbent player, you will tend to find an extremely sophisticated, cutting-edge algorithmic risk pricing system which was thrown away a couple of years ago because it worked great in testing and then fell apart really badly in the real world.
There are two reasons why fine-grained risk based pricing has been such a catalogue of failure. First, banks almost never lose money on bad risks. They lose money on good risks, which go bad. The nature of algorithm-driven pricing is that you are searching out profitable niches, Moneyball style, in the form of customers which have some set of characteristics in common which marks them out as statistically better than the average. Unfortunately, this tends to mean that you get a book of business which has loads of little concentrations in them — you’ve got all the mixed-race dentists in Yorkshire, or something. And this, in turn, means that when the world changes, your risks tend to be very correlated and you lose years’ worth of profit in one lump. Continue reading →
Apple (NasdaqGS: AAPL), the world’s largest company by market value, reports fiscal second-quarter earnings after the close of U.S. markets Monday with analysts expecting per share earnings of $2.16 on revenue of $56.1 billion.
