ICE Announces Digital Assets Platform; Brokers Face Crypto Scrutiny

First Read

Hits & Takes
JLN Staff

John had his hip surgery yesterday and all went well. Thanks to all who sent well wishes. He should be back home in a few days.

The American Financial Exchange (AFX) announced that William Daley will serve as an independent director on its board of directors. Daley is currently a managing partner and head of U.S. operations for ArgentiËre Capital and served as President Barack Obama’s chief of staff from January 2011 until January 2012.~JK

If you’d like to hear what Richard Sandor has to say about interest rates – particularly Ameribor – he is featured in a podcast on Grant’s Interest Rate Observer.~JK

Check out the FIA’s infographic regarding the makeup of this year’s “Innovator’s Pavilion.”~SD

CBOE’s Q2 earnings showed a 33 percent jump in its global FX trading, generating revenue of $14.5 million, up from $10.9 million a year earlier.~JK

There is a new CFTC Talks podcast out with Robert Shiller. ~SD

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Wall Street Claims Success on Diversity – At Least With Interns
Jordyn Holman, Ivan Levingston,and Emma Kinery – Bloomberg
Wall Street is looking at lot more diverse — at least for the summer.
This year’s crop of interns is Bank of America Corp.’s “most diverse group ever,” the lender told investors on its second-quarter earnings call. Women comprise 45 percent of the current class — up from 42 percent in 2017 — while non-white interns make up 55 percent. Goldman Sachs Group Inc. and Wells Fargo & Co. report similar numbers.
/goo.gl/HWCAJB

**A McKenzie’s report shows that companies in the top quartile for gender diversity were 21 percent more likely to post above average profitability. And with ethnic and cultural diversity, it was even higher.~JK

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Apple hits $1 trillion market cap
Sara Salinas – CNBC
Apple hit a $1 trillion market cap on Thursday, making the iPhone maker the first publicly traded U.S. company to reach the record valuation.
The stock rose nearly 3 percent following a strong third-quarter earnings report earlier this week, briefly hitting a session high of $207.05 in midday trading before falling back below $207.
/jlne.ws/2va4haA

****It must must have been a hard day for Ronald Wayne, who helped found Apple Computer back in the ’70s. He sold his 10 percent share back to Steve Jobs and Steve Wozniak for $800 (and he got another $1500 to relinquish any future claims). Had he held on to it, today he would be worth $100 billion and the second wealthiest man in the world.~JB

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Trump’s Trade War Is Killing American Blue Jeans
Uliana Pavlova and Matthew Townsend – Bloomberg News
Victor Lytvinenko is thumbing through emails on his iPhone trying to find the one that best shows the damage the global trade war has already done to his little, decade-old American jeans company.
/goo.gl/jopyfs

**The interesting item in this story is that Levi’s produces almost all of its jeans now in Asia and Mexico.~JK

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So Your Wife Embezzled $500,000 and the IRS Wants to Tax You
Laura Saunders – WSJ
Rick Jacobsen’s wife embezzled nearly $500,000. After her conviction, the Internal Revenue Service asked him to pay more than $100,000 of taxes due on her theft. Yes, embezzled funds are taxable, and Mr. Jacobsen and his wife had filed joint tax returns.
/jlne.ws/2vxfu4l

****The IRS will tax stolen money? Who knew?~JB

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Thursday’s Top Three
Our top story of the day on Thursday was the Wall Street Journal’s piece on OCC, Regulators Probe Options Market’s Major Clearinghouse. Second was ICE’s announcement Intercontinental Exchange to Create Platform to Standardize ETF Primary Market Trading. Third went to the short item in Profit & Loss, Team Jump to Swim Across English Channel for Charity

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MarketsWiki Stats
130,501,200 pages viewed; 23,224 pages; 214,449 edits
MarketsWiki Statistics

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Lead Stories

ICE Announces BAKKT, A Global Platform and Ecosystem for Digital Assets
Business Wire
Intercontinental Exchange announced today that it plans to form a new company, Bakkt, which intends to leverage Microsoft cloud solutions to create an open and regulated, global ecosystem for digital assets. The new company is working with a marquee group of organizations including BCG, Microsoft, Starbucks, and others, to create an integrated platform that enables consumers and institutions to buy, sell, store and spend digital assets on a seamless global network.
/goo.gl/6FQEiU

Brokers’ Cryptocurrency Deals Are Focus of SEC Review
Bloomberg
Wall Street’s main regulator is boosting its scrutiny of brokerages that deal in cryptocurrencies, according to two people familiar with the matter, the latest sign that authorities want to know more about a burgeoning market that they fear might be full of misconduct.
/jlne.ws/2n6nBB7

China Dethroned by Japan as World’s Second-Biggest Stock Market
Bloomberg News
Nation surrenders No. 2 ranking taken from Japan in late 2014; Shanghai stock gauge one of world’s worst performers this year. China just lost its ranking as the world’s number two stock market. After a Thursday slump, Chinese equities were worth $6.09 trillion, according to data compiled by Bloomberg. That compares with $6.17 trillion in Japan. The U.S. has the world’s largest stock market at just over $31 trillion.
/goo.gl/9TKtLx

Italian government debt hit by fresh sell-off; Yields hit highest levels since post-election crisis on concerns over budget talks
Financial Times
Italian government debt sold off sharply for a second day on Friday, hitting lows not seen since a post-election crisis in June as senior figures in the populist government prepared for talks on the country’s next budget.
/goo.gl/jq2JMM

BoE’s Carney sees ‘uncomfortably high’ risk of no-deal Brexit
Reuters
Bank of England Governor Mark Carney said on Friday Britain faces an “uncomfortably high” risk of leaving the European Union with no deal, comments that drove sterling to an 11-day low against the dollar.
/jlne.ws/2n7dZG7

Market Asks if Beijing Still Has a Red Line for the Yuan
Saumya Vaishampayan – WSJ
The Chinese yuan is sinking toward a boundary that held even during severe capital outflows two years ago, reviving speculation about how much depreciation Beijing will tolerate.
/jlne.ws/2vwcmpx

Bitcoin Whale’s Bad Trade Leaves Counterparties Holding the Bag
Benjamin Robertson, Andrea Tan, and Yuji Nakamura – Bloomberg
A massive wrong-way bet on Bitcoin left an unidentified futures trader unable to cover losses, burning counterparties and threatening to dent confidence in one of the world’s largest cryptocurrency venues.
The long position in Bitcoin futures listed on OKEx, a Hong Kong-based exchange, had a notional value of about $416 million, according to an OKEx statement on Friday and data compiled by Bloomberg.
/goo.gl/KUkX3M

China Plans Tariffs on $60 Billion of Imports to Counter Trump
Bloomberg
China announced a list of $60 billion worth of U.S. imports it plans to apply tariffs on should the Trump administration follow through with its latest trade threats.
/goo.gl/BynDXV

Buy Side Juggles Efficiency and Workflow in Search for Corporate Bond Liquidity
Ivy Schmerken, FlexTrade – TABB Forum
Corporate bond investors are seeking operational efficiencies on their fixed income trading desks to lower costs. As the search for bond liquidity across a fragmented credit trading marketplace remains a priority, buy-side firms are grappling with two distinct workflows – voice-based and electronic – in the $8 trillion corporate bond market.
/jlne.ws/2Mbd965

Tesla short sellers are sitting on a paper loss of nearly $2 billion after stock rally
Ciara Linnane – MarketWatch
Investors who are betting that Tesla Inc. shares are poised for a fall were sitting on a paper loss of nearly $2 billion Thursday, after the stock rallied more than 16% following its latest quarterly earnings.
Tesla short sellers were down $1.7 billion in mark-to-market losses on the 35.1 million Tesla shares that they have shorted, according to S3 Partners LLC, a company that has access to and tracks real-time short interest data.
/jlne.ws/2vzrzWL

Asset Class Scoreboard – July
RCM Alternatives Blog
Long Only Commodity Investments lost their spot at the top of the asset class scoreboard, losing -3.63% on the month, but still up 6% on the year. Meanwhile, U.S. Stocks made its most gains since January, to take the top spot on the year, up 6.32%.
/jlne.ws/2MdXDGJ

Exchanges, OTC and Clearing

ICE Reports July 2018 Statistics
BusinessWire
Intercontinental Exchange, Inc. (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported July 2018 trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
/goo.gl/SYqxDK

Cboe Global Markets Declares Increased Third-Quarter 2018 Dividend; Announces Increase in Share Repurchase Authorization
Cboe
Cboe Global Markets, Inc., one of the world’s largest exchange- holding companies, today announced its Board of Directors has declared an increased quarterly cash dividend of $0.31 per share of common stock for the third quarter of 2018, representing a 15 percent increase compared with the prior quarter’s dividend of $0.27 per share, and increased its share repurchase authorization by $100 million.
/goo.gl/3odg5h

Cboe Global Markets Reports Results for Second Quarter 2018
Cboe
Raised Quarterly Dividend by 15 Percent, to $0.31 Per Share, Effective For Third Quarter of 2018; Increased Share Repurchase Authorization by $100 Million
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE) today reported financial results for the second quarter of 2018. Consolidated results for year-to-date 2017 include Bats Global Markets (Bats) for the period March 1 through June 30, 2017. Cboe completed its acquisition of Bats on February 28, 2017.
/goo.gl/xY1MgX

Euronext publishes Q2 2018 results
Nasdaq
Increase in revenue to EUR157.3 million (+14.6%) Listing revenue of EUR28.4 million up +20.3%, resulting from the consolidation of Euronext Dublin and improved primary markets, offsetting a moderate activity in secondary markets. Cash trading revenue at EUR53.9 million up +7.1%, thanks to a sustained market share, at 66.1%, efficient yield management, at 0.51bps, and stable volumes (Cash ADV at EUR8.4bn, down -2.5%)
/jlne.ws/2KoFkNk

EEX eyes LNG product launch this year as H1 energy volumes rise
Reuters
Energy bourse EEX saw trading volumes in power, emissions and gas products rise in the first half of 2018 and said on Thursday it plans to launch an exchange product for the liquefied natural gas (LNG) market later this year.
/jlne.ws/2v9Ot7N

NEX Markets Volumes – July 2018
NEX
/jlne.ws/2n7HMyx

Cracks in the Pillar – Dismantling NYSE’s Weak Foundation
Eric Stockland (Chief Strategy Officer, IEX) and Stan Feldman – Medium
The SEC’s Transaction Fee Pilot (“the pilot”) is about market structure reform. It is about aligning the interests of stock exchanges and brokers with investors. The path to getting there requires unwinding the monopolistic and conflicted business models of the incumbent exchanges. In the end, we hope that simplifying the overly complex and fragmented market structure reduces implementation costs for all investors.
/jlne.ws/2AB4Zmr

****SD: The war of the words continues. On the flip side, a frequent IEX detractor, Matt Hurd, has his monthly “NMS action” post up with a decent chunk devoted to what he calls “IEX lowlights.”

BlackRock to help ICE develop new ETF platform
The ETF platform will be connected to BondPoint, TMC Bonds and ICE Credit Trade and is set to begin operations in 2019.
By Hayley McDowell – The Trade News
BlackRock has agreed to support and develop a new exchange-traded fund (ETF) platform alongside exchange powerhouse Intercontinental Exchange (ICE).
/goo.gl/aeBCYW

Fintech

U.S. Needs Smarter FinTech Regulation To Compete Globally
Tom Groenfeldt – Forbes
The U.S. lags behind other leading developed countries in offering fintech firms a legal framework which supports innovation and protects consumers. Speaking in a webinar ahead of the publication of a paper from The Pew Charitable Trusts, Consumer Finance Director Nick Bourke said the U.S. lacks a coherent approach. The country has eight federal agencies with some oversight of finance and 50 states with their own rules, he said.
/jlne.ws/2vx11Fy

Barclays teams up with fintech business MarketInvoice
Valentina Kirilova – LeapRate
Barclays Plc (NYSE: BCS) has today announced that it is partnering with fintech business MarketInvoice, Europe’s largest online invoice financing platform, in a deal that is set to transform the way small and medium enterprises (SMEs) in the UK manage cash flow and accelerate growth.
The bank has committed to a significant minority stake in the firm to give Barclays’ SME clients seamless access to innovative forms of finance. The new partnership is a key part of Barclays’ plans to invest in new business models for growth, and MarketInvoice’s ambition to broaden its reach across the UK.
/jlne.ws/2vy4vrs

Treasury Department Report: Nonbank Institutions, Fintech, and Innovation
Weiss Nusraty and David A. Stein – National Law Review
On July 31, 2018, the U.S. Department of the Treasury released a report identifying numerous recommendations intended to promote constructive activities by nonbank financial institutions, embrace financial technology (“fintech”), and encourage innovation.
/jlne.ws/2vzaRqF

Could Europe Become a Fintech Hub?
Alastair Johnson – Entrepreneur Europe
A number of technologies and new regulations are poised to disrupt the incumbent financial system. So much so that the emerging field of financial technologies has earned itself the “fintech'” portmanteau. The term “financial institution” no longer evokes visions of a centuries-old, technophobic business, but of an increasingly wide range of startups and partnerships that aim to turbocharge banking and investments on a rapidly evolving playing field.
/jlne.ws/2vy3QpY

OCC To Begin Accepting Charter Applications From Fintechs
Amanda Dixon – Bankrate.com
The line between what’s considered a bank and what’s considered a fintech company is about to get even blurrier.
Startups like MoneyLion are already planning to introduce banking products, like checking accounts. Soon, they may enjoy some of the benefits available to national banks like Chase and Wells Fargo.
/jlne.ws/2vtcGoS

Cryptocurrencies

Red Friday for Crypto as Markets Shed Another $14 Billion
Martin Young – NewsBTC
The bears have a stranglehold on markets once again and they have plummeted overnight. Total market capitalization has dropped closer to $260 billion as another $14 billion got wiped out of crypto in just 18 hours.
Bitcoin could not hold support and has dropped 3.5% on the day to $7,380. Its market dominance remains at the same level of 48.5% which means all of the other cryptocurrencies are crashing even harder. Ethereum has fallen back to November 2017 levels of just over $400, a 2.4% decline on the day.
/jlne.ws/2vxcJjv

Twitter’s Lock On Users With Elon Musk’s Name Means A Nazi Ban Is Possible
Jenna Amatulli – HuffPost
If you’re on Twitter and you change your unverified account’s display name to Elon Musk, the social media platform will lock you out.
According to numerous reports, Twitter took this step because scammers posing as the Tesla CEO have been attempting to trick people into sending them cryptocurrency. An account with “Elon Musk” in the display name and a photo of him could reply to one of the real Musk’s tweets to make it look like a threaded reply.
/jlne.ws/2vx5U1u

Transaction Costs and Tethers: Why I’m a Crypto Skeptic
Paul Krugman – New York Times
…if you only speak to friendly audiences, you’re not challenging yourself enough. So I thought it might be worth explaining why I’m a cryptocurrency skeptic.
/goo.gl/wx3224

Tricks Of A Crypto Trader: Meet Asia’s Hottest Crypto Hedge Fund
Jeff Kauflin – Forbes
On a damp Tuesday night in March, some 200 people crammed into a bar in San Francisco’s Four Seasons Hotel to discuss the buzziest topic in finance and tech: cryptocurrencies. They were lured by the chance to rub elbows with the latest overnight success story in crypto, FBG Capital of Beijing.
/goo.gl/qrcga8

Korea’s Financial Watchdog Calls for Stock Trading on a Blockchain
Samburaj Das – CCN
South Korea’s primary financial watchdog has backed the use of blockchain technology as the core infrastructure for trading stocks in the country.
/jlne.ws/2vFyNZx

John McAfee’s ‘Unhackable’ BitFi Hardware Wallet, Hacked. Fueling a ‘Twitter War’
John P. Njui – Ethereum World News
On the 27th of July, John McAfee had challenged the crypto-community and hackers worldwide, to attempt to hack the BitFi Hardware wallet. McAfee has more or less claimed on several occasions that no one can steal any funds locked away in the hardware wallet therefore making it unhackable. The initial bounty for anyone who could hack the device was $100,000 but McAfee upped the ante to $250,000 only 4 days later through the following tweet:
/jlne.ws/2vxct41

FinTech Crypto Briefing: Buying crypto in UK just got easier
Mo Aldalou – Business Cloud
Crypto enthusiasts rejoice: it just became a whole lot easier to buy Bitcoin and other cryptocurrencies in the UK thanks to Coinbase.
The “world’s most popular crypto exchange” has now introduced faster payments – meaning that people in the UK will be able to make payments and withdraw funds directly in British pounds to and from their bank accounts.
/jlne.ws/2vymzl3

Politics

Trump Fury Over Mueller ‘Conflicts’ Dates to Oval Office Meeting
Shannon Pettypiece and Chris Strohm – Bloomberg
President Donald Trump sat with Robert Mueller in the Oval Office in May of last year to interview him for a job: director of the FBI. The next afternoon, Trump was in another Oval Office meeting when an aide interrupted with news that Mueller had taken a different post: special counsel to investigate Trump’s campaign.
/goo.gl/JaXoz4

China Rejects U.S. Request to Cut Iran Oil Imports
Rachel Adams-Heard and Nick Wadhams – Bloomberg
The U.S. has been unable to persuade China to cut Iranian oil imports, according to two officials familiar with the negotiations, dealing a blow to President Donald Trump’s efforts to isolate the Islamic Republic after his withdrawal from the 2015 nuclear accord.
/goo.gl/u98N7n

Paul Manafort’s fraud trial: His bookkeeper didn’t know about foreign accounts – live updates
CBS News
Prosecutors want former Paul Manafort associate Rick Gates to testify in Manafort’s fraud trial. Ten witnesses have testified so far, out of the potential 35 the government has offered.
/goo.gl/xgjEiU

Regulation

U.S. derivatives regulator doles out $45 million to whistleblowers
Pete Schroeder – Reuters
A top U.S. financial regulator announced on Thursday it had awarded whistleblowers over $45 million for helping the watchdog identify improper activity.
/jlne.ws/2LKNNjn

Fostering Innovation One Year Later
Haimera Workie – FINRA
Just over one year ago, FINRA launched the Innovation Outreach Initiative as part of FINRA360, our comprehensive organizational review. The Initiative began an ongoing dialogue with industry participants, investor advocates and policy makers centered on the implications of financial technology (fintech) for the broker-dealer industry.
/goo.gl/5UgDva

Remarks of CFTC Chairman J. Christopher Giancarlo at the West Texas Legislative Summit\
CFTC
…You know, I love Western Swing and American Country music. I play the banjo and guitar. I grew up listening to Waylon Jennings and J.D. Southern. Today, I am here in the melody of America. It is thrilling to think about it. Lubbock’s own Buddy Holly influenced most of the great rock and rollers. And, Roy Orbison from Odessa influenced my state’s own Bruce Springsteen. Of course, from right here in San Angelo, the legendary Ernest Tubbs and the fabulous Los Lonely Boys got their start. Amazing!
/goo.gl/4J7yhA

Investing and Trading

Vitol’s Ian Taylor on oil deals with dictators and drinks with Fidel; Chairman of the biggest independent oil trader talks about the art of living dangerously
Lionel Barber – FT
Ian Taylor is one of Britain’s wealthiest businessmen, chairman of the Royal Opera House, and a generous donor to the arts and the governing Conservative party. He rubs shoulders with cabinet ministers, boasts a fabulous private art collection, and spent hundreds of thousands of pounds trying to stop Brexit and Scottish independence. His choice for lunch is a quintessentially English establishment: the five-star Goring Hotel, close to Buckingham Palace.
/goo.gl/Xnr1hi

Why Apple’s $1 trillion milestone won’t revive tepid stock-trading volume
Bob Pisani – CNBC
It’s no secret that trading volumes have been stagnant for years. But that doesn’t mean no one is trading. The dollar volume of trading – the amount of shares traded times the price of the stocks – has never been higher. The average S&P 500 stock is now $115, highest in history, according to S&P Dow Jones Indices. A little more than a decade ago, it was just north of $50. You can attribute this to the relentless rise of the stock market, which is up 50 percent in the last five years, plus the refusal of companies to split their stocks.
/goo.gl/8biKRx

Blackstone’s Studzinski to Exit as Gray Era Ushers in Change
Erik Schatzker – Bloomberg
International dealmaker is looking for ‘new challenges’; He has counted Bill Ackman and Indra Nooyi as clients
John Studzinski, an international dealmaker who became a fixture at Davos, a human-rights advocate and an adviser to the Vatican, is leaving Blackstone Group LP.
/goo.gl/EQEb3Q

Institutions

Exclusive: Deutsche Bank reports show chinks in money laundering armor
Edward Taylor, Tom Sims, John O’Donnell – Reuters
Deutsche Bank has uncovered shortcomings in its ability to fully identify clients and the source of their wealth, internal documents seen by Reuters show, more than a year after it was fined nearly $700 million for allowing money laundering.
/goo.gl/xigZQn

Hedge funds fight back against tech in the war for talent; Industry appeals to graduates with Silicon Valley-style perks – and big bonuses
Lindsay Fortado – FT
As Mario Roussanov, a recruiter for hedge funds, began making his annual visit to clients this year, the change was apparent.
/goo.gl/ZQjr6N

Goldman’s electronic trading head quits for Instinet
Samuel Agini – Financial News
One of the heads of electronic trading at Goldman Sachs in London is leaving the investment bank to take up a senior post at a global equities broker owned by Nomura.
Ralston Roberts, a managing director and Goldman’s co-head of execution services and electronic trading in Europe, will move to the US to join Instinet as its chief operating officer, according to people familiar with the matter.
/jlne.ws/2MdIyVG

Regions

China, Brazil and The Future for U.S. Corn
Russell Blinch – CME Group OpenMarkets
It’s hard to imagine the world running short on corn when you consider the massive size of the U.S. corn crop. The U.S. corn belt, the granary to the world, sweeps across at least six Midwestern states, often covering about 90 million acres of planted area.
/jlne.ws/2MdcBN6

China tries to restrain bearish bets on renminbi; Decision sparks late rally in China’s currency
Gabriel Wildau – FT
China’s central bank has raised the cost of betting on renminbi depreciation, a move intended to stabilise its currency following a sharp fall in recent weeks. The People’s Bank of China late on Friday announced the re-imposition of a 20 per cent reserve requirement on banks that sell dollars to clients using currency forwards. Banks will pass the cost of this requirement on to their clients, raising the cost of betting on renminbi weakness.
/goo.gl/pgrCsg

Chinese consortium snaps up Ireland’s oldest stockbroker
Don Weinland – Financial Times
China’s state aerospace and defence corporation is among the investors backing an acquisition of Ireland’s oldest stockbroker, Goodbody.
Avic, China’s state-owned developer of fighter jets, helicopters and military drones, holds a significant stake in Zhongze Culture Investment, part of a Chinese consortium that agreed to acquire Goodbody, choosing a toehold in Dublin over one in London for an expansion in Europe.
/jlne.ws/2Ma7Fc4

China Plans Tariffs on About $60 Billion in U.S. Goods
Bloomberg News
China plans to levy duties at levels of 25%, 20%, 10% and 5% on about $60b U.S. imports, Finance Ministry says in a statement, Bloomberg News reports.
(story developing)
/goo.gl/m3Z4dx

Brexit

BOE’s Carney warns chance of no-deal Brexit is ‘uncomfortably high’
Karen Friar – MarketWatch
The governor of the Bank of England has warned that there is an “uncomfortably high” chance of the U.K. crashing out of the European Union without a transition agreement, which could rattle the economy.
/jlne.ws/2vFCn5V

Miscellaneous

British pug, dogged by no-deal Brexit fears, applies for Belgian ‘citizenship’
James Crisp, Telegraph.Co.UK
Pippa, a British pedigree pug who splits her time between Brussels and Britain, is taking Belgian ‘citizenship’ amid fears of a looming no deal Brexit.
The four-year-old pooch is one of the quarter of a million British pets that cross from the UK to the EU every year and regularly visits friends and family in Britain and Ireland.
/goo.gl/pJacsR

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