| February 26, 2019 | | | | | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Best Online Brokers of 2019
Matt Miller - Barron's
Market volatility is commonplace. Interest rates, which a few months ago seemed certain to rise, now look likely to remain flat or possibly decline. The chances of an economic slowdown in the U.S. and overseas are high. So it's tempting to follow the S&P 500, our own portfolios, and investment opportunities the way some of us check the weatherÂconstantly and doggedly. Online discount brokerage firms are happy to accommodate. They provide mobile apps that let customers monitor, analyze, and trade, often with the same speed, ease, and completeness as a desktop, and with complete interoperability.
/goo.gl/K2s173
****SD: A lot to parse through in here.
First, who's in first? Interactive Brokers. The rest of the rankings from second to fourteenth are: Fidelity, E*Trade, TD Ameritrade, Merrill Edge, Charles Schwab, TradeStation, tastyworks, Ally Invest, eOption, SogoTrade, AutoShares, Just2Trade and TradingBlock. (Vanguard and Firstrade did not participate.)
Some random bits and pieces:
-TradeStation's average trade execution time in December was 60 milliseconds, while tastyworks says its execution ranges between 25 and 50 milliseconds.
-Fidelity says that in 2018 it tallied $637 million in price improvement.
-Quote from Michael Ellison, president of consulting firm Corporate Insight that monitors brokers: "The increase in fee-based revenue is more than making up for declining DARTs. Additionally, the custody businesses of TD Ameritrade, [Charles] Schwab, Fidelity, and now E*Trade provide those firms further protection from declining commissions."
-Barron's first did its online survey in 1996. It's inaugural winner, Lombard Institutional Brokerage, averaged $34 in fees per trade. How far we've come...
++++++
Aaaand We're Back
Spencer Doar - JLN
It's like the holidays never happened. Well, I still have a new addition to the ol' Lego collection, but the market plummet around the holidays has been pretty much erased by the blistering start to 2019 (eight straight up weeks!).
Below are charts of the SPDR S&P 500 ETF Trust ETF (SPY) and the iShares Russell 2000 Index ETF (IWM). The Dow is back up, too, but why throw the Diamonds in there? It's just Boeing, IBM, Goldman and Home Depot doing the majority of the heavy lifting.
Click to enlarge - image via TradingView
| | | | | | Lead Stories | | | Investment banks have a problem with volatility
Peter Thal Larsen - Reuters Breakingviews
Be careful what you wish for. That's the phrase haunting the world's largest investment banks as they lick their wounds after a painful fourth quarter. For years, bankers complained that markets were too calm. But when bonds and stocks tumbled in the last few months of 2018, almost all trading divisions suffered. It doesn't bode well for business if markets stay choppy.
/goo.gl/4xX84A
***This is exactly the point made at the end of last week's episode of "The Spread." ~SD
Goldman Traders Had Most Losing Days in Seven Years Last Quarter
Sridhar Natarajan and Brandon Kochkodin - Bloomberg via Yahoo Finance
The end of 2018 proved to be a rough one for Wall Street. Goldman Sachs Group Inc. just showed how bad it got.
The bank's traders posted losses on at least 19 days in the last quarter of the year, including a day where losses approached almost $100 million, according to its annual regulatory disclosure. It was the worst showing for the bank by that measure since 2011, according to filing data reviewed by Bloomberg.
You've reached yo
/goo.gl/Eh8WNT
****SD: Meanwhile, per efinancialcareers, One of Goldman's longest-serving U.S. traders left the firm - think there's any relation?
Hedge-Fund Veteran Who Won Big on Volatility Is Back in the Game
Bei Hu and Saijel Kishan, Bloomberg via Yahoo Finance
Stephen Diggle, the executive who made more than $2.5 billion on volatility wagers during the global financial crisis, is getting back into the hedge-fund game. Eight years after Artradis Fund Management returned money to investors, Diggle has hired fellow veteran Gavin Gilbert as chief investment officer of Kit Trading Fund, a $10 million vehicle that currently manages money for his family office, Vulpes Investment Management, and other wealthy clans. By bringing in outside institutional investors, the pair plan to expand Kit to as much as $350 million by the end of 2019, and possibly more if extra traders are hired.
/goo.gl/yZuo2q
Energy Traders Gird for Market Roiling Mishap in No-Deal Brexit
Mathew Carr - Bloomberg (SUBSCRIPTION)
The possibility of Britain exiting the European Union without a deal is coming into sharper focus for power, natural gas and carbon allowance traders as futures for next month start to expire.
A no-deal Brexit could rattle traders because of the complicated links that hold the EU energy market together. For example, natural gas produced in Norway can be shipped to Zeebrugge in Belgium, where it's then piped to England to feed a power plant that sends electricity to millions of homes and businesses. Layers of environmental rules and market and financial regulations make the connections even more complex.
/bloom.bg/2EjJTaC
It's Too Quiet When It Comes to Volatility for Some Analysts
Joanna Ossinger - Bloomberg via Yahoo Finance
The rally thundering across markets has done more than just drive up prices, it's pushed down volatility.
Markets around the world have started the year on a tear encouraged by easing trade tensions, a more dovish-sounding Federal Reserve and signs that China is bolstering its economy. And volatility gauges have responded. The CBOE Volatility Index touched its lowest level in four months last week, while the Merrill Option Volatility Index, which monitors Treasury options, is near a four-month low. The JPMorgan Global FX Volatility Index ended Monday at the lowest reading since May.
/goo.gl/h3cKLv
****SD: I know how hard it is, but we in the media really need to go back to the drawing board with this whole "quiet, too quiet" headline thing when it comes to volatility stories.
The Risk Rally Hasn't Been This Reliant on the Fed Since 2012
Luke Kawa - Bloomberg
Markets are likely to be jittery as Federal Reserve Chair Jerome Powell testifies to the Congress on Tuesday, judging by the first two months of the year.
The Fed's infamous U-turn that took expectations for rate hikes this year to zero has led to a drop in real borrowing costs and a subsequent rally in equities, creating a degree of divergence between the two last seen when Ben Bernanke helmed the central bank in 2012.
/bloom.bg/2Efacip
****SD: CNBC has Powell warns of slower growth, says the Fed is prepared to 'adjust' balance sheet unwind if needed.
Launch Of Acuiti And The Acuiti Derivatives Insight Report - New Business Intelligence Platform For The Derivatives Market
Mondovisione
William Mitting, the former publisher of FOW and managing director of the Global Investor Group, has today announced the launch of Acuiti, a business intelligence platform focused on the derivatives market.
/goo.gl/b5mu7r
Fund aiming for 12% return launches
Dippy Singh - FT Advisor
Axiom Alternative Investments has launched a credit derivatives fund targeting double digit net returns. Axiom Credit Opportunity will aim for an annual net return of 12 per cent. The fund's strategy will focus on capturing value from structural price anomalies within the credit derivatives market.
bit.ly/2EgMemC
Sterling hits 21-month high on bets Britain can avoid no-deal Brexit
Tom Finn - Reuters
Britain's pound vaulted to a 21-month high against the euro on Tuesday after Prime Minister Theresa May offered lawmakers the chance to vote on delaying Brexit.
By opening up the possibility of avoiding a chaotic no-deal departure from the EU - the worst-case scenario for sterling - May's proposal sent the currency surging.
/reut.rs/2Eioy1d
| | | | | | Exchanges and Clearing | | | US Futures Smash Volume Records in 2018
Russell Rhoads - TABB Forum
US futures markets surged 17% in 2018, topping 4 billion contracts for the first time ever. Volume in the options-on-futures markets also grew at a double-digit rate, exceeded 1 billion contracts for the year.
bit.ly/2EdsnoB
****SD: Options on futures volumes grew 12 percent compared to 2017.
Nasdaq Dubai to partner with FTSE Russell for more derivatives offerings
Sarmad Khan - The National
Nasdaq Dubai, the first Arabian Gulf exchange to offer derivatives and futures trading, is partnering with the global index provider FTSE Russell on several new products including futures country specific indexes as it looks to expand its offerings and investor base, its chief executive said.
bit.ly/2H3W3rp
| | | | | | Regulation & Enforcement | | | In CFTC Action, Former Trader Krishna Mohan Admits To Engaging In Spoofing And Manipulative Scheme At A Proprietary Trading Firm
CFTC
The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Krishna Mohan (Mohan), in which Mohan admits to engaging in manipulative and deceptive schemes, along with other individuals, which involved thousands of acts of spoofing (bidding or offering with the intent to cancel the bid or offer before execution) in a variety of futures contracts traded on the Chicago Mercantile Exchange and Chicago Board of Trade. The Order finds that Mohan engaged in this unlawful activity while trading for his former employer, a proprietary trading firm named as "Firm A" in the Order.
/goo.gl/bck7Tz
****SD: Plenty of dominoes left to fall in the prop world if this goes the way I think it is...
BoE gives banks extra liquidity to alleviate Brexit cash shortfall risk
Chris Giles - Financial Times (SUBSCRIPTION)
Banks will be able to access additional funds from the Bank of England in case they run short of money as Britain leaves the EU, the central bank said on Tuesday.
Announcing that it would offer to lend cash weekly to banks in March and April rather than monthly, the BoE is seeking to prevent any possibility that Brexit could be the trigger for a financial crisis or a squeeze on credit.
/on.ft.com/2EcJeIa
FCA says Mifid II has had 'positive' effects; Aim of the rule was to toughen investor protections and reduce conflicts of interest
Philip Stafford and Siobhan Riding - Financial Times (SUBSCRIPTION)
The UK's market watchdog has vowed to examine the effects of tough new EU-wide standards on analyst research  but warned struggling providers that it has so far seen a "positive impact" from the rules. In a speech on Monday, Andrew Bailey, chief executive of the Financial Conduct Authority, said equity investors in the UK had saved more than GBP180m from changes to the way asset managers paid for research last year.
/goo.gl/sUHZEH
Tesla's Musk must address SEC contempt bid as he calls agency 'broken'
Jonathan Stempel, Vibhuti Sharma - Reuters
A federal judge on Tuesday ordered Tesla Inc Chief Executive Elon Musk to explain by March 11 why he should not be held in contempt for violating his fraud settlement with the U.S. Securities and Exchange Commission.
/reut.rs/2EdzE7Z
****SD: Despite opening down today on the news, Tesla has rallied back (a ~$10 move from tip to tail).
| | | | | | Technology | | | Trends in Cloud Migration for Financial Services
Maven Wave
While the public posture for cloud migration in financial services is one of caution and restriction, the word on the ground tells a different story. With names like JP Morgan Chase, Nasdaq, FINRA, and Capital One cropping up as cloud adopters, it has become apparent that there is more than meets the eye when it comes to the true rate of cloud migration in financial services. What is the true state of migration to the cloud and what are some of the key lessons for moving forward?
/goo.gl/TXZWZX
Options widens financial colocation services across Asia Pacific
Antony Sawas - Data Economy
The move follows the opening of a New Zealand office and the company's services are now available at new exchanges in Hong Kong, Korea and Australia.
bit.ly/2EcAEcf
| | | | | | Strategy | | | UBS Sees S&P 500 Climbing to Record by June Following Fed Pivot
Lu Wang - Bloomberg via Yahoo Finance
The rebound in stocks since Christmas has been breathtaking. Sentiment among Wall Street analysts is being repaired with similar speed.
The latest example is Keith Parker at UBS Group AG. The strategist in January slashed his 2019 forecast for the S&P 500 from the second-highest among those tracked by Bloomberg to below consensus. Now, he says the benchmark will climb to new highs by the end of June, approaching his year-end target of 2,950. The index recently traded close to 2,805, about 4 percent below the record 2,930 reached in September.
/goo.gl/f86Ew7
| | | | | | Miscellaneous | | | Piper Jaffray Companies Agrees to Acquire Weeden & Co., L.P.
BusinessWire
Piper Jaffray Companies (NYSE: PJC), a leading investment bank and asset management firm, today announced that it has reached a definitive agreement to acquire 100% of Weeden & Co., L.P. ("Weeden & Co."), a broker-dealer focused on providing institutional clients with premier execution services. Upon closing, Weeden & Co. will convert to and operate as Piper Jaffray & Co.
/goo.gl/CYVRog
With 10-to-1 Leverage, Shadow Banks Fuel China's Stock Boom
Bloomberg (SUBSCRIPTION)
Eager to pile into the world's most-volatile major stock market with 10-to-1 leverage? China's shadow bankers are happy to help -- and that has the nation's policy makers worried.
Just hours after China's CSI 300 Index notched a 6 percent surge on Monday -- its biggest gain in more than three years -- the country's securities regulator warned of a rise in unregulated margin debt and asked brokerages to increase monitoring for abnormal trades. The China Securities Regulatory Commission's statement followed a pickup in advertising by margin-finance platforms, which operate with little to no supervision and offer far more leverage than the country's regulated securities firms.
/bloom.bg/2EphznB
Finance Industry Wins a Two-Year Break on EU Benchmarks Law
Alexander Weber and Silla Brush - Bloomberg via Yahoo Finance
European Union policy makers agreed to give an extra two years to the financial industry to complete an overhaul of key regional and foreign financial benchmarks to protect them from potential manipulation.
The deal reached late on Monday by EU diplomats and members of the European Parliament will allow Eonia and Euribor to be used by firms based in the bloc until the end of 2021, according to a statement from the European Commission, the EU's executive arm. Without the extension, their use would have been restricted starting next year because they don't meet incoming EU standards designed to make benchmarks more reliable.
/goo.gl/oCiyBm
****SD: A delay on a regulatory effort? When has that ever happened?
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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Editor
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