Forefront Communications

Forefront Week in Review: August 26, 2018

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Sam Belden

Sam Belden

Welcome to the Forefront Week in Review, where we take another look at top recent stories from the action-packed world of trading and market structure.

It was an eventful week for J.P. Morgan, which announced a new online trading service that could have major implications for discount brokerages. Customers will be able to make up to 100 free trades in the first year of the service, making it a viable alternative to firms like Robinhood, E*Trade and Charles Schwab. In slightly more negative news, the banking giant also laid off around 100 employees from its asset management business.

Other major stories included a new batch of rejected proposals for a bitcoin ETF and another summer acquisition for State Street.

This week’s Week in Review features stories by Samuel Agini of Financial News, Richard Johnson of Greenwich Associates and Frank Chaparro of Business Insider, among others. Keep scrolling for more, and don’t forget to subscribe to the Forefront Trading Digest if you’re not on our list already.

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Broker News

JP Morgan to Unveil New Investing App with an Eye-Catching, Disruptive Price: Free
CNBC | Hugh Son

J.P. Morgan is about to lob a grenade into the increasingly competitive world of retail investing. The bank is rolling out a digital investing service next week that comes bundled with free or discounted trades, a sophisticated portfolio-building tool and no-fee access to the bank’s stock research. Anyone who downloads J.P. Morgan’s mobile banking app or uses its website can get at least 100 free trades in the first year. The move, more than two years in the making, instantly intensifies the price war that is occurring throughout the investing landscape.

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Exchange, ATS and Clearing News

A Case for Asymmetric Speed Bumps in U.S. Equities
Greenwich Associates | Richard Johnson

Every day profits are made by the fastest traders who react quickly to new information, whether it’s an earnings release, economic data, geopolitical news, or a price movement in a related instrument trading in a geographically dispersed data center. There is a strong argument that this type of trading activity places a material tax on the industry, in the form of wider spreads and, therefore, worse execution prices as liquidity providers seek to avoid being adversely selected by firms deploying these latency arbitrage strategies. Over the past two years, exchanges have innovated in ways designed to ameliorate the effects of some of these strategies. In a recent study study, we found that 85% of buy-side traders were supportive of the IEX speed bump or other exchange speed bumps.

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Vendor News

IT Spending Remains Robust — For Now
Markets Media | Rob Daly

Wall Street’s investment into information and communications technology should remain stable over the next 12 months but could start tapering in later 2019 and beyond, according to research published by industry analysis firm IDC. “Financial services continues to be on of the fastest growing industries from a global perspective,” said Stephen Minton, vice president, customer insights & analysis at IDC, during a webinar discussing the firm’s outlook for ICT spending for the second quarter.

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Buy Side News

At Hedge Funds, Where Are the Women?
Wall Street Journal | Rob Copeland

Of the largest 50 U.S. hedge funds by assets under management, only two have women as their top investment executive, according to a Wall Street Journal analysis of data from researcher Absolute Return. In that same group of 50 hedge funds, half the investor-relations or marketing departments have female heads or co-heads. Below the top manager, investment teams are overwhelmingly male at hedge funds, according to industry executives, who call it an extreme example of a larger reality: Women are clustered in specific and lower-paying corners of the financial world.

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M&A/Investment News

State Street Acquires London Foreign Exchange Startup BestX
Financial News | Samuel Agini

State Street has acquired a London-based forex startup in a deal that underscores how fund managers are turning to new technologies to help gain an edge in markets and stay on the right side of regulation. The financial services giant, with a $31bn market capitalisation, has acquired BestX, a group backed by Thomson Reuters that provides analytics on the $5.1tn-a-day global foreign exchange markets. BestX’s clients include 60-plus banks and investment firms with more than $17tn in assets under management. Its transaction cost analysis service is designed to help users secure the best trades for end-investors.

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Regulatory & Legal News

‘You’re Literally Shifting Deck Chairs on the Titanic’: Here’s Why the SEC Probably Won’t Approve a Bitcoin ETF Anytime Soon
Business Insider | Frank Chaparro

A bitcoin ETF has long been viewed as a next step in bitcoin’s maturation as an asset class and a way to breath new life into the crypto which has struggled to break through $10,000 for much of 2018. But most of the market experts Business Insider spoke to fully expected the SEC’s Wednesday decision to reject nine bitcoin ETF proposals. For a bitcoin ETF to get approved, whether it’s based on futures or bitcoin itself, crypto exchanges will need to start cooperating more with each other to make the market more transparent, said Dave Weisberger, the chief executive of crypto data company CoinRoutes.

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Blockchain & Crypto News

Wall Street Veterans Ready Launch of Crypto Prime Brokerage
The TRADE Crypto | Hayley McDowell

Two Wall Street veterans are preparing to launch a cryptocurrency prime brokerage service in a move that could help legitimize digital asset markets for institutional players, particularly hedge funds. Digital Gamma claims to be ‘digital back office’ for firms trading cryptocurrencies, bringing a pooled-asset model with access to exchanges and the ability to lend crypto for income or borrow for short positions. Co-founders Ari Pine and Paul Sacks have extensive experience in capital markets, with particular knowledge of options trading and trading technology engineering.

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That’s all for this week. Don’t forget to subscribe to the Forefront Trading Digest for more headlines like these.