The first few weeks of the new year have been busy for the financial services industry. Perhaps the biggest headline of last week was the revelation that Brian Schatz, the senior U.S. senator from Hawaii, is working on a plan that would tax financial trades. His spokesman didn’t provide many details to Laura Davison of Bloomberg News, who broke the story, but it appears the purpose of the idea is to curb high-frequency trading while also raising money for progressive policies. While there’s no telling when or if a financial trade tax will be realized — Republicans still control the Senate — it’s a reminder that nearly a decade after the financial crisis, Wall Street remains a lightning rod for controversy, especially in Washington. With each major party controlling one chamber of congress, it will be fascinating to watch these next two years play out.
Other major headlines ran the gamut from high-profile people moves to an in-depth examination of the rapid consolidation of the OMS/EMS space. The latter included commentary from Robert Dykes, CEO of client TORA, as well as Guy Cirillo, formerly of Credit Suisse and Quantitative Brokers.
This week’s Week in Review features stories by Davison, Tom Teodorczuk of Financial News, John D’Antona of Traders Magazine and Frank Chaparro of the Block, among others. Keep scrolling for more, and don’t forget to subscribe to the Forefront Fintech Digest if you’re not on our list already.
Market-Maker Flow Traders Names Head of Fixed Income
Financial News | Tom Teodorczuk
Flow Traders, the European electronic market-making firm, has appointed a former JPMorgan and Nomura executive as its head of fixed income trading. Ramon Baljé joined Flow Traders earlier this month, a spokesperson confirmed. He was most recently global head of Nomura’s trading business in the Netherlands, having worked at the Japanese bank for around four years before leaving last summer. Earlier in his career, Baljé held senior trading roles at JPMorgan, Lehman Bothers and UBS in London, according to his LinkedIn profile.
Exchange, ATS and Clearing News
A VIX Copycat Tries to Break Cboe’s Monopoly on Volatility Products
Bloomberg News | Luke Kawa
Wall Street’s wildly popular fear gauge — the VIX — may finally get some real competition. On Feb. 19, MIAX Options plans to debut options on a VIX copycat, the SPIKES Index, in an attempt to break up Cboe Global Markets’ monopoly on exchange-traded volatility products. The new product is being pitched as a lower-cost alternative to the VIX, with cheaper fees to trade the MIAX contracts. A company called T3 developed SPIKES. Its chief executive officer, Simon Ho, said it lowers “the cost of doing business significantly” and will compete on “quality, price, and innovation.”
OMS/EMS Vendor Consolidation Raises Questions Among the Buy Side
Traders Magazine | John D’Antona
While 2018 was a banner year for M&A bankers specializing in the OMS/EMS space, the wave of consolidation has left some concerned, according to several industry executives. “Almost always, the acquirer is focused on strategic platform integration plans and their ‘core’ business, so it’s easy for the acquireree’s planned product upgrades and client enhancements to get pushed off, sometimes indefinitely,” said Robert Dykes, CEO of TORA. Efficiencies of scale – otherwise known as “synergies” – will also start to take their toll on the level of client service the OEMS clients will receive, which can manifest itself as slower response times and less knowledge of the product, according to Dykes.
Buy Side News
Investors Are Asking Hedge Funds to Move to a ‘0-and-30’ Fee Model, and It’s Putting Pressure on a Big Chunk of the Industry
Business Insider | Bradley Saacks
For years, most hedge funds charged investors a flat rate of 2%, known as a management fee, as well as a 20% performance fee. But the emergence of public pressure from big investors like pension plans to lower costs — as well as several years of mediocre performance from hedge funds — has led to a rethinking of what investors should be paying for. Commonfund, a Connecticut-based manager, is OK with writing big checks to hedge funds, as long as they’re making money. The investor has pushed for managers to accept a fee structure of 0-and-30 — as in no management fees whatsoever but a performance charge of 30%.
U.S. Crypto Exchange Kraken Buys Index Provider Crypto Facilities
Reuters News | Anna Irrera
Virtual currency exchange Kraken said on Monday that it had acquired Crypto Facilities, a cryptocurrency index provider that calculates the reference price for CME Group’s bitcoin futures. Kraken said the “nine-figure deal” was its largest acquisition to date. It gave no further financial details. London-based Crypto Facilities calculates the CME CF Bitcoin Reference Rate, the index used to price the CME’s bitcoin futures, which were launched in December 2017. It also calculates CME’s reference rate for virtual currency ether and other cryptocurrency indices.
Regulatory & Legal News
Democrats Target Wall Street With Financial Trade Tax Proposal
Bloomberg News | Laura Davison
Wall Street would bear the brunt of the latest tax proposal as Democrats jockey for the most progressive tax ideas with the approach of the 2020 elections. Senator Brian Schatz, a Hawaii Democrat, is working on a plan that would tax financial trades, according to his spokesman, Michael Inacay, who declined to provide details on how, exactly, it would be structured. Financial transaction taxes typically place a levy of a fraction of a percent on the price of a securities trade. The idea has gained popularity within the Democratic Party as a way to curb high-frequency trading as well as raise revenue for progressive policies such as free college tuition.
Blockchain & Crypto News
ErisX Fills C-Suite Spot with Former Barclays Exec as It Eyes the Launch of Its Institutional Crypto Exchange
The Block | Frank Chaparro
ErisX, the institutional-grade exchange, announced three new hires Thursday as it prepares for the launch of its spot marketplace for crypto in Q2. Led by former Citigroup executive Thomas Chippas, ErisX also aims to offer trading in a number of physically delivered futures including ones tied to bitcoin, ether, bitcoin cash, and litecoin. ErisX is looking to attract traditional investors and traders to its market, which it says will be regulated by the CFTC. As for Thursday’s announcement, the firm said it has brought on Robert Thrash as COO. The new hires mean the firm has finished staffing up its executive team, Chippas said in an interview.
That’s all for this week. Don’t forget to subscribe to the Forefront Trading Digest for more headlines like these.