Forefront Communications

Forefront Week in Review: November 11, 2018

Forefront

Sam Belden

Sam Belden

Before we begin our weekly news roundup, we at Forefront would like to extend our gratitude to our nation’s veterans, both within our industry and across the country. In a world where the headlines are dominated by market data squabbles and MiFID II anxiety, days like Veterans Day are an ideal time to appreciate the freedoms that make such debates possible.

That said, the trading and capital markets news cycle moved as quickly as ever last week. One of the most talked-about firms was ITG, which had a particularly eventful Wednesday – after agreeing to be sold to Virtu Financial for $30.30 per share, the SEC announced a few hours later that the agency brokerage and fintech firm was being fined $12 million to settle charges related to dark pool violations. The settlement didn’t seem to frighten investors, as ITG’s stock has flatlined since achieving its YTD peak following the Virtu announcement.

Other top headlines included J.P. Morgan’s plan to sell its trading software to investors and D.E. Shaw’s struggle to find human talent that can compete with its computers.

This week’s Week in Review features stories by Rachael Levy of the Wall Street Journal, Hugh Son of CNBC and Frank Chaparro of The Block, 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 Is Selling Its Trading Software to Investors in a Glimpse of Wall Street’s Tech Future
CNBC | Hugh Son

At the heart of the world’s biggest investment bank is an all-seeing program that allows its traders and salespeople to value trillions of dollars in stocks, bonds and currencies. Now, J.P. Morgan is letting clients access the trading program to run analytics on their own investments, according to Teresa Heitsenrether, the bank’s global head of custody and fund services. The firm has already sold subscriptions to its Investment Analytics Platform to 208 big investors, Heitsenrether said in an interview. Another 42 clients are expected to sign by year-end.

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Exchange, ATS and Clearing News

Bringing Nasdaq’s Derivatives Franchises Together
John Lothian News | Spencer Doar

Kevin Kennedy now has two jobs. Formerly just the head of U.S. options for Nasdaq, he’s now also the head of the Nasdaq Futures Exchange (NFX), a post left open by the departure of Rick Beaman. Kennedy inherits a still nascent endeavor – it was formed in 2015 – that is largely focused on energy products. Despite its youth, NFX has hit some home runs. NFX’s natural gas options have plenty of traction and the exchange’s open interest in energy products represents 11.5 percent of overall U.S. energy product open interest.

[minti_button link=”http://www.johnlothiannews.com/2018/11/bringing-nasdaqs-derivatives-franchises-together/” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Vendor News

Investment Research in the Era of MiFID II: Is Variety Still the Spice of Life?
TABB Forum | Francis Land (IHS Markit)

A recent report suggests a reduction in the number of research vendors being paid in the regulatory era of MiFID II and a concentration of payments with the large investment banks. With less variety, however, we risk forcing asset managers to make investment decisions with partial or sub-optimal information. It cannot be a good thing for the future performance of funds – and therefore, for investors – if firms are cutting research provision for reasons of cost or administrative burden, rather than quality.

[minti_button link=”https://tabbforum.com/opinions/investment-research-in-the-era-of-mifid-ii-is-variety-still-the-spice-of-life” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Buy Side News

D.E. Shaw Is a Quant King. Its Humans Are Losing Money
Wall Street Journal | Rachael Levy

D.E. Shaw Group is known as one of the most successful quantitative investment funds, using computers to make trading decisions. This year, it is facing challenges replicating its success using human beings. A group of D.E. Shaw traders who oversee about $2 billion in bets for and against individual stocks have struggled to make money in 2018, people familiar with the matter said. They were down about $60 million as of late September, these people said. By mid-October, the losses had deepened to roughly $100 million, one of these people added.

[minti_button link=”https://www.wsj.com/articles/a-quant-king-finds-stock-picking-can-be-difficult-1541707293?mod=flipboard” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More ($)[/minti_button]

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M&A/Investment News

Virtu Aims for New Revenue Mix with Second Billion-Dollar Deal in 2 Years
S&P Global Market Intelligence | Declan Harty

Virtu Financial’s blueprint for integrating ITG may already be in place. The New York-based trading giant agreed to acquire the independent agency brokerage known as ITG for $30.30 per share, or approximately $1.00 billion. The deal is Virtu’s second large-scale purchase in as many years and the latest sign that proprietary trading companies are still exploring scale acquisitions, new business lines and cost-cutting measures to stay afloat and find consistent growth, something Virtu believes it has in ITG.

[minti_button link=”https://platform.mi.spglobal.com/web/client?auth=inherit#news/article?id=47630085&cdid=A-47630085-11569″ size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Regulatory & Legal News

ITG, Subsidiary Settle with SEC Over Dark Pool Charges
Pensions & Investments | Rick Baert

ITG and subsidiary AlterNet Securities will pay a combined $12 million to the SEC to settle charges that the firms disclosed their clients’ confidential dark pool trading information without their knowledge, the regulatory agency announced Wednesday. According to the SEC’s administrative order, ITG from 2010 to 2017 misstated and omitted details to its clients about the operation of its POSIT dark pool and did not set “adequate safeguards and procedures” to protect POSIT subscribers’ confidential trading information.

[minti_button link=”https://www.pionline.com/article/20181107/ONLINE/181109908/itg-subsidiary-settle-with-sec-over-dark-pool-charges” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Blockchain & Crypto News

From $50M Bitcoin Deals to Almost Selling for $50M at the Market Bottom: The Story of B2C2
The Block | Frank Chaparro

B2C2, a UK-based cryptocurrency market-making firm, was doing multi-million dollar bitcoin deals in 2017 but the crypto bear market almost brought it to the chopping block in 2018. Sources familiar with the situation told The Block that the firm in recent months was searching for a buyer and laid off a number of employees, including those in business development and sales. It also parted ways with its public-relations firm. The situation for the company, which one source described as “troubled,” is striking considering the firm in 2017 was growing at a breakneck pace. Back then, B2C2 was taking calls for $50 million bitcoin trades.

[minti_button link=”https://www.theblockcrypto.com/2018/11/05/from-50m-bitcoin-deals-to-almost-selling-for-50m-at-the-market-bottom-the-story-of-b2c2/” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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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.