Forefront Communications

Forefront Week in Review: October 21, 2018

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.

This week, we saw a story with major implications for the crypto world: Fidelity is launching a new business that will provide cryptocurrency custody and brokerage solutions for institutions. While the custody solutions will initially accommodate only bitcoin and ether, the firm hopes to branch out into other cryptos down the line, Tom Jessop, head of corporate business development at Fidelity, told The Block’s Frank Chaparro. The new business will join new platforms like Bakkt and ErisX as a major player in institutional crypto, making it a huge couple of months for the space.

Other top stories included the SEC’s new division for ICOs, Robinhood’s controversial bargain with HFTs and the launch of a new asset manager backed by veterans from Point72, Balyasny, Goldman Sachs and Morgan Stanley.

This week’s Week in Review features stories by Chaparro, Gunjan Banerji of the Wall Street Journal and Anthony Malakian of Waters Technology, 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

Robinhood Gets Almost Half Its Revenue in Controversial Bargain With High-Speed Traders
Bloomberg News| Simone Foxman, Julie Verhage & Suzanne Woolley

Robinhood Markets has built a reputation on its origins in finance counterculture and a steal-from-the-rich ethos. But the firm, which offers no-fee stock trading, is making almost half its revenue from one of the most controversial practices on Wall Street. The startup, valued at $5.6 billion, was bringing in more than 40 percent of its revenue earlier this year from selling its customers’ orders to high-frequency trading firms like Citadel Securities and Two Sigma Securities, according to three people with knowledge of the matter. Almost all retail brokerages employ the practice, but it’s an unlikely strategy for a company built on an anti-Wall Street message.

[minti_button link=”https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Exchange, ATS and Clearing News

Upstart Exchange Looks to Profit From Wall Street Fear
Wall Street Journal | Gunjan Banerji

Miami International Holdings, a small but rapidly growing exchange operator, won regulatory approval on Friday for options on an index that tracks expectations for U.S. stock volatility. The measure, called SPIKES, competes head-to-head with the already established Cboe Volatility Index, known as the VIX. The approval comes after investors were reminded last week of how quickly market turbulence can snap back. On Friday, both the S&P 500 and Dow Jones Industrial Average capped their worst weeks since March as investor anxiety bubbled up over how much longer the nine-year bull market in U.S. equities can go on.

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Vendor News

Orbital Insight Expands Telemetry Footprint, Considers New Delivery Service
Waters Technology | Anthony Malakian

Satellite analytics platform provider Orbital Insight is aiming to move beyond satellite data and into the broader geospatial analytics space by adding an increasing number of telemetry datasets. The expansion will eventually include a new way for users to receive this information. At this year’s Buy-Side Technology North American Summit, the audience selected Orbital Insight as having the best 10-minute pitch when pitted against two other startups. During that pitch, which was delivered by Ben Rudin, commercial business lead for Orbital Insight, he said the company will eventually use a platform-as-a-service (PaaS) model to deliver information to users.

[minti_button link=”https://www.waterstechnology.com/connectivity-networks/data-delivery-technologies/3922846/orbital-insight-expands-telemetry-footprint-considers-new-delivery-service” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More ($)[/minti_button]

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Buy Side News

Point72, Balyasny Vets Launch Firm That Only Wants Alpha
Institutional Investor | Julie Segal

Veterans from Point72, Balyasny, Goldman Sachs, and Morgan Stanley are launching an asset manager that aims to scour the industry for talented managers and scrape off the alpha they produce for institutional investors. The new firm, called Alpha Innovations, is strives to be an alternative to high fees for beta and sub-benchmark performance. Alpha Innovations will hire mostly external managers but is also looking to bring on internal trading teams. The firm, which requires all managers to trade within a separate account, will consider all types of investment strategies.

[minti_button link=”https://www.institutionalinvestor.com/article/b1bf48mbwz0163/Point72-Balyasny-Vets-Launch-Firm-That-Only-Wants-Alpha” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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M&A/Investment News

Goldman Sachs, Two Sigma and Citi Invest Further $20 Million in Data Science Startup
The TRADE News | Hayley McDowell

A data science and engineering startup has secured a further $20 million investment from Goldman Sachs, Two Sigma and Citi in a second funding round. Crux Informatics was established in 2017 to help financial institutions gather and use data via a Data Engineering Managed Service on its Informatics platform. The second funding round in the data science specialist, which made $10 million for the company, follows on from the first funding round led by Goldman Sachs Principal Strategic Investments in November 2017.

[minti_button link=”https://www.thetradenews.com/goldman-sachs-two-sigma-citi-invest-20-million-data-science-startup/” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Regulatory & Legal News

The SEC Is Setting Up a New Division to Talk to ICO Startups
CoinDesk | Nikhilesh De

The SEC is launching a new division with the goal of making it simpler for fintech startups – including those launching ICOs – to navigate the legal implications of their products. Announced Thursday, the Strategic Hub for Innovation and Financial Technology will act as a central point for the securities regulator to interact with entrepreneurs and developers in the financial technology world, in particular with groups focusing on DLT, automated investment advice, digital marketplace financing and artificial intelligence. As envisioned, FinHub will both publicize information produced by the SEC, as well as let innovators ask questions or clarify regulations.

[minti_button link=”https://www.coindesk.com/the-sec-is-setting-up-a-new-office-to-talk-to-ico-startups/” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Blockchain & Crypto News

Fidelity, the $2.5 Trillion Wall Street Giant, Is Launching a Brand New Institutional Brokerage and Custody Business for Crypto
The Block | Frank Chaparro

Fidelity is diving into the world of crypto with a brand new digital assets business. The financial-services firm announced Monday its cryptocurrency custody and brokerage solutions for institutions. The new services will be offered through a new entity, Fidelity Digital Assets, Tom Jessop, head of corporate business development, told The Block in an interview. While the initial custody solutions will be for bitcoin and ether, the firm also plans to custody other digital assets down the road. As for the trading side of the business, the firm will provide so-called white-glove services to asset managers to help them enter the market.

[minti_button link=”https://theblockcrypto.com/2018/10/15/fidelity-the-2-5-trillion-wall-street-giant-is-launching-a-brand-new-institutional-brokerage-and-custody-business-for-crypto/” 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.