Forefront Communications

Forefront Week in Review: October 7, 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.

This week concluded with a major M&A story: Virtu Financial is reportedly exploring a takeover of ITG, a move that would continue the firm’s rapid development on the client-facing side. Nothing has been decided, but the firms have held talks about a deal, according to Bloomberg News. Other significant headlines included another major hire for Coinbase and the industry’s continued debate over rebates.

Finally, we at Forefront had an incredible week at the Security Traders Association’s annual Market Structure Conference in Washington, D.C. The program was packed with big names from both the financial services industry (Cboe President Chris Concannon, TD Ameritrade CEO Tim Hockey) and other arenas (U.S. Senator Ben Sasse, political analyst Charlie Cook, comedian Colin Quinn). We also got to see a pair of Forefront clients take the stage: Dash Financial Technologies CEO Peter Maragos and Luminex CEO Jonathan Clark. Hearing their insights and reconnecting with friends and former colleagues made for a productive and memorable experience. Check out the STA’s Twitter feed for some highlights from an outstanding event!

This week’s Week in Review features stories by Frank Chaparro of The Block, Nick Baker of Bloomberg News and Dave Michaels of the Wall Street Journal, 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

Coinbase Has Poached Instinet CEO to Lead Institutional Sales
The Block | Frank Chaparro

Instinet CEO Jonathan Kellner is set to join cryptocurrency exchange Coinbase next year, according to people familiar with the situation. Kellner, whose career at Instinet, the institutional brokerage firm, began in 2007, took on the CEO position in 2014. Now, The Block can report that Kellner is going to Coinbase to lead institutional sales, covering the firm’s new over-the-counter trading business. He will start in January 2019.

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Exchange, ATS and Clearing News

How Should Stock Exchanges Make Money? The NYSE Has Some Ideas
Bloomberg News | Nick Baker

NYSE proposed that U.S. regulators revise their test of how equity exchanges get paid and suggested freezing the rates that exchanges charge for market data, which are viewed by many investors and traders as already too high. The SEC wants to test the incentive system that powers much of U.S. stock trading, whereby exchanges charge some traders while paying rebates to others. Critics say that system prompts traders to route orders to exchanges that pay the most, not necessarily the ones that would treat the customers’ trades the best.

[minti_button link=”https://www.bloomberg.com/news/articles/2018-10-03/nyse-proposes-that-sec-revise-its-test-of-how-exchanges-get-paid” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Vendor News

For True TCA, Buy Siders Must Pierce the Cloak of Secrecy Around Tech Fees
TABB Forum | Sean Sullivan (CRO, LiquidityBook)

For more than a decade, buy-side firms have been working to improve their trading efficiency and performance by analyzing their implicit and explicit trading costs. But non-disclosure agreements that some large OMS vendors subject their brokers to prevent the buy side from fully understanding opaque transaction and connectivity fees. As more clients have grown frustrated with these pricing practices, however, newer business models have emerged – and the case for replacement gets stronger every day.

[minti_button link=”https://tabbforum.com/opinions/for-true-tca-buy-siders-must-pierce-the-cloak-of-secrecy-around-tech-fees” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Buy Side News

ExodusPoint Doubles Down in New York, Adding More Traders in London
eFinancialCareers | Beecher Tuttle

$8 billion hedge fund startup ExodusPoint Capital just doubled the size of its footprint in New York, despite opening its doors less than nine months ago. The firm has inked a deal to rent out an entire second floor at its East 55th Street office in New York as it continues to make new hires, particularly in the middle and back office. The fund, led by former Millennium Management star trader Michael Gelband, added more than a dozen portfolio managers in New York over the first two months of the summer. Now, the hedge fund seems to be filling in the gaps, hiring more junior analysts as well as risk and accounting specialists.

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M&A/Investment News

Virtu Is Pursuing Takeover of Investment Technology Group
Bloomberg News | Nick Baker & Annie Massa

High-speed trading firm Virtu Financial is seeking to acquire independent brokerage Investment Technology Group as pressure mounts for proprietary traders to branch out. Virtu is working with a financial adviser to pursue ITG, according to people familiar with the matter, who asked to not be named because the information isn’t public. The companies have recently been holding talks about a deal. No decision has been made and ITG could decide to remain independent. A purchase of ITG would continue Virtu’s transformation from a company that places bids and offers on exchanges to one that has relationships with customers.

[minti_button link=”https://www.bloomberg.com/news/articles/2018-10-04/virtu-is-said-to-pursue-takeover-of-investment-technology-group” size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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Regulatory & Legal News

Exchange Executive Says SEC Trading Experiment Will Cost Investors ‘Millions’
Wall Street Journal | Dave Michaels

Stripping stock exchanges of the ability to offer incentives to lure trading will cost investors “millions of dollars,” according to Chris Concannon, president and COO of Cboe Global Markets. The SEC has proposed a two-year pilot program that exchanges say would undermine a key leg of their strategies: a widely used pricing system in which exchanges pay rebates to attract orders and charge fees to other traders. “That is a commercial arrangement that we should be free to do,” Mr. Concannon said at a Security Traders Association conference in Washington DC. “Having the federal government saying you can’t negotiate for a principal trader to make quotes on your market—that is not logical.”

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Blockchain & Crypto News

Fund Administrators Step Up to the Crypto Challenge
The TRADE Crypto | Jon Watkins

A handful of fund administrators have begun stepping into the digital asset servicing space as crypto funds continue to set up in their droves. Research house Autonomous NEXT has tracked a record high of 226 in February 2018 – more than double that of the number in October 2017, and five times more than at the start of 2017. According to a report by Morgan Stanley, there is now around $3.5 billion in estimated assets under management from over 250 crypto-dedicated funds. Traditional hedge funds have also been getting in on the crypto game.

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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.