Forefront Communications

Forefront Week in Review: January 13, 2019

Sam Belden

Sam Belden

It’s shaping up to be an exciting week for all of us at Forefront — starting Wednesday, we’ll be in the Windy City for the Security Traders Association of Chicago’s 93rd annual Mid-Winter Meeting, a three-day gathering of executives from top exchanges, broker-dealers, asset managers and regulators. We’ll be on hand along with a number of our clients — Dash, Imperative Execution, HPR and Templum — so track us down and say hello!

For attendees, there will be plenty of current events to discuss. Perhaps the biggest development from the past week was the revelation that a number of Wall Street heavyweights, including Morgan Stanley, Fidelity and Citadel, will launch a new low-cost stock exchange known as Members Exchange or MEMX. Once it launches, MEMX will serve as a throwback to the days when exchanges were owned by their members. Whether this is the latest battle in the ongoing war over market data or simply a new initiative in a heavily concentrated space remains to be seen, but either way, we’re a long way off from the new exchange becoming a reality — the SEC approval process for a new exchange could take over a year.

Other top stories included Morgan Stanley cutting jobs across sales and trading, Greenwich Associates’ new report predicting major consolidation in the bond trading business, and Coinbase’s pivot away from Wall Street — a plan that doesn’t involve bringing on former Instinet chief Jonathan Kellner, who was reported to be joining the firm in October.

This week’s Week in Review features stories by Dakin Campbell of Business Insider, Alexander Osipovich of the Wall Street Journal 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

Morgan Stanley Is Cutting Dozens of Jobs Across Sales and Trading Right Before Year-End Bonuses
Business Insider | Dakin Campbell

Morgan Stanley is in the process of dismissing dozens of sales and trading staff. The cuts are being made to cull the firm’s underperformers or reposition desks that may need fewer staff, according to people with knowledge of the matter. It’s part of an annual process that the bank has made more rigorous in the past few years, one of the people said. The bank began alerting affected employees over the past week as part of its annual promotion and compensation process, one of the people said.

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Exchange, ATS and Clearing News

Wall Street Firms Plan New Exchange to Challenge NYSE, Nasdaq
Wall Street Journal | Alexander Osipovich

A group of financial heavyweights including Morgan Stanley, Fidelity Investments and Citadel Securities plans to launch a new low-cost stock exchange to challenge the NYSE and Nasdaq, the companies said. The creation of the new venue, called Members Exchange or MEMX, comes after years of frustration among Wall Street brokers and traders with the fees charged by U.S. stock exchanges. MEMX will be controlled by the nine banks, brokerages and HFTs funding it, according to a news release viewed by The Wall Street Journal. Such an arrangement harks back to the era when exchanges were owned by their members, typically stockbrokers.

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Vendor News

Outlook 2019: Anthony Amicangioli, HPR
Markets Media | Rob Daly

This year will be the year that the cloud goes mainstream in financial services. The cost, simplicity and usability benefits of the cloud are just too hard to ignore. In recent conversations with a significant buy-side firm, its CTO said they have gone from a situation a few years ago where they had to argue why they should use the cloud for specific projects, to now having to make a case for why they shouldn’t. That’s a massive change in only a few years, and I think it is indicative of the mindset we see with most of the firms with which we speak.

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Buy Side News

The Hedge Fund Comeback That Wasn’t: Steve Cohen’s Mediocre 2018
Bloomberg News | Hema Parmar

Hedge fund titan Steve Cohen, who had been banned from trading client money for two years, opened Point72 Asset Management to investors amid fanfare. Anticipation that the man whose former firm, SAC Capital Advisors, had averaged annual returns of about 30 percent would be back in the game attracted $5 billion of capital to his fund, making it one of 2018’s biggest launches. But by the end of 2018, Point72 had made less than 1 percent for investors, according to people familiar with the matter. The fund, which started trading last spring, lost about 1 percent in October and 5 percent in November, which largely wiped out its gains for the year.

[minti_button link=”https://www.bloomberg.com/news/articles/2019-01-08/the-hedge-fund-comeback-that-wasn-t-steve-cohen-s-mediocre-2018″ size=”small” target=”_blank” lightbox=”false” color=”orange” icon=””]Read More[/minti_button]

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M&A/Investment News

‘The Boom in New Corporate Bond Trading Platforms Is Over’: There Could Be a Wave of M&A in the Bond Trading Business
Business Insider | Dan DeFrancesco

A new report by financial research firm Greenwich Associates predicts a consolidation of US corporate bond platforms over the next 18 months. The prediction comes at a time when electronic trading in US corporate bonds continues to rise. In Q3 2018, 26% of trading volume in the market was done electronically. That’s a 7% increase from Q1 of the same year. “The boom in new corporate bond trading platforms is over,” said Kevin McPartland, head of research for market structure and technology at Greenwich Associates and author of the report.

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Regulatory & Legal News

Norwegian Watchdog Censures Nasdaq for Failure to Supervise Power Traders
Financial Times | Philip Stafford

The Norwegian markets regulator has censured Nasdaq’s commodities exchange in Oslo for supervisory failures after a trader blew a €114m hole in the stability fund that ensures the safety of derivatives trading last year. The business failed to adequately monitor its trading members or the traders’ positions limit the regulator had set, a report on Thursday from Finanstilsynet, the Norwegian financial supervisory authority, said. It “censures the company for depending too heavily on the monitoring carried out by Nasdaq Clearing, whose objective differs from that of the company,” Finanstilsynet said.

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Blockchain & Crypto News

Jonathan Kellner Will No Longer Join Coinbase as Firm Shifts Course Away from Wall Street
The Block | Frank Chaparro

Coinbase is shifting its client focus away from the likes of Goldman Sachs and BlackRock to crypto-native funds like Pantera and Polychain. As a result, the firm is readjusting its 2018 goal to build out a full-scale Wall Street-grade prime broker, according to people familiar with the situation. And there’s one striking casualty. Jonathan Kellner, the Wall Street veteran who led brokerage giant Instinet, is no longer joining the firm, a Coinbase spokesperson confirmed.

[minti_button link=”https://www.theblockcrypto.com/2019/01/09/the-inside-story-of-the-coinbase-crypto-og-and-wall-street-guard-power-struggle/” 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.