| August 18, 2017 | | | | | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | | Thesys vs. Goliath: That's One Big CAT
Spencer Doar - JLN
FINRA, FIS, Cinnober, Thomson Reuters  what do they have in common? They are just a few of the 30 bidders who lost out on developing the Consolidated Audit Trail (CAT) to Thesys Technologies LLC, a subsidiary of the proprietary trading firm Tradeworx, founded in 2009. To develop and implement the CAT, Thesys partnered with IBM (which was a bidder on its own, too), as well Rosenblatt Securities and law firm Latham & Watkins.
"You had some big tech companies that really understand tech but maybe don't understand the markets that well," Thesys Technologies CEO Mike Beller said. "You've got financial technology companies but most of them kind of live in a sort of old world. They understand the milieu but can they really build the tech?"
The CAT project stems from the fallout of 2010's flash crash when regulators realized the need to comprehensively track trading activity. The Securities Exchange Commission adopted Rule 613 in summer 2012 which, per the SEC's website, required the creation of an audit trail "that would allow regulators to efficiently and accurately track all activity throughout the U.S. markets in National Market System (NMS) securities." (That means equities and options but not futures.) It was then left to the self-regulatory organizations (SROs), which are simply the relevant equity and options exchanges, to come up with a blueprint for the CAT, which they did by the end of 2014.
Read the rest HERE.
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No, Not the VIX - the VSTOXX
Sarah Rudolph - JLN
Even your dog has heard of the VIX, the Chicago Board Options Exchange's benchmark volatility index, but the VSTOXX, the benchmark for volatility in European stocks, is less of a household name in the U.S. Eurex has been trying to change that by adding more and more functionality to their VSTOXX products, starting out with spot prices and futures contracts on the index and then more recently moving into options on futures and ETNs.
/goo.gl/WEX11T
***** We have added some slides from Mark Shore's presentation to the story posted on the JohnLothianNews.com website.~JJL
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Trump Tells Aides He Has Decided to Remove Stephen Bannon
Maggie Haberman - NY Times
President Trump has told senior aides that he has decided to remove Stephen K. Bannon, the embattled White House chief strategist who helped Mr. Trump win the 2016 election, according to two administration officials briefed on the discussion.
/goo.gl/BeisB5
****SD: The breaking news of the day that's moving markets. Or maybe something else is.
| | | | | | Lead Stories | | | The Options Industry Council Continues to Expand its Outreach to Financial Advisors
Eric Cott, Director of Financial Advisor Education
The Options Industry Council (OIC)'s mission is to educate investors and financial advisors (FAs) about the benefits and risks of using exchange-listed options to manage financial risk. Towards that end, we continue to expand our outreach to FAs with respect to how options strategies can be used to provide risk management for their clients as they work toward achieving their investing goals. To help guide this effort, we created the Advisor Leadership Council (ALC), the first group of its kind in the industry, made up of FAs who use options for their clients and represent the various advisor channels.
/goo.gl/gEfRn3
Some marquee money managers are looking pretty smart right now
Julia La Roche - Yahoo Finance
Investors and traders who bet market volatility would return are feeling pretty good right now. On Thursday, the CBOE Volatility Index (^VIX) spiked to 15.5 from 11.7 on Thursday, ending one of the longest stretches of low volatility we've seen.
/goo.gl/PndQRN
Volatility spike creates another signal for stock market bears
Ryan Vlastelica - MarketWatch
Bears calling for a U.S. stock market fall haven't had much luck in recent years, as equities have risen in nearly uninterrupted fashion, but lately they've had a lot more evidence to point to in building their case.
/goo.gl/urCuJi
Euro Bulls Not Cowed By ECB
Vassilis Karamanis - Bloomberg
Currency has rebounded strongly from support in recent weeks; Derivatives market shows greater enthusiasm for call options
/goo.gl/2AdVWb
7 signs the stock market is ready to run smack into a wall
Mark DeCambre - MarketWatch
The stock market's relentless rally to records may soon be facing a key test. A number of indicators point to a steady, halting deterioration of some of the factors that have helped Wall Street equities score a steady stream of all-time highs. Peek beneath the hood of the action, and market technicians point to some unsightly problems within the market's machinery.
/goo.gl/vpkWqT
A bubble in political risks, too
William Pesek - LiveMint
What makes today's uncertainty different is how asset bubbles are bumping up against surging political risk, a problem compounded by a uniquely weak roster of world leaders
/goo.gl/QjppZy
****SD: This is slightly more comprehensive commentary than the usual "North Korea is unnerving" and "I have Trump concerns." Pesek is a former Barron's and Bloomberg columnist.
| | | | | | Moves | | | JP Morgan Hires New AI Expert in Push Towards Next Wave of Trading; The move marks push by major banks to using machine learning to analyse risks and market behavior
Colin Firth - Finance Magnates
In further evidence that the financial world is moving towards artificial intelligence and machine learning, JP Morgan, one of the largest investment banks in the world, has hired a machine learning expert. Previously working for Goldman Sachs, Chris Murray is joining the firm to advance the company's use of artificial intelligence in a rapidly changing world.
/goo.gl/pdcrB7
| | | | | | Regulation & Enforcement | | | Exclusive: SEC officials' holdings, legal work, pose potential conflicts
Pete Schroeder - Reuters
Two lawyers appointed to senior jobs at the U.S. Securities and Exchange Commission have ties to major companies including financial firms Goldman Sachs Group Inc (GS.N) and Wells Fargo & Co (WFC.N) that could complicate efforts to regulate them, according to government documents viewed by Reuters.
/goo.gl/Tg4oPR
FDIC sues Barclays, RBS and other banks over Libor
Caroline Binham and Barney Thompson - Financial Times
The US has taken the unusual step of suing European banks in a London court over the Libor-rigging scandal after parts of a similar New York lawsuit failed.
The Federal Deposit Insurance Corporation, which is in charge of winding down failing banks, is suing Barclays, Deutsche Bank, Lloyds Banking Group, Royal Bank of Scotland, Rabobank and UBS, as well as the British Bankers' Association, the trade group that oversaw the Libor-setting process, for fraudulent misrepresentation. It claims the banks submitted artificially low estimates to the Libor rate-setting process between 2007 and 2009 Â known as "lowballing" Â making them seem more creditworthy than they really were.
on.ft.com/2x8Kirh
| | | | | | Technology | | | AWS Direct Connect service added in Equinix New York data centres
Jason Mcgee-Abe - Capacity Media
Equinix has established connectivity into Amazon Web Services (AWS) Direct Connect service in the New York region.
The news now means that AWS Direct Connect is available to seventeen metros globally with the global interconnection and data centre company at all available speeds via its Cloud Exchange platform or Equinix-provided metro connectivity options.
/goo.gl/Kpr9CK
Data center provider Equinix bets big on Bloom Energy fuel cells
Network World
Data center provider Equinix is making a big bet on fuel cells to power its facilities by installing natural gas-powered fuel cells at 12 of its U.S. data centers. It's part of a push for the firm to be 100% reliant on renewable fuels, and it could set an example for other data centers in power management.
/goo.gl/Jo2pg3
CBOE Vest Technologies and The Options Industry Council (OIC) Offer Options Strategy Builders Tool on OIC Website
CBOE
CBOE Vest Technologies, a software company enabling users to work with target outcome investment strategies, and the Options Industry Council (OIC), a provider of unbiased options education, are working together to educate investors and broaden the appeal of options with a new online tool, The Options Strategy Builders.
bit.ly/2whz6MP
****SD: Everybody wants the visuals  this is collars and covered calls at the moment in case you missed it yesterday.
| | | | | | Strategy | | | Crude Market Shows Enduring Strength Beyond Seasonal Peak
Javier Blas A- Bloomberg
WTI barrels surge to levels not seen in more than a year; Middle East, Latin American crudes also trading strongly
The market for physical barrels of crude from places as far apart as Oman and Colombia is strengthening beyond the traditional seasonal peak in demand, a positive indicator for global benchmark futures prices that remain stuck near $50.
/goo.gl/9YQG4N
"Friends Don't Let Friends Buy VIX"
Peter Tchir, Brean Capital via ZeroHedge
You know a trade is getting crowded when my parents start asking about it. You know just how one sided something is when people think that even Chuck Norris can't make money buying vol.
bit.ly/2weMCAw
****SD: I couldn't find this posted anywhere but ZeroHedge. But some good observations in here.
VXX: The VIX Is Back
Victor Dergunov - Seeking Alpha
The VIX surged by roughly 30% on Thursday, with shares of iPath S&P 500 VIX ST Futures ETN (VXX) gaining an impressive 15% in the meantime. This huge surge followed increasing uncertainty regarding the Trump's team ability to carry out any meaningful tax-related and infrastructure agenda. Further elements such as extremely rich stock valuations, geopolitical risks, worsening economic data and suggested FED tightening have all contributed to the recent surge in VXX shares.
bit.ly/2wgUtxP
| | | | | | Events | | | Amazon Web Services and Nasdaq to sponsor FIA Innovators Pavilion
FIA
FIA is pleased to announce that Amazon Web Services and Nasdaq have signed on as sponsors of FIA's third annual Innovators Pavilion, a showcase for fintech startups that are offering forward-thinking solutions for the global derivatives markets.
/goo.gl/uDvARu
| | | | | | Miscellaneous | | | Goldman's sketchy case to buy (and then sell) bitcoin
Dan McCrum - FT
Attracting attention in parts of the web this week were headlines that captured the strange place on the fringes of modern banking where astrology, finance and computer games intersect. A Goldman Sachs analyst had predicted the price of bitcoin  currently above $4,000  would surge in a frenzy of speculation, before going on to halve.
/goo.gl/b6LtMG
Bitcoin bond launch brings digital currency step closer to 'world of high finance'
Evelyn Chang - CNBC
Fisco, a Japanese financial information company, announced this week a unit of the company has issued a bitcoin bond.
The bitcoin bond "brings digital currencies into the world of high finance," said Dan Doney, chief executive officer of Securrency.
The development of bitcoin options, futures and now bonds could help the often volatile digital currency become a better-established asset class.
/goo.gl/yEjVZb
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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