Archives: September , 2014

ISE To Launch Another Options Exchange Platform

September 30, 2014 MarketsMuse Staff Reporter Leave a comment

Below courtesy of extract from Bloomberg LP 29 Sept reporting.

International Securities Exchange Holdings Inc. applied to create its third U.S. options exchange, to be called ISE Mercury.

ISE, a unit of Deutsche Boerse AG that already operates two options venues in the U.S., said the new venue’s structure, fees and products will be made public at a later date. Should ISE Mercury open, it would be the nation’s 13th options market.

“ISE Mercury will use our proven technology platform to service a segment of the options market not currently active on ISE or ISE Gemini,” Boris Ilyevsky, managing director of ISE’s options exchanges, said in a statement. “Our goal is to reach broadly across market segments and to deliver innovative trading functionality, superior customer service and competitive fees to different constituencies in the industry through our three exchanges.”

The firm last year started a second exchange, ISE Gemini, that had a market share of 3.8 percent at the end of last week, according to data from Options Clearing Corp. ISE’s namesake platform’s market share was 11.1 percent, placing it fourth among the 12 options venues.

People Profiles

This Morgan Stanley FA is the “Go-to-Guy” re ETFs..

September 29, 2014 MarketsMuse Staff Reporter Leave a comment

Below is courtesy of extract from ThinkAdvisor.com Sept 29 edition

Search far and wide, but you’re unlikely to find many financial advisors as shrewd about investing with exchange-traded funds as Shelley Bergman, managing director-senior portfolio manager of The Bergman Group at Morgan Stanley on Fifth Avenue in New York City.

Bergman was smart enough to start using ETFs more than eight years ago, when the flexible investment vehicle was in its infancy. Today, the ETF market boasts a whopping $2 trillion in assets and is the fastest growing product on the market. Bergman and his clients are, increasingly, reaping the rewards.

He is a 30-year-plus advisor and ranked No. 5 on Barron’s Top 100 Advisors list for 2014. A Chairman’s Club member, Bergman is the sole advisor of his eight-person team, managing about $3.5 billion in assets for high-net-worth and ultra-high-net-worth clients.
Continue reading →

People Profiles

Cycling For A Good Cause: Wall Street Vets Raise $100k in Boston’s #SoldierRide for Wounded Warriors

September 27, 2014 MarketsMuse Staff Reporter Leave a comment

MarketsMuse Editorial Team is proud to be the first media outlet to profile Sept 27 Boston #SoldierRide, a cycling-for-dollars event that raised more than $100k for Wounded Warriors. We extend a special commendation to Fidelity Investment PM Fergus Shiel (pictured on left) and Mischler Financial Group’s Head of Equities Joe Digiammo (pictured on right) for being among the 300 athletes who turned out for this fund raising event on behalf of service-disabled veterans who have served with honor and distinction.

Fidelity Investment's Fergus Sheil (l) and Mischler Financial's Joe Digiammo (r) — Fidelity Investment’s Fergus Shiel (l) and Mischler Financial’s Joe Digiammo (r)

ETF News

Do Bond ETFs Pose A Systematic Risk? Regulators Confused, Investors Confounded

September 25, 2014 MarketsMuse Staff Reporter Leave a comment

Index fund managers are finding it challenging to ensure the bonds they need in the prices they want, driving them to make trade-offs that leave supervisors vulnerable in a market downturn and may hurt investors.

Bond liquidity has all but dried up for corporate problems after new regulations and capital requirements compelled Wall Street banks to slash their stocks of fixed income products following the fiscal disaster. That’s especially challenging for index fund supervisors who must get certain bonds to be able to monitor specific standards.

The lack of liquidity additionally means funds could have trouble selling bonds in the event interest rates rise and also the investors who have sunk about $1.2-trillion (U.S.) in net deposits into long-term bond funds since the end of 2004 head for the exits. The Financial Stability Board (FSB) is analyzing whether exchange-traded funds pose a hazard to the global financial system for exactly that reason, in accordance with the Bank of Canada’s representative to the committee. Continue reading →

ETF News, People Profiles

Euro ETF firm backed by ex-iShares leader Kranefuss launches first fund

September 23, 2014 MarketsMuse Staff Reporter Leave a comment

Below extract courtesy of Investmentnews.com and Trevor Hunnicutt

An ambitious European ETF firm backed by former iShares leader Lee Kranefuss charged into the U.S. Tuesday, launching its first fund and throwing down the gauntlet to a “stale” industry.

The firm, Source, is the seventh largest in Europe’s smaller ETF industry and 23rd globally. As it enters the United States, Source will be competing for assets with an increasingly entrenched group of three providers — iShares (owned by BlackRock Inc.), the Vanguard Group Inc. and State Street Corp. — and dozens of smaller players.

While at iShares before it was acquired by BlackRock in 2009, Mr. Kranefuss, Source’s executive chairman, led the firm’s efforts to popularize the concept of cheaply trading entire markets over exchanges much like a stock, the core concept of the original exchange-traded funds. The industry managed tens of billions in the early 2000s; today, it’s a $2.7 trillion business.

Mr. Kranefuss, who built iShares into a $300 billion business between 2000 and 2009, today calls the industry “rather stale,” arguing a newcomer needs to shake things up. Continue reading →

Tech Talk

Former Sell-Side Trader Blows Whistle on NYSE Order Routing Scheme; SEC Says Nothing..So Far

September 21, 2014 MarketsMuse Staff Reporter Leave a comment

As recently reported by Automatedtrader.com, with below excerpt from Sept 21 New York Post, this is not the first we’ve heard about Wall Street whistle-blower Haim Bodek; its an update to claims of conflict he brought to the SEC and other regulators last year in connection with NYSE’s electronic order handling procedures that favor high-frequency trading (HFT) strategies wrapped within the NYSE payment-for-order flow schemes. Until now, Bodek’s allegations have gone unanswered, so he is apparently increasing the volume.

Now managing principal of Decimus Capital Markets, Bodek is a former Goldman Sachs and UBS trader-turned-high-profile-mole last week launched a fusillade at the already battered New York Stock Exchange, saying the exchange’s latest gamble on high-speed reforms should be stopped.

Bodek last went this ballistic back in 2011, when he went directly to the Securities and Exchange Commission to accuse exchanges of giving turbo-charged electronic traders an unfair edge over the little guy.

Bodek, 43, of Stamford, Conn., had run a high-speed-trading firm after his Goldman and UBS gigs. The SEC is said to be quietly probing his charges, but declined to comment.

Continue reading →

ETF News, People Profiles

Is KCG Cracking Up? More Key Executives Quit ETF Trading Behemoth

September 13, 2014 MarketsMuse Staff Reporter Leave a comment

As reported by various news outlets on Friday, KCG, the firm that was created last year via a “take-under” of former Knight Capital by HFT market-maker Getco Securities after Knight suffered a $460 million trading loss attributed to a technology snafu, and whose business model somehow continues to pass the smell test by combining proprietary trading with “agency-only” execution of institutional orders that are directed to the firm courtesy of payment-for-order flow schemes, is suffering from more executive departures.

In a news release issued by the company, which was once considered to be a leading market-maker in ETFs, it was announced that Steven Bisgay, the firm’s CFO Richard Herr had left the firm. Two other senior executives have also apparently left during recent days, including Richard Herr, the firm’s head of corporate strategy and Andy Greenstein, the firm’s deputy general counsel. All three of these senior executives had come from Knight Capital when the 2 firms were combined in a $1.6 billion transaction.

According to one industry source, who is not authorized to speak on behalf of his firm stated, “The combination of the two cultures, one that is essentially an opportunistic trading shop and the other, which has been trying to justify its role as both a fiduciary broker and a prop trader is no doubt creating internal dysfunction.”

People Profiles

Step-Mom Hedge Fund Gal Gets Mixed Up in Bad Trade

September 11, 2014 MarketsMuse Staff Reporter Leave a comment

MarketsMuse Editor Note: Below extract is courtesy of the HF Industry’s best read publication, FinAlternatives.

Sep 10 2014 | 2:43pm ET

A high-profile hedge fund manager is caught up in a nasty child custody battle in Georgia.

Renee Haugerud, founder of the New York-based commodity-focused hedge fund Galtere, is embroiled in a dispute between her husband, John Murphy, and his ex-wife Michelle Murphy—a dispute that has sparked a social media campaign to “free” the Murphys’ two children.

According to Michelle Murphy, her sons—15-year-old Jack and 13-year-old Thomas—are being “held against their will” by their father at the home he shares with Haugerud on St. Thomas in the U.S. Virgin Islands.

Letter allegedly written by Jack Murphy to his father and stepmother. — Letter allegedly written by Jack Murphy
to his father and stepmother.

“I am not permitted to contact them,” Michelle Murphy told FINalternatives. “They are being held with no cell phones, no home phones, no internet…cameras in every room, intercoms in every room…. Nobody is allowed to come into the house. They’re being imprisoned.”

The current situation stems from the Murphys’ 2006 divorce, during which Michelle was granted primary custody of the boys and alimony of $1,500 per child per month.

In 2012, John, now married to Haugerud, applied for increased visiting time or primary custody. According to the court filings, John was prompted to act by fears Michelle planned to move from Newnan, Georgia to South Carolina with the children, a move Michelle said she never contemplated. Haugerud told FINalternatives John simply wanted more time with his children.

Michelle’s lawyer, Millard Farmer, said: “When it looked like the judge was going to rule against them and just give Michelle the children…, then John tells the custody evaluator that one of the children told him that the mother was fondling the children, which was an absolute lie.”

For the full story from FinAlternatives, please click here

ETF News, Tech Talk

ETF Execution and Algo’s: Bloomberg Says

September 10, 2014 MarketsMuse Staff Reporter Leave a comment

As electronic trading markets become more fragmented, the majority of large orders are executed via broker-provided execution algorithms.

Typically, implementation shortfall trading algorithms are used to slice the parent order into many small ones and spread them out over the time horizon to minimize the slippage between average fill price and midquote of order entry, through striking the optimal balance between market impact and volatility risk.

Bloomberg Tradebook’s recent study, entitled “Seeking Optimal ETF Execution in Electronic Markets,” shows that trade costs of ETF orders are quite different from those of common stocks.

The team has measured trade costs of ETF orders and common stock orders for various order size groups and compared them side by side within each group. The dataset of the study includes more than 100,000 orders trading US common stocks and ETFs from clients of Bloomberg Tradebook throughout the whole of 2013.

Results show that the median trade cost of orders becomes higher with increased order size for both common stocks and ETFs. However, given the same order size group, median costs of ETF orders are significantly lower than those of common stocks with 95% confidence.

Also, the study shows that ETFs have tighter cost distribution (i.e., lower variance of trade cost) compared with common stocks. This data implies that ETFs have lower median market impact than common stock of the same order size due to the liquidity of the underlying basket in addition to ETF liquidity displayed in the limit order book of the exchange.

As a result, those trading ETFs directly in exchanges can afford to be more aggressive in taking out liquidity without causing as much market impact as trading common stocks would.

– See more at: http://www.ftseglobalmarkets.com/blog/blomberg-tradebook/etfs-determining-final-trade-costs.html#sthash.Fu93JKAB.dpuf

Continue reading →

ETF News

Brazilian ETFs take hit due to Moody’s Rating

September 9, 2014 MarketsMuse Staff Reporter Leave a comment

etfmarketmuse post made possible through ETFTrends.com

The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) and other Brazilian ETFs have been enjoying a mostly excellent 2014, but that ebullience has encountered some resistance in recent days. Investors’ willingness to stick by EWZ and Brazilian stocks in the run-up to next month’s national elections is being tested Tuesday after Moody’s Investors Service lowered its outlook on Brazil’s sovereign debt rating to negative from stable. Continue reading →

Tech Talk

Hedge Fund Manager Blames HFT for Firm Closing

September 6, 2014 MarketsMuse Staff Reporter Leave a comment

A hedge-fund manager says an unusual culprit contributed to his firm’s demise: high-frequency traders.

Rinehart Capital Partners LLC, which had been backed by hedge-fund veteran Lee Ainslie and specialized in emerging-markets stock-picking, is closing, according to a letter viewed by The Wall Street Journal.

In the letter, Rinehart founder Andrew Cunagin aligned himself with those who have been critical of the rise of fast-moving traders.

“This is a circus market rigged by HFT and other algorithmic traders who prey on the rational behavior of warm-blooded investors,” Mr. Cunagin wrote, referring to the high-speed traders who have attracted wide attention this year for the alleged advantages they hold over more traditional investors.

For the full article from the WSJ, please click here.

Global Macro Strategy

Blind dedication to Loss Aversion secures AUM

September 5, 2014 MarketsMuse Staff Reporter Leave a comment

MarketMuse.com post made possible through FINalternatives.com and Neil Azous

The 2008 financial crisis exposed institutional money managers to a range of risks for which they were not prepared. Some of these were market risks, in which the value of their investments declined more than they had previously imagined possible. Some of these were liquidity risks, in which still-viable strategies gated their funds, thereby preventing investors from getting their money out. Finally, some of these were operational risks, in which the demise of Lehman Brothers and the Madoff scandal highlighted the importance of factors such as accounting, compliance, and infrastructure, as well as just performance when it came to choosing a fund.

In the wake of a traumatic loss, whether it is financial or personal, it is just human nature to overcompensate to make sure the experience is not repeated. But while that is understandable, it is rarely the best response. And so it has proved for many hedge fund investors over the past few years. While one could argue that each of the investor responses highlighted above has damaged investment performance, this article will focus on one specific issue: the cult of loss aversion in global macro investing. Continue reading →

ETF News

BrokerDealers Balk and Walk From Top ETF Adviser

September 3, 2014 MarketsMuse Staff Reporter Leave a comment

F-Squared Investments Receives Wells Notice From SEC, and Brokers Back Away

Extract courtesy of WSJ and reporter Chris Dieterich and Corrie Dreibusch

Three large brokerage firms are distancing themselves from money manager F-Squared Investments Inc., amid regulatory scrutiny of whether the firm overstated its track record.

RBC Wealth Management and Raymond James Financial Inc. RJF +0.28% have set limits on how much new business its advisers can conduct with F-Squared, according to people familiar with the policies. Wells Fargo Advisors has put the firm on “watch,” essentially a caution to advisers who either have invested or are considering investing clients’ money with the firm, people familiar with the matter say.

F-Squared, which oversees $27.7 billion, said in a filing submitted Friday that it had received a so-called Wells notice from the Securities and Exchange Commission indicating the commission is considering bringing a civil case against the company. The SEC notice isn’t a formal allegation of wrongdoing and gives the company a chance to respond.

Late last year, the firm told clients it was being investigated by the SEC, and earlier this year the company said the regulator’s investigation found the firm’s historical returns overstated performance. F-Squared said it has “taken significant steps in recent years to improve its controls to ensure that these sorts of problems will not recur,” a spokesman for F-Squared told The Wall Street Journal on Wednesday. Continue reading →

ISE To Launch Another Options Exchange Platform

This Morgan Stanley FA is the “Go-to-Guy” re ETFs..

Cycling For A Good Cause: Wall Street Vets Raise $100k in Boston’s #SoldierRide for Wounded Warriors

Do Bond ETFs Pose A Systematic Risk? Regulators Confused, Investors Confounded

Euro ETF firm backed by ex-iShares leader Kranefuss launches first fund

Former Sell-Side Trader Blows Whistle on NYSE Order Routing Scheme; SEC Says Nothing..So Far

Is KCG Cracking Up? More Key Executives Quit ETF Trading Behemoth

Step-Mom Hedge Fund Gal Gets Mixed Up in Bad Trade

ETF Execution and Algo’s: Bloomberg Says

Brazilian ETFs take hit due to Moody’s Rating

Hedge Fund Manager Blames HFT for Firm Closing

Blind dedication to Loss Aversion secures AUM

BrokerDealers Balk and Walk From Top ETF Adviser

F-Squared Investments Receives Wells Notice From SEC, and Brokers Back Away

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