All posts by MarketsMuse Curator

victor-haghani-etf

Another Old-Style Quant Jock Embraces ETF-Style Passive Investing

Former LTCM Guru Gives Up the Ghost; Converts From Convergence Trading to Passive Investing Armed with ETFs

Proving that old traders never die, they simply re-invent themselves, yet another highly-seasoned hedge fund guru whose pedigree extends back to Salomon Brothers and thereafter, senior partner at the now infamous hedge fund Long Term Capital (LTCM) has become a convert to the world of ETFs and passive investing through the use of index-based exchange-traded funds. With $500mil AUM via London-based Elm Partners Management LLC, Victor Haghani is a new man with a big bankroll and is extolling the virtues of exchange-traded funds.

“..A man once at the center of a world-rattling hedge-fund collapse believes you should think twice before trying to beat the market.”

For those in the industry who were barely out of diapers when Long Term Capital rose among the ranks of the world’s most famous funds and then fell like a rock in the midst of the Russian ruble devaluation in the late ’90s, LTCM was the Greenwich, CT-based quant shop /hedge fund created by Nobel Prize winners and credited with minting money by deploying highly-levered, quantitative-based “convergence trading” strategies. What made the firm go from famous to infamouse was its rapid demise in 1998 when the Russia Flu found the hedge firm’s holdings in Russian bonds suffering from from severe-mark-down syndrome, creating a domino effect of losses across Wall Street prime brokers, and ultimately required a $3.6billion bailout by the Federal Reserve Bank of New York.

But, as any astute follower of hedge fund gurus will attest, if you haven’t lost a bundle along the way, then you’re probably not a big shot deserving of another swing at the bat. The mere fact that 55-year old Haghani has eschewed exploiting opaque markets and instead, is now embracing passive investing schemes via index-based strategies, speaks volumes to the impact that ETFs have had in transforming the investment management landscape.

MarketsMuse editors extend a “hats off” to WSJ’s Sam Goldfarb for the reincarnation story below.

Victor Haghani, a veteran of the legendary Salomon Brothers trading floor, is probably best known as a founding partner of Long-Term Capital Management LP, the hedge fund that posted huge returns using leveraged bets in the mid-90s before collapsing 19 years ago so spectacularly that the Federal Reserve deemed it a threat to the financial system.

That experience dramatically altered the course of Mr. Haghani’s life, leading to a roughly decade long break from full-time work, during which he seriously considered a career in another field, such as arbitration or academia.

Now, 55-year-old Mr. Haghani is back as a presence in the financial world, a person both familiar and different from the one last seen in public. The relentlessly quantitative side of him is still very much intact. The “volatile, impulsive streak” identified in “When Genius Failed,” Roger Lowenstein’s 2000 book about LTCM, is hard to detect.

Since 2011, Mr. Haghani has run, from a small office near his home in London, Elm Partners Management LLC, an investment firm that now manages around $550 million of assets. Using a simple algorithm, the firm takes into account valuations and momentum to invest in index and exchange-traded funds across different asset classes. Index funds, as of Sept. 30, accounted for 43% of U.S. stock-fund assets, up from 12% in 2000, according to the Investment Company Institute. Many on Wall Street believe that the proliferation of technology and information means there are simply fewer opportunities than there used to be to find market-beating returns.

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Index funds, as of Sept. 30, accounted for 43% of U.S. stock-fund assets, up from 12% in 2000, according to the Investment Company Institute. Using index funds and ETFs, Elm Partners’ baseline allocation is 75% risk assets, such as stocks, and 25% fixed income, with about two-thirds from the U.S. Allocations to specific buckets such as European stocks, which normally would represent 12.3% of the total portfolio, can be dialed up or down by up to two-thirds based on their valuations or one-third if current prices depart from their one-year moving average, suggesting short-term momentum

Along with giving Mr. Haghani something to do in the morning, Elm has given him a platform, which he has used in part to make a forceful case for the merits of passive investing. In journal articles, blog posts and videos, he has explored, among other issues, the different ways that people fail to maximize their savings, such as by trusting their intuition or overestimating their abilities.

It is, perhaps, the perfect role for him, as his former success as a trader lends him credibility while his famous failure provides an example of what can happen to even the savviest investors. To keep reading the WSJ story, click here

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sec-ico-initial-coin-offerings

SEC Aims to Rein In and Reign Over Initial Coin Offerings – Duck Test 3.0

Initial Coin Offerings [Finally] Get SEC Attention; The Duck Test 3.0.

For those who believe the US SEC is slow to react when reining in and/or reigning over new-fangled investment products, the evidence indicates you are accurate. After all, recent history regarding sub-prime debt sold to unwary investors, Madoff-style investment management scams, payment-for-order schemes advanced by exchanges, and high-octane exchange-traded notes unsuitable for retail investors are just a few of the topics that made it out of the gate and far into the fields before investor advocates rang the alarm bells at the front door of the US Securities & Exchange Commission.

There have been more than 160 of these ICOs this year, which have collectively raised more than $3 billion, according to data from research firm Coindesk. Before this year, ICOs had raised a total of about $300 million going back to 2014.

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SEC Chair Jay Clayton Photo: Andrew Harrer/Bloomberg News

In defense of the bureaucrats based in Washington, their job description is arguably less a function of evaluating investor-suitable products and Wall Street selling practices as opposed to their primary role of chasing the horse after its out of the barn. After all, the folks who offer SEC staff with new investment product insight and regulatory recommendations (and tickets to concerts and sports events) are highly-paid lobbyists who represent Wall Street investment banks that have an agenda–to make fees from selling investment products and to ensure there is as little as possible regulatory oversight on their activities. Thanks for reinforcing that view, Mr. Trump!

But, in the case of the latest innovative product known as initial coin offerings, where innovators are raising money for an assortment of business models through issuance of bitcoins vs traditional shares in a company, Wall Street banks are finding themselves short of having a controlling role in the underwriting, sale and secondary market trading of these ‘instruments.’ Whilst the likes of Goldman Sachs and other fintech-friendly firms are racing to find their sweet spots in the digital ledger, blockchain and bitcoin space, suffice to say those investment banks are not happy about losing out on what would have been tens of millions of dollars in underwriting fees that could have been generated from the more than 160 private placement offerings that raised nearly $3billion since the beginning of the year, as well as potentially hundreds of millions of dollars in potential underwriting fees based on the pipeline of ICO deals in the pipeline.

So, it should come as no surprise that despite the ongoing string of announcements about new ICO issuance, the SEC has seemed to be asleep at the wheel for months insofar as issuing any regulatory edicts, leading some cynics to suggest that lobbyists from Wall Street have more recently whispered into the ears of SEC Chair Jay Clayton and compelled him to assert the power of SEC over those conducting initial coin offerings.

MarketsMuse readers are directed to coverage by Prospectus.com, “SEC Invokes Duck Test for Initial Coin Offerings-ICO Alert” via this link

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

bitcoin- futures-market

CME Group Says: Bitcoin Future Depends On…Bitcoin Futures Exchange

CME Aims to Legitimize Bitcoin Marketplace via..What Else? A Bitcoin Futures Mart!!

Any and every credible financial market veteran will argue that any credible financial instrument can only be credible when there is a legitimate marketplace in which buyers and sellers can express their view as to the value of that instrument. Bitcoin enthusiasts have long advocated that digital currencies aka cryptocurrencies-those that are presented as ‘coins’ or ‘tokens’ represent a revolutionary form of currency and deserve to be represented as such within the context of yet another instrument within the global financial market ecosystem. To date, those enthusiasts have flocked to unregulated ‘exchanges’ that make it easy to purchase these instruments, but only a very few of those people can actually implement hedging techniques that enable ‘shorting’ bitcoins.

For those not aware what ‘shorting’ means, you’re better off going to a different blog site–but before you leave, shorting allows a speculator to bet against an upward movement in the value of the instrument by borrowing the asset from an existing holder, paying that holder a ‘borrow cost’ and agreeing to return that asset at a later date.

ICO’s aka Initial Coin Offerings are all the rage, right? Thought leaders at Prospectus.com offer sober guidance and insight via this link

The thesis of shorting is therefore to borrow the instrument, wait until the bubble bursts and purchase the instrument at a lower price and profit from the difference between the original short sale price and the ‘cover the short price’. But the vast majority of bitcoin enthusiasts can’t ‘short; there is no borrow mechanism for most market players without having to put up nearly 10x margin on the underlying value, which means posting $50,000 in collateral for a single coin that is priced at $5000, whereas any other financial instrument ‘margin requirement’ to sell short ranges from as little as 10% of the value to perhaps 50%, not 500 %. The vast majority of speculators therefore can only ‘go long’ and hope the price goes higher, at which point they can sell and make a profit. The CME Group, one of the world’s leading futures markets, wants to change that and provide a legitimate platform in which optimists and pessimists can meet in a regulated marketplace and transact–in turn creating a true market that reflects a realistic current market value.  CME’s announcement below tells the latest story:

CHICAGO, Oct. 31, 2017 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced it intends to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods.

The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin.  Bitcoin futures will be listed on and subject to the rules of CME.

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Terry Duffy, CME Group

“Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” said Terry Duffy, CME Group Chairman and Chief Executive Officer.  “As the world’s largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities.”

Since November 2016, CME Group and Crypto Facilities Ltd. have calculated and published the BRR, which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR is designed around the IOSCO Principles for Financial Benchmarks. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.

“We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product,” said Dr.Timo Schlaefer, CEO of Crypto Facilities. “The BRR has proven to reliably and transparently reflect global bitcoin-dollar trading and has become the price reference of choice for financial institutions, trading firms and data providers worldwide.”

CME Group and Crypto Facilities Ltd. also publish the CME CF Bitcoin Real Time Index (BRTI) to provide price transparency to the spot bitcoin market.  The BRTI combines global demand to buy and sell bitcoin into a consolidated order book and reflects the fair, instantaneous U.S. dollar price of bitcoin in a spot price. The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management.

Cryptocurrency market capitalization has grown in recent years to $172 billion, with bitcoin representing more than 54 percent of that total, or $94 billion.  The bitcoin spot market has also grown to trade roughly $1.5 billion in notional value each day.

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david-glasser-weinstein-financial-fraud

Weinstein Saga Snags Company’s Co-CEO Glasser

(Courtesy of BrokerDealer.com) Whilst most of the news media coverage of the travails of Harvey Weinstein have been dedicated to sordid details and otherwise extoling the newly-appointed (or interim) corporate chiefs, it leads one to wonder whether investigative journalism is losing cache…But, lo and behold, one Hollywood news journalist has peeled back the onion to discover what could be an episode from “Arrested Development” starring Weinstein & Co. President & COO David C. Glasser, who was elevated to share the CEO suite with Harvey’s brother Bob Weinstein as the Hollywood mogul sex scandal unfolded last week. According to Variety’s Gene Maddaus, Glasser, who started his Hollywood career as a child actor, turns out to be in Wall Street parlance, a “bad actor.” It seems that Glasser has been a “person of interest” in more than a few financial fraud investigations extending back two decades. And, according to court judgments extending back many years, Glasser has been ordered to pay millions of dollars in restitution to victims who bought into ‘film finance deals’ promoted by Glasser.

According to Maddaus’ reporting, “Glasser has long been dogged by legal issues that date back more than two decades. In the most serious case, Glasser’s former film finance company was used by the now defunct penny stock broker-dealer Hanover Sterling Securities to launder the proceeds of a massive stock manipulation scheme which, according to federal prosecutors, was connected to the Genovese crime family.” While Glasser managed to dodge the bullets of federal prosecutors in that incident, in an exclusive reveal, Glasser’s inglorious film finance history includes a long trail of yet-to-be paid civil court judgements in various jurisdictions for defrauding investors in an assortment of “pre-production finance deals.”

To be fair and balanced, Hollywood is as notorious for its deal makers advancing “the Art of The Steal” as it is for casting couch hi-jinks for which Harvey Weinstein has been “reputation-ally cremated.” Just as Harvey is no lone wolf for gaslighting aspiring (and well-established) actresses and coercing them to observe (or enable) his sexual deviant behavior, Weinstein & Co.’s co-CEO David Glasser is not the only film finance aficionado who has played the deviant game of “hide the banana from investors.” The industry-common scheme is taking investors’ money, then later informing them the projects they backed either ‘died on the vine’ or courtesy of using two sets of accounting books, produced meager returns. One classic case study is the Academy Award winning film and box office blockbuster “Crash”, coincidentally produced by David Glasser and industry titan Bob Yari.  This was a small-budget project investors backed but “somehow” didn’t produce any profits for distribution to those investors. For the record, the film Crash, written and directed by Paul Haggis, was produced on a budget of $7.5mil and brought in $250mil in ticket sales. According to Glasser’s partner Yari, the film was not profitable. According to a civil court finding, it was, and the producers were ordered to disgorge millions.

The connection between Glasser in that case, seems more than ‘tangential’, a phrase Glasser has invoked multiple times to investigators when being named a ‘person of interest’ in film funding schemes that have gone sideways under his watch. Glasser was also a target in a convoluted criminal investigation into the 2001 financing behind a remake of “Devil and Daniel Webster,” the first and last directorial debut for Hollywood bad boy Alec “Bloviator” Baldwin, who also starred in the film with among others, Sir Anthony Hopkins and Jennifer Hewitt.  The story behind Glasser’s role in the financial shenanigans and the ensuring investigation is the topic of a novel making its second way around book publishing circuits, but upon closer look, that case is part of a longer trail in which Glasser has found to have defrauded investors.

Entrepreneurs seeking to raise capital for an innovate product or industry disruptive business model need to follow two first steps: assembling a compelling business plan that is complemented by investor offering documents that comply with securities laws and regulatory guidelines relating to private placements to accredited investors. A leading firm that specializes in the full spectrum of capital formation documents and collateral is Prospectus.com

david-glasser-weinstein-fraudAs evidenced by interrogating pacer.gov–Glasser is better cast as a serial financial fraudster who has racked up multiple civil court judgements in various jurisdictions, -each of which determined Glasser had perpetrated fraud relating to ‘pre-production film financing’ schemes in which investors lost all and restitution awards were mandated by the various courts. As best as can be determined, those restitution awards, totaling several millions of dollars, remain unsatisfied. In 2004, in the midst of various litigation, Glasser transferred ownership of his $2.8mil home in Hollywood’s Calabasas community to a ‘trust’ held by him and his wife.  Why the complicated 3 Card Monty game to shield title to that asset? One could conclude (as many have already) the ‘former child actor’ is a notorious bad actor, as evidenced by at least half a dozen cases.

Here’s 1 example http://caselaw.findlaw.com/tn-supreme-court/1651031.html.
A quick trip to court record database www.pacer.gov provides more insight to cases back in ’05 ’06 and ’14 (search civil court module). Three other cases prior to ’05 are not available in the pacer.gov dbase, but through a stealth investigations, those records are purportedly being held pending what could prove to be a blockbusting class action law suit against Glasser.  For full details and links to the actual court cases, click here

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

investor-solicitation-offering-document

Investor Solicitation 3.0 – Start-Ups Squared Away w Investor Offering Documents

You’re an emerging fund manager, an entrepreneur vying to create a real estate development platform or you’re a fintech guru aiming to alter the current payment processing landscape with Ethereum that didn’t get the memo titled  “If you don’t have properly-pared Investor Offering Documents that comply with securities regulator regimes, you’re not likely to pass Go and collect $200, and certainly not the $2mil or even $20mil that you think you need to fund your business.”

For entrepreneurs  seeking capital, whether for a fintech initiative that envisions an “ICO”,  a real estate development project, a fund formation or any other unique, innovative or disruptive company, the investor solicitation “rules of the road” beyond initial stage “friends and family round” include a properly prepared business plan and fully ‘squared-away’ investor offering documents. Without these basic elements, capital formation campaigns will get stuck in neutral. More likely, without having the proper document file, inclusive of a offering circular, offering memorandum and/or offering prospectus that complies with securities industry regulatory regimes and local securities laws, those capital raising goals will get totally grounded.

(via Broker Dealer LLC-re-published with permission)

Private Placement Offerings Surge as Demand for Offering Memorandum Document Experts Follows Along

Whether due to improving economic conditions in the US as well as various other parts of the world, or due to technology advancements that serve as the catalyst to innovative products and services that solve legacy business challenges, the global private placement marketplace is surging. With this new era of entrepreneurship, the need for investor offering memorandum experts is likewise cascading. In Wall Street parlance, the demand for such experts is nearly “over-subscribed,” meaning the supply of capable professionals who specialize in preparing fully-compliant investor offering documents is being stretched thin. But, at least one firm within the professional services sector is addressing the investor documentation needs of forward-thinking business enterprises and they are situated neatly within the “curl of the wave”-all you need to find them is a search engine and the right key words/phrases.

Operating under the web banner OfferingMemorandum.com, the firm behind this portal is NY-based Broker Dealer LLC and with footprints in various cities across the global financial services ecosystem, they are leading the pack by making it simple and easy for broker-dealers*, captive business advisors and corporate lawyers for companies of any size and located in nearly every geographic location of the world to engage local securities law professionals and investor offering document experts who specialize in preparing preliminary offering memorandums, red herrings and final offering prospectus documents that conform to financial industry best practices and comply with local regulatory guidelines that govern investor solicitations. (*For various reasons, registered broker-dealers do not prepare the investor offering memorandum or an offering prospectus, and it is therefore incumbent on the Issuer to provide the investor offering documents.)

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Ryan Gorman

Prospectus.com

According to Ryan Gorman, a PR-IR-Corporate Communications expert who works with many startup companies, “While some capital markets  professionals will attribute the continued spike in private placement issuance to the ‘Trump Bump”,others will credit the evolution of the JOBS Act [the US legislation spearheaded by former President Obama intended to make the regulatory steps more simple for small companies in the US to raise capital], global macro gurus point to the rising economic tides in various regions of the globe. That said, nobody disputes the number of new companies and latter-stage funding initiatives for small, medium and large companies remains in an unobstructed uptrend.

Private Placement offerings are surging and direct IPOs are gathering steam. But, for those seeking to raise capital for a start-up or to fuel expansion for a fast-growing business, any entrepreneur worth his salt knows their first step is preparing a cogent business plan, then consolidating that blueprint into a short-form ‘pitch deck’ and once prospective investors have expressed interest in the investment opportunity, the enterprise seeking capital (aka “Issuer”) provides the investor with an offering memorandum or an offering prospectus. Simple as this process might sound, offering memorandum preparation is non-trivial and is typically performed by securities attorneys who specialize in investor offering documents. Also known as an “OM”, the offering memorandum is perhaps the most critical document, as it frames the terms and conditions of the investment, and when prepared within the context of best practices, the offering memorandum is the document that both Issuer and Investor can hang their hats on. Somewhere in the mix, the enterprise that seeks funding (also known as the Issuer) might engage a registered broker-dealer to serve as a placement-agent aka underwriter for the financing round, or the Issuer may already have identified investors and has determined there is no need to engage a broker-dealer.

*Registered broker-dealers generally serve as a placement agent or underwriter for a capital raise, but typically defer to the Issuer to provide them with the investor offering documents, as such it is the obligation of the Issuer or their corporate counsel to create an offering memorandum or a prospectus. In most instances the Issuer will engage their law firm to prepare these documents, and increasingly, law firms that do not have a securities law practice will outsource or sub-contract to firms that dedicated to this type of work. As the number of private placement offerings and direct IPOs via Regulation A+ continues to grow, portals such as OfferingMemorandum.com and Prospectus.com provide a unique solution.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

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cannabis-share-listings-canadian

Canada Stock Exchanges Weigh Walk-Back re Cannabis Share Listings

Canada stock exchange regulators appear to be suffering from a pot-hangover, as exchange execs and regulators re-visit criteria for cannabis share listings. Its a high-flying industry for sure; 69 publicly-traded cannabis companies with aggregate market cap of USD $6.4bil have their shares listed on the Toronto Stock Exchange, the smaller TSX Venture Exchange and the Canadian Securities Exchange. According to private placement specialist firm Prospectus.com, during the most recent 2-3 years, upwards of 300 ‘established entities’ have advanced private placement offerings that have raised nearly $1bil from private equity firms, venture capital shops and other sophisticated investors. When considering that North American sales of legal cannabis, which generated $6.7 bil in 2016  is growing at a rate of 30% YoY, its no surprise that cannabis entrepreneurs and their investors are stoking for public share listings, an avenue that provides a publicly-traded currency for them to expand and acquire others, and enables investors to benefit from greater liquidity of their holdings. That said, according to senior attorneys at Phoenix OTC Services,  “Cannabis share listings are certainly being sought by a broad spectrum of private companies, but Canada stock exchanges, which host the majority of public cannabis companies, appear to be suffering from a “pot hangover” as senior exchange executives and Canadian regulators are now weighing a walk-back on listing criteria to address fears these companies could be violating US securities laws.”

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Horizons Medical Marijuana Life Sciences ETF

While some ETF industry players continue to plot courses behind the scenes to follow the path of TSE-listed Horizons Medical Marijuana Life Sciences ETF (TSE: HMMJ) in an effort to create their own cannabis-flavored exchange-traded funds, some cannabis industry legal experts are bracing for Canadian securities regulators to try and “put the genie back in the bowl” and possibly de-list companies that are viewed to be running afoul of US laws.

According to 14 Sept story in the WSJ,  the parent company of the Toronto Stock Exchange and an umbrella organization of Canadian securities regulators are looking at cannabis companies with U.S. operations—including growers, medical-marijuana distributors and pharmaceutical firms whose products include marijuana ingredients—to determine whether trading in their shares should be allowed to continue on Canadian exchanges.

The regulatory attention comes as the Toronto Stock Exchange and its smaller rival, the Canadian Securities Exchange, have been actively courting marijuana company listings from around the world. At present, roughly half the trading activity on the Canadian Securities Exchange is sourced from marijuana-based businesses, a high-growth sector that is expected to become a $50 bil global industry within the next 7-10 years. (Source: WSJ)

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

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GOP-friendly ETF MAGA

What’s Next? A GOP-Friendly ETF That Tracks Corporate Friends of Trump. OMG!

GOP-friendly ETF Set to List on BATS BZX; Exchange-Traded Fund with ticker MAGA Will Buy Companies Supportive of Republican Party Agenda

We can’t make this sh*t up..Just when MarketsMuse curators thought we’d seen and heard it all when it comes to new-fangled ETF products, along comes an exchange-traded fund construct that has managed to surprise even our own high-seasoned in-house cynics. The proposed ETF is one with an investment style (or call it a scheme) that is dedicated to “assembling shares in public companies that support the US Republican Party” aka G.O.P. The fund sponsor, Point Bridge Capital of Forth Worth, TX , has dubbed the proposed ETF,  “The Point Bridge GOP Stock Tracker.” Point Bridge execs hope to list the new politically-flavored ETF on the BATS BZX Exchange with the ticker symbol “MAGA” an acronym that stands for the slogan that current US president Donald Trump stole from former President Ronald Reagan i.e. “Make America Great Again.”

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Hal Lambert, Point Bridge Capital

According the Point Bridge Capital website, firm founder Hal Lambert has over 20 years of investment experience and leads investment advisory for the firm. Prior to launching Point Bridge Capital, Lambert was a Director at Credit Suisse advising and managing client assets in excess of $1 billion. He advises pension plans, family offices, foundations, and ultra-high-net-worth individuals.

Before joining Credit Suisse, Hal was a Portfolio Manager at J.P. Morgan, where he headed discretionary portfolio management for the Southwest Region, advising all regional clients – individuals, foundations and endowments – on overall investment strategy. He managed a U.S. Core Equity strategy with total assets under management of over $1 billion, as well as a long/short strategy. After JP Morgan was acquired by Chase, Hal helped open the Denver office and headed discretionary portfolio management for the Mountain Region. .

According to a Wednesday filing last week with the US Securities and Exchange Commission, the Point Bridge GOP Stock Tracker ETF will specifically track the performance of an index of stocks meeting the following criteria:

“Companies whose employees and political action committees (PACs) are highly supportive of Republican candidates for election to the United States Congress, the Vice Presidency, or the Presidency and party-affiliated federal committees or groups that are subject to federal campaign contribution limits.”

To select its constituents, the fund’s underlying index starts with an initial universe of S&P 500 companies and then whittles it down based on factors like campaign donations made during recent elections. The fund’s sponsors did not indicate whether the fund will also be short-selling public companies that have been on the receiving end of so-called President Trump’s twitter diatribes. MarketsMuse attempted to contact Point Bridge senior executive Hal Lambert to pose that very question, but unlike Mr. Trump, a Point Bridge spokesperson (or someone who says they are the spokesperson, but refused to provide their name) stated, “We are in a quiet period and any comment would violate the SEC rules.” Maybe they should reach out to the Tweeter-in-Chief and request amnesty from SEC rules??

While this marks the first ETF to specifically track partisan interests, there are plenty of other funds embodying Trump’s political spirit. They include the Global X US Infrastructure Development, which started trading on March 18, and the WisdomTree Global ex-Mexico Equity Fund, which hit the market on February 10.

The Point Bridge GOP ETF has an expected inception date of September 7, according to Bloomberg data.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

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nasdaq-eases-blank-check-spac-ipo-listing

Nasdaq Bets on Blank-Check Co. IPOs To Boost Listings; SPACs are Sizzling

Competition for listings is a contact sport in the world of major stock exchanges as evidenced by the assortment of US bourses vying to increase market share in exchange-traded fund (ETFs), which represent nearly 2000 securities or more than half of all equities listed on major US stock exchanges.  While the NYSE has long been the place-to-list for issuers of ETFs, Nasdaq has proven to have sharp elbows in not only soliciting ETF issuers (with BATS taking a distant third), Nasdaq now has another card up its sleeve-the exchange operator is aiming at another listing product known as blank-check companies and is aggressively biting at the heels of Intercontinental Exchange Inc.’s NYSE, which has carved out a niche in the listing of these companies, more formally known as Special Purpose Acquisition Companies aka SPACs ™. In an effort to grab market share in this product away from NYSE and boost IPO listings (and hence more fees from Issuers and more revenue from distributing market data) Nasdaq recently filed proposed new rule changes with the SEC that will make it easier for SPACs ™ to list on that platform.

According to reporting by Alexander Osipovich of the WSJ, 22 blank-check companies have floated IPOs so far this year, raising nearly $7bil.

Special Purpose Acquisition Vehicles are shell companies that raise funds via a public offering whereby the proceeds are managed by a pre-selected team of industry-specific executives who receive an equity stake in the shell and are charged with acquiring an existing private company or in some cases, several private companies and roll those companies into the existing publicly-traded entity. In the event an acquisition cannot be identified and approved by an overwhelming majority of the shareholders within [typically] 24 months of the IPO, 95% of the funds raised are returned to the shareholders.

The investment vehicle construct was first created in the 1970’s, but soon fell out favor after regulators uncovered widespread abuse by operators of  blank check company managers, which led to multiple cases of securities fraud charges against many different firms.  The blank check model was later refined in the early 1990’s by GKN Securities, whose principals created a much tighter construct and trademarked the SPAC™ acronym. GKN successor firm boutique investment bank Early Bird Capital since carried the torch of its predecessor; during the past ten years, Early Bird has underwritten and/or co-managed nearly 75 SPAC™ IPOs that have raised over $4bil.

Early Bird’s early success has not gone unnoticed by leading Wall Street firms; 6-pack investment banks Goldman Sachs, Merrill Lynch, and Deutsche Bank among others have crowded into the space that Early Bird Capital forged. In 2017 alone, SPACs™ have raised nearly $4bil for an assortment of acquisition-minded firms.

According to Paul Azous, CEO of Prospectus.com, a consultancy that assists companies throughout the course of preparing investor offering documentation and via a captive network of securities attorneys, the firm also advises companies seeking to list on stock exchanges, “The blank-check concept is in vogue once again, and we’re working with at least two clients who have targeted specific industries that are seemingly ripe for roll-up.” Added Azous, “With Nasdaq easing the listing burdens, strategy of creating a public shell that can with reasonable ease, roll a private company into that publicly-listed entity should provide a good shot-in-the-arm to IPO activity, which has experienced fits and starts in each of the last several years.”

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

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equity markets-you'll know it when

You Know The Equities Markets Will Move Lower When…

If you’ve been a professional trader for ‘more than 15 minutes’ (i.e. years, if not decades), you know the equities markets will move lower when (a) complacency prevails, a sense of calm is seemingly endless and equity market indices quietly creep higher and higher or (b), business news front page stories profile ‘amateur day traders’ who are minting millions of dollars by betting against volatility, and ‘selling short’ the risk of increased volatility by using VIX-centric products to capitalize on the complacent nature of markets. If this were a high school history class (or an advanced math lesson titled “revert to the mean”), the correct answer to above would be both (a) and (b). That said, professional traders who have ‘seen it all’ and are programmed to take a contrarian stand –in this case, by betting against complacency- have been suffering for months, both intellectually and P&L wise.

But when the front page of the NYT business section profiles home grown trading wizards, including a twenty-something former store manager at Target Corp who quit his day job to become a day trader, and has since made as much as 20x his prior annual income (and accumulated an eight-figure nest egg) “simply” by selling short new-fangled “VIX-flavored” financial instruments-those that measure market volatility, its no surprise that a shoe will drop and hit those folks in the head quickly and decisively. Not to suggest that MarketsMuse curators were shocked this morning when, after finishing their read of the aforementioned NYT story, US equity markets sold off by nearly 1% in early Tuesday trading. The question becomes, why is today different than other day within the context of the past 9 months, when equity market sell-offs have had a shorter shelf life than a freshly made souffle?

Out of every crisis comes opportunity, and Hurricane Harvey portends to provide a re-building boon for those areas in Texas that have been tormented by one of the country’s greatest natural disasters. Prospectus.com provides a full menu of feasibility study services for entrepreneurs who will be working to make Houston, Austin and surrounding areas great again.

US Equities, along with a discrete universe of non-US equity markets have been in a north bound trajectory for multiple months, despite ever-increasing geopolitical concerns and crises that have not merely seemingly right-minded global macro investment strategies, but have confounded highly-trained portfolio managers focused on equities markets and nearly every other asset class. Existential threats to the equities markets are served for breakfast, lunch and dinner every day, and include but are not limited to North Korean missile launches, catastrophic environmental events (e.g Hurricane Harvey), terror-wreaking incidents advanced by a faction of fools who have hijacked the Islamic faith and actually believe that after blowing themselves up, they will spend eternity with 7000 virgins as a reward, and of course, the chaos-inducing cackle that comes straight out of the mouth of the current US President–aka He-Who-Must-Not-Be Named further as it will only enhance his ‘ratings’.

Who do you call to distill whether equities markets are actually poised to ‘revert to the mean’ after achieving 20% gains in less than 12 months? MarketsMuse curators who connect with top gun traders and investment managers (and have collectively spent multiple decades working in/around trading desks on both sides of the aisle) have a default go-to investing guru. Will our favorite top gun, who advances a uniquely RareView have all of the right answers all of the time? Most likely not, but its better to be right more often than wrong, and better still to achieve solid performance on a consistent basis vs. flying blindly with the notion ‘keep calm and carry on’ , especially when that approach inevitably leads to undesirable outcomes..

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor via cmo@marketsmuse.com.

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Fortune CEOs Take Unequivocal Stand; This BD Bids On

Taking a Unequivocal Stand is Easier for Fortune CEOs than for POTUS–so it seems. Fortune 500 CEOs who have taken exception to erratic and equivocal statements made by the current sitting president of the United States have been systematically subjected to ‘assault by Twitter’ by the country’s CEO-in-Chief. In turn, their company’s share prices have suffered from sell-offs, as investors fear the “wrath of Trump” will extend to federal government actions intended to harm those companies who have failed to heed Mr. Trump’s so-called “lectures.” Attacks and Counter-Attacks via Twitter has become a contact sport, all thanks to “POTUS.”

Within the context of Wall Street firms, “un-biased and conflict-free” are two phrases that agency-only broker-dealers advance on a continuous basis. These phrases connote their conforming to a fiduciary posture that is intended to protect the interests of their client above all else. When it comes to political discourse, most broker-dealers are loathe to insert themselves in a political fracas, yet other BDs are run by folks whose moral compass overrides their need to keep quiet, regardless of the risk that a regulatory agency such as the SEC or FTC (overseen by Congress) will , at the urging of Mr. Trump, exact some type of revenge for challenging the current president. Courtesy of BrokerDealer.com Editorial Section, MarketsMuse editors join those who are taking the high road, and in that effort, we’re re-distributing a piece that profiles a unique broker-dealer’s viewpoint expressed via trading desk commentary and distributed to their Fortune treasury clients and the leading Wall Street ‘book-runners’. We’ll defer to our readers to click on links leading back to the minority broker-dealer in question. Hint-the firm is the oldest minority broker-dealer owned/operated by Service-Disabled Veterans.

A Special Editorial from BrokerDealer.com: Most Fortune CEOs, as well as leaders of Investment Banks and Broker-Dealers (aka BD) are typically loathe to take a political stand. For the former, making pronouncements that will raise the ire of the current president are likely to be met by “injury by twitter,” or worse still, federal agency scrutiny of the company, which could prove devastating for public company shareholders. For the universe of corporate leaders with a conscience and also recognized thought-leaders, only a few have yet to prove unequivocal when reacting to the equivocal comment made by President Trump when framing his first view of what US Attorney General Sessions labeled as a”domestic terror event.” We’re referring to the white supremacist rally that led to 3 deaths and multiple injuries in Charlottesville, VA this past weekend.

For investment banks and broker-dealers, let’s face it-politics and business mix best with each other when done over cocktails or discrete ‘off-site’ meetings to discuss new capital market initiatives, deal issuance and/or asset management mandates. After all, most traditional broker-dealers eschew taking a political stand that opposes the federal government administration, simply out of fear that the long lips of the current WH CEO will whisper to administration-appointed SEC bureaucrats with a message akin to ‘the right industry regulator might want to make this [firm] go away..” Most, but not all is the catchphrase that compels a re-distribution of a capital markets desk commentary that focuses on fixed income markets and along with a smidgen of geopolitical observations and delivered to a captive group of leading Fortune 500 corporate treasurers, as well as a select group of sell-side syndicate desk ‘book-runners’.

Sponsored by Prospectus.com. Our team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link

Here’s the extract of the day’s piece, titled “Risk On, Risk Off, US-NOKO Tensions Subside; Ugly Heads of Racism Take Top Headline…”

Investment Grade Corporate Debt New Issue Re-Cap – A View About Charlottesville and the Aftermath

Risk was clearly back on in the financial markets today, as U.S./NOKO tensions fell to the wayside.  Unfortunately prejudice and racism reared their ugly heads in the Charlottesville, Virginia riot over the weekend.  On Monday, Fortune 500 thought leaders Ken Frazier, CEO of Merck & C0., Brian Krzanich, CEO of Intel, and Kevin Plank, CEO of Under Armour each took a stand by protesting the ‘equivocal’ comments made by President Trump in his first response to the domestic terrorism acts in Charlottesville, which were advanced by self-proclaimed alt-right and white supremacist neo-Nazis.  Mischler Financial Group  stands with every corporate executive (and every duly-elected or duly-appointed government official) who stays true to genuinely right-minded beliefs and applauds their respective organization’s dedication to doing right by doing good. In case you missed the memo, many of America’s Fortune corporations adhere to this same notion and advance their commitment via proactive Diversity & Inclusion initiatives.

 

For those corporate executives who may have spent all of their undergrad time in finance and accounting classes, and for those who are perhaps not as familiar as they could be i.e. American History (let’s not forget to mention world history, too!), racism and bigotry are diseases that spew hatefulness and cannot be allowed in a free and democratic society. The incendiary and incite-full actions for which the various white supremacist and KKK groups are notorious for, are NOT protected by “First Amendment rights.* These are cancers that cannot be discounted or condoned via equivocal platitudes; simple right-mindedness demands they be eradicated.

(*Think Justice Oliver Wendell Holmes Jr i.e. Schenck v United States and also re-visit Brandenburg v. Ohio)

 

To the above point, one need only re-read the Constitution and the Bill of Rights to appreciate that D&I is part and parcel to our country’s DNA. It is also part of the cultural foundation of many Fortune 500 corporations, including Intel, including Merck, including Under Armour and including many others! D&I infers respect for and appreciation of differences in ethnicity, gender, age, national origin, disability, sexual orientation, education, and religion. But it’s more than this. We all bring with us diverse perspectives, work experiences, life styles and cultures and we presumably all share a disdain for anyone and any group that attempts to dismantle, disrupt and or destroy. Kudos to Mssrs. Frazier, Krzanich and Plank for putting themselves in harm’s way and risk of “injury by Twitter” for being true leaders and staying true to their convictions and their constituents.

 

Kudos also to the many Fortune executives who have raised their own voices to advocate on behalf of right mindedness, and to those corporate executives such as Jamie Dimon, CEO of Citigroup, who have opted not to resign their volunteer roles serving on “Presidential Councils” in protest to seemingly wrong-headed rhetoric. One can hope they have chosen to remain in their roles so that they can be that much more proactive in their WH-appointed roles and/or similar presidential councils in which they serve as volunteers. These are jobs these business leaders have [presumably] accepted to better the country, not to help advance any political platform or political agenda. How the US Secretary of the Treasury or the Director of the National Economic Council can square the so-called ‘equivocal’ views expressed by the CEO-In-Chief vs. their own cultural beliefs will likely be subject to ongoing self-reflection, external speculation and spirited debate. These are smart folks and optimism demands these administration officials be given the benefit of the doubt, just as it is incumbent on any/every corporate leader to serve as role models for employees, customers and clients; just as right-minded parents do for their own children.

 

Today’s VIX closed 3 bps tighter versus Friday’s close. Also a reminder that tomorrow is August 15th – “mid-August” – that’s when North Korea’s illustrious “bad boy” proclaimed that he’d have his master plan ready to bomb Guam developed by.  One week from today on Monday, August 21st begin joint U.S-South Korean military exercises referred to as Ulchi-Freedom Guardian. The exercise began in our Bicentennial year of 1976. North Korea has annually perceived the joint exercise as “preparation for war.” It is the world’s largest computerized command control implementation. Up to 80,000 American and South Korean troops have participated in this exercise in the recent past.  The game will go on for two weeks before concluding on Thursday August 31st.  Enjoy the show Mr. Jong-Un. You’ll have front row seats though I recommend binoculars. Here’s lookin’ at you kid!  To continue reading the day’s debt market commentary, click here

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cannabis etf marketsmuse

Put this Cannabis Fund in Your ETF Pipe

Cannabis cures all kinds of ailments (so they say..), but whether the plant-based elixir is framed as ‘medical marijuana’ or “recreational marijuana”, investing in a nascent stage, a fast growing enterprise, or even a cannabis fund that capitalizes on pot companies can be problematic, particularly via US exchanges. So, to borrow a phrase from Horace Greeley, MarketsMuse exchange-traded fund curators say “Go North, Investors, Go North!” Pass “GO” and head straight to Canada’s Toronto Stock Exchange (TSE), where you can imbibe on Horizons Marijuana Life Sciences ETF (HMMJ.TO).

With $120 million in AUM, Horizons Marijuana Life Sciences ETF  is the first exchange traded fund in North America that focuses on the legal marijuana market.  Launched in April on the TSE, it has no U.S. competitors,  as federal law prohibits the drug, making it difficult to set up a cannabis fund or a marijuana etf that includes companies that grow and/or legally distribute wacky weed or derivative products.

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Steve Hawkins, Horizons ETF

As noted by Reuters’ David Randall in his Aug 7 profile of HMMJ and interview with Steve Hawkins, Horizons ETF co-CEO and the Issuer behind HMMJ, “Canada, is gearing up to legalize recreational use of cannabis by July 2018, and that legislation is expected to bolster investment opportunities in an industry that will be catering to 20 million+ Canadian adults aged 20-65.”

So, aside from the direct constituents of the companies that cater to the cannabis trade, the natural question is, what are the constituents of this so-called cannabis fund aka Marijuana ETF? Notes Reuters, “With positions including marijuana grower Aurora Cannabis Inc (ACB.TO), medical marijuana companies such as GW Pharmaceuticals Plc (GWPRF.PK), and fertilizer company Scotts Miracle-Gro Co (SMG.N), the fund attempts to capture the full extent of the Canadian marijuana industry, which Deloitte expects could grow to $22.6 billion if the recent bill to legalize recreational use is successful.  Scotts Miracle-Gro is a part of it because they have been extremely public about their investment in the growth of the marijuana industry going forward with respect to hydroponics and specialized fertilizer. Then there are biopharm companies which are not specifically marijuana growers or distributors but are involved directly or indirectly in a derivative.”

According to Israel Frenkel, a securities attorney for private placement and IPO documentation firm Prospectus.com, “We’re administering investor offering documents for several US-based start-ups right now, and at least one of those companies, which is positioned as a combination real estate play and  equipment leasing company would ostensibly be a candidate for HMMJ. Added Frenkel, “Arguably, there are potentially several dozen start-ups in the cannabis space that offer intriguing opportunities for public market investors, but only when the US Federal Govt gets its house in order and accepts the notion that Volstead Act didn’t stymie the spirits industry, it merely inspired a whole set of work-arounds that left out paying taxes to the US Treasury. ”

Prospectus.com team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link

ledgerx-options-market-bitcoin

CFTC Approves LedgerX Exchange to Facilitate Bitcoin Options Trading

What’s Next for Option Markets? A CFTC regulated platform for bitcoin options; NY-based firm gets approval to trade puts and calls on cryptocurrency.

For bitcoin aficionados, the road to legitimacy has been pockmarked with obstacles and detractors, including those who have insisted that bitcoins are the currency of money launders, drug dealers and illegal arms dealers, as well as those who believe ‘bitcoin is a massive Ponzi Scheme’. In the meanwhile, the price of a bitcoin has increased exponentially in the last 12 months alone and has vaulted past the price of gold–which has historically been the back-up currency of choice for those hedging fiat currencies of sovereign governments.  But, innovation and disruption knows no barrier or limits, demonstrated by fact the US CFTC has put its impromptu er on New York-based LedgerX, which will be the first regulated platform to trade options contracts on cryptocurrency.

Per CNBC coverage–The U.S. Commodity Futures Trading Commission announced Monday it unanimously approved digital currency-trading platform LedgerX for clearing derivatives. LedgerX initially plans to clear bitcoin options, the release said.

“A U.S. federally-regulated venue for derivative contracts settling in digital currencies opens the market to a much larger customer base,” Paul L. Chou, LedgerX CEO, said in a separate release from the trading firm.

“We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues,” Chou said, noting a desire for assets that aren’t correlated with the broader stock market.

The firm plans to launch bitcoin options in early fall, and ethereum options “within a few months,” Chou told CNBC in a phone interview. That will mark the first federally supervised options venue for bitcoin.

LedgerX received an order of registration as a Swap Execution Facility on July 6.

The firm primarily operates in New York and said in May it raised $11.4 million in a Series B round of financing led by Miami International Holdings and Huiyin Blockchain Venture Investments.

Prospectus.com team of capital markets experts and securities lawyers specialize in preliminary offering prospectus, secondary offering prospectus and full menu of financial offering memorandum document preparation. More information via this link

The CFTC noted that its Division of Clearing and Risk also issued Monday a letter “exempting LedgerX from complying with certain Commission regulations due to LedgerX’s fully-collateralized clearing model.”

Chou said the exemption was due to LedgerX’s plan to “not allow very leveraged trading.”

The authorization “does not constitute or imply a Commission endorsement of the use of digital currency generally, or bitcoin specifically,” the CFTC said in a release.

Bitcoin traded Monday afternoon about two-thirds of a percent higher, near $2,780, while ethereum traded about half a percent lower, near $225, according to CoinDesk.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor  or email: cmo@marketsmuse.com.

payment-for-order-flow-rebates

Yale University Wonks Blast Exchanges’ Payment-For-Order-Flow Schemes

In a July 18 NYT op-ed piece “Wall Street Profits by Putting Investors in the Slow Lane” submitted by Jonathan Macey, a professor at Yale Law School and David Swensen, the chief investment officer of Yale University, the spirit debate topic of payment-for-order-flow schemes, aka rebates paid by the various stock exchanges to retail brokers that route orders to those platforms is once again brought to a public forum. MarketsMuse curators and editors have profiled this issue more than once during the past years, and each of those posts have earned us lots of visitor traffic from Washington DC outlets, academics and a multitude of sell-side firms that are loathe to let it be known they are getting paid a kickback for routing orders to exchanges, but not feeling obliged to share those rebates with their retail customers.

Mssrs. Macey and Swensen frame the issue in what is arguably a clear, crisp and straight forward manner:

Institutional brokers are legally obliged to execute trades on the exchange that offers the most favorable terms for their clients, including the best price and likelihood of executing the trade. The 12 exchanges, most of which are owned by New York Stock Exchange, Nasdaq and Better Alternative Trade System (BATS), along with the Chicago Stock Exchange and the Investors Exchange (IEX), are supposed to compete to offer the best opportunities.

But that’s not what is happening. Instead, brokers routinely take kickbacks, euphemistically referred to as “rebates,” for routing orders to a particular exchange. As a result, the brokers produce worse outcomes for their institutional investor clients — and therefore, for individual pension beneficiaries, mutual fund investors and insurance policy holders — and ill-gotten gains for the brokers.

Although the harm suffered on each trade is minuscule — fractions of a cent per share — the aggregate kickbacks amount to billions of dollars a year. The diffuse harm to individuals and the concentrated benefit to Wall Street create yet another way in which the system is rigged, justifiably eroding public confidence in the fairness of the financial system.

That said, MarketsMuse takes this view: The regulation of “market structure” falls on the SEC. Well before anyone even envisioned the notion nightmare of a Trump-led US Government administration, it has always been the SEC’s mandate to ensure PUBLIC investors are treated fairly and properly. Somewhere along the line, the moral compass got lost by the boy scouts and girl scouts at the SEC, or maybe they never had one considering the legacy of that failed agency. After all, it was  Joe Kennedy, Sr. who was appointed to be the first person appointed to run that agency when it was established in 1934. But, whether or not Kennedy Sr.’s  DNA was stuck to the walls of that venerable institution and has permeated ever since, the fact is that the securities industry and its lobbyists have served as the Oz Behind the Curtain for decades.

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor  or email: cmo@marketsmuse.com.

As technology evolved and ‘innovation’ came to the stock markets, brokerage firms found themselves suffering from having to offer increasingly lower commission schemes in a ‘race to zero’. Whenever industries evolve to point where services provided become nothing more than a commodity, it should be no wonder to anyone that creative folks will step in and figure out how to remake those business models and monetize new models. Hence, the existing payment-for-order-flow market structure that permeates throughout the US equities markets (and now emulated by players in other product areas) should be of no surprise to anyone. After all, few who work within the financial services sector could not survive if they don’t embrace Gordon Gekko’s decree that Greed is Good. Don’t believe that? Well, this ‘blog post’ would extend for tens of thousands of words and hundreds of links to news articles profiling the travails of financial industry gurus that got ‘busted’ for playing hide the banana with their customers. Tens of Billions of Dollars in Fine Payments have been made by the Industry for misleading, duping, defrauding and cheating customers–many of whom were innocent, unsuspecting and not completely stupid; they were simply cheated by folks who are too slick for their socks. (Editor note: To Donald Trump, Jr.–this article didn’t envision referencing you, but that last comment seemed applicable, if only as a metaphor.)

It boggles the mind of this industry veteran when observing that the topic profiled by Yale’s Macey and Swensen has yet to be addressed by regulators. In fact, those regulators have consistently enabled the ever-more-sophisticated schemes that its industry constituents have devised. (Can you spell M-a-d-o-f-f?)

In an informal survey of 100 retail investors conducted by MarketsMuse, 70% of those individuals had ‘no clue’ that their brokers were receiving kickbacks from industry platforms that pay those brokers to receive the respective customers’ order flow. The remaining 30%  were “somewhat aware” and when the issue was framed for them, they were unanimously vexed by the fact the brokers charged them a commission and also earned a kickback from someone else.  When asked to review statements, those same folks took out a magnifying lens and located the small print, but all asked rhetorically, “Why don’t I get a piece of that kickback? After all, its MY order!”

OK, those same individuals did acknowledge that commission rates for executing stock orders have come down sharply during the past 10 years. “Hoorah to that ‘progress'” say those who love Schwab, Fidelity, eTrade and TD for offering “Only $5.99 to trade 1000 shares!”,  but when pendulums swing so far, something is awry. Then again, when the likes of FB, LinkedIn and the thousands of other platforms that offer something for seemingly nothing are chastised for ‘selling customer data to advertisers’, perhaps the guiding principle should be- If its too good to be true, it isn’t.

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open-outcry-options-trading

Box Options Exchange Wants To Turn Clock Back to Open-Outcry Trading

Electronic Exchange Box Options Exchange LLC plan to re-introduce open-outcry trading for options met with derision by competitors..

The first thought that came to this writer’s mind when reading the WSJ headline in today’s front page “Proposal to Launch Options Trading Floor Stirs Outcry” which profiles a contentious effort on the part of Chicago’s Box Options Exchange to introduce an open-outcry trading trading floor inside the Chicago Board of Trade [aka CBOT], was of Yogi Berra-who so eloquently stated, “Its like deja vu all over again!” After all, those of us from a previous era whose “office” was an open-outcry options trading pit, whether in NY, Chicago, Philly or San Fran, can easily recall their office back in the day; it was a stadium-sized venue shared by hundreds of others, many wearing colored smocks and equipped with the barest of necessities: sharp elbows, paper pad and pen to record buys and sells. The ones with the best position in the trading pits, the loudest bark, and most importantly, the best price were typically the ones who won the day.

But, ‘progress’ and technology evolution rendered those heroic, risk-taking options floor market-makers virtually extinct, as trading floors have become as outdated as Donald Trump’s hairdo (not to mention his views with regard to climate change, diversity, healthcare, economics, equal rights, etc. etc.). For all practical purposes, options trading migrated to the ethernet. No more shouting, no audible price improvement made by market-makers in the crowd, no looks of angst on the faces of traders caught on the wrong side of the market and worst of all, none of the pretty women that Thomas Petterfy installed on the various exchange floors to do his bidding on behalf of market-making firm Timber Hill Group, the predecessor to Interactive Brokers LLC.

Ironically, it was Petterfy, along with other iconic tech-centric options trading firms such as O’Connor & Associates and Susquehanna International Group that played a major role in the migration of open-outcry options trading to electronic venues. And even more ironic, Box Options Exchange–created in 2002 to capitalize on the electronification of markets is, to the chagrin of competitors in the industry,  now campaigning to re-introduce open out-cry trading. Those opposing the plan claim that yet another options venue will add to the continued fragmentation of markets and Box is asserting that human traders are an integral component to maintaining fair and orderly markets.

For those option quants in their early 20’s and 30’s, the concept of open-outcry trading is akin to driving diesel-powered cars in a world in which Tesla is on the verge of introducing autonomous autos. For those who know better, the clip below is a nostalgic reminder of what once was..

If you’ve got a hot insider tip, a bright idea, or if you’d like to get visibility for your brand through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, news release etc., please reach out to our Senior Editor  or email: cmo@marketsmuse.com.

trump-cuba-vicana-sugar-stock

What’s Next? Trump WH Aims to Make Cuba Pay To Open Trade; Honor Claims

Trump’s treasury team says Cuba’s Vicana Sugar Company assets, including 60,000 acres of land and 48 miles of railroad belong to US investors. Ole to Compania Azucarera Vicana!

Courtesy of a Trump White House that has more leaks than a rusty old pipe, sources “not authorized to speak on the record” have said that members of the Trump administration are working to strike a ‘really great deal’ to open full trade with the government of Cuba. The Trump Caveat? Only if President Raul Castro agrees to make good on several billion dollars of claims relating to properties that were “blatantly stolen” from US investors by the Cuban government in 1959 when Fidel Castro’s revolutionary forces took control of the Batista-led regime.

Despite the limited progress made by the Obama administration to relieve sanctions and work towards a full recognition of Cuba, recently-elected President Trump has put together a crisp outline (comprised of three paragraphs on a single page) that will “make Cuba great again” via public-private partnerships sponsored by the US State Department and the real estate development arm of the Trump Organization. White House officials claim there would be no conflict of interest were Trump Organization to participate in the envisioned program, as the public-private scheme would be dependent on a RFP process that would require the lowest bidders to be awarded contracts to build infrastructure, hotels and apartment buildings throughout Cuba.

stock cert vicana sugar cuba trumpAccording to a transcript of internal White House discussions, one close Trump advisor stated, “ Our new mantra is going to be Cuba libre! Once the Cuban government addresses how they will make good on claims that the US Government has acquired from US shareholders in companies such as Vicana Sugar Company, which owned more than 26,000 acres of sugar land, 35,000 acres of virgin land and 48 miles of railway before it was stolen by Fidel Castro, we’ll be able to transform Cuba into being a really great place.” Vicana’s real estate assets at current value are estimated to be as much as $500 million. When shares in the company last traded (in 1959), the company’s value was approximately $40 million.

US officials are basing their “New Cuba” strategy on a 1971 ruling made by the Foreign Claims Settlement Commission, which in turn, was based on Title V of the International Claims Settlement Act of 1949.

Noted antique bond and stock certificate dealer and collector Bob Kerstein, the founder of Scripholy.com, “There has certainly been a uptick in the prices of out-dated and collectible-value only Cuban debt and share certificates since the easing of relations, including interest in Vicana Sugar stock certificates. That said, whatever Trump people might be thinking is something I am not privy to.” Continue reading

corporate-bond-trading-plaforms

One More Corporate Bond Electronic Trading Platform; Still None Include Bond ETFs

Well Matilda, as if the universe of corporate bond electronic trading platforms isn’t crowded enough, despite clear signs of consolidation taking place for this still nascent stage industry (e.g. upstart Trumid’s recent acquisition of infant-stage Electronifie) , one more corporate bond e-trading platform has its cr0ss-hairs on the US market. The latest entrant is UK-based Neptune Networks, Ltd., a consortium controlled by sell-side investment banks that has inserted electronic trading veteran Grant Wilson as interim CEO. Neptune’s lead-in value proposition’ is perfecting the IOI approach to capturing liquidity, and also offers a tool kit of connectivity schemes that bridge buyside and sell-side players.

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Grant Wilson, Interim CEO Neptune Networks

Promoting indication-of-interest orders ( pre-trade real-time AXE indications) as opposed to actionable bid-offer constructs that are ubiquitous to equity trading platforms, is a technique that other US-based corporate bond trading platforms are already advancing. Neptune is also not alone in their positioning an ‘all-to-all’ model as a means to inspire buy-side corporate credit PMs and traders to embrace electronic trading, a seemingly counter-culture technique that enables them to swim in the same pool as sell-side dealers aka market-makers. The distinction that Neptune brings to the table is girth and size, thanks to its sponsors Goldman Sachs, JP Morgan, Credit Suisse, Morgan Stanley, UBS, Citi and Deutsche Bank, each of which maintain board seats.  Unlike the other players in the space that are focused on building a “round lot marketplace” (as opposed to retail size orders that MarketAxxess (NASDAQ: MKTX) specializes in, Neptune carries over 14,000 individual ISINs daily, claims that its average order size is 5mm,  total daily gross notional in excess of $115bn, and according to Neptune’s marketing material, over 22,000 individual ISINs have been submitted to the platform since January 1st.

Lots of e-bond trading platforms, but none are incorporating bond ETFs, at least not yet.

As compelling as Neptune’s value proposition is, some corporate bond e-trading veterans are quietly wondering whether these initiatives are somehow missing the memos being circulated throughout the institutional investor community profiling the rapid adoption of corporate bond ETF products in lieu of their long-held focus on individual corporate credits.

According to e-bond trading veteran Jay Berkman, who helped launch BondNet in 1994 when it was the industry’s very first web-based exchange platform for investment grade and high yield bonds, and who now serves as an advisor to fintech merchant bank SenaHill Partners, the firm that has led early fund-raising rounds for  Trumid,  Electronifie and  EMbonds  (SenaHill also advised on the recent Trumid-Electronifie combination), “Anyone who follows the trends [and follows the money] can’t help but appreciate that a broad assortment of Tier 1 investment managers, RIA’s and even public pensions’ use of bond ETFs is increasing in magnitude by the week, not the quarter. Added Berkman, “If you’re operating an electronic exchange platform for corporate bonds, and your users are rapidly increasing their use of fixed income exchange-traded funds, having a module for ETFs would seem to be a natural next step.”

Others in the industry have suggested to MarketsMuse reporters that enabling users to trade the underlying constituents against the respective corporate bond cash index along with a module for create/redeem schemes, or even a means by Issuers can distribute new debt directly seems to make “too much sense.”  But then again, these same industry experts acknowledge the political landmines that would most assuredly be encountered by those trying to disrupt and innovate within corporate bond land are perhaps too much for those who need to prove their business models before aiming at new frontiers. Continue reading

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Trump, Mnuchin, Russia & Estonia Share Common Bond: 1927 Estonian Govt Bond Certificates

MarketsMuse Exclusive: The Trump-Russia-Estonia Government Bond connection, first disclosed three weeks ago by a MarketsMuse investigative report that linked US Treasury Secretary Mnuchin to a cache of rare, $1000 USD denominated 1927 Estonian Govt bond certificates, has a new layer of intrigue.

According to Trump White House sources, last week Estonian Finance Minister Sven Sester visited the White House and held a one hour private meeting with Trump’s Secretary of Treasury Steven Mnuchin and Gary Cohn, Trump’s chief economic advisor. The meeting reportedly took place days after April 14, when President Trump ordered White House visitor logs  be kept secret from public disclosure for the first time since Richard Nixon held that office. In view of the current President’s gag order on disclosing names of lobbyists, foreign government agents and all other visitors to the White House, the loose-lipped White House whistle blower’s view of Estonia’s Sester and Trump team members meeting could not be independently confirmed. The topics discussed in this week’s rumored meeting were equally secret.

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At issue: 1927 Govt of Estonia Debt Certificate
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Estonia Finance Minister Sester (l), US Treasury Secretary Mnuchin (r)

As first disclosed three weeks ago, a rare collection of US dollar denominated bonds ($1000 face value) issued by the Government of Estonia in 1927  has purportedly wound up in the personal hands of Mnuchin. The bonds represent a portion of a $3.8 million sovereign debt offering that went into default after Russia annexed Estonia in 1940, thirteen years into the term of the issuance’s 40-year maturity, whereby each bond obligation came with a 7% per year interest payment promise.

!n 1991, when Boris Yeltsin was Russia’s leader, Estonia secured its independence from Russia and a new Government of Estonia was formed.  If the 1927 Estonian Govt Bond Certificates are somehow deemed to be legitimate debt obligations today, and whether Russian President Vladimir Putin will offer to pay a repatriation payment tp Estonia on behalf the Russian government, each USD $1000 certificate would now be worth more than $130,000, presuming the interest payment coupons from 1940-1967 remain affixed to the physical certificate. International experts who specialize in defaulted government debt peg the value of the Estonia bonds to be of a historical nature only, as evidenced by a listing of a small collection of certificates, which are being offered by the estate of a Wall Street investor who apparently purchased the bonds at a steep discount soon after Russia annexed Estonia in the late spring of 1940.

Aside from Mnuchin’s purported stash, the remaining certificates are thought to be the last known certificates of the three thousand $1000 face certs issued in 1927. A portion of that 1927 debt offering included eight hundred $500 face value certificates; the last know four certificates were sold on eBay for $279 each.

US Treasury Secretary Mnuchin’s early career roles includes a stint as a bond salesman for Goldman Sachs; he later played a role in acquiring subprime mortgage lender IndyMac in 2009 when it was auctioned off by the FDIC. Soon after, Mnuchin moved into the world of feature film production. Cohn, who prior to becoming the Director of Trump’s National Economic Council, led Goldman’s Fixed Income, Currency and Commodities (FICC) division before moving up to the role of the firm’s President and Chief Operating Officer. Continue reading

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Buy-Side Managers Say: Hooray for High-Touch

High-Touch or High-Tech? That is The Question.. Virtually any industry professional will acknowledge the now two-decade evolution of financial markets whereby the electronification of equity, options, currency and even fixed income markets has been the primary catapult for business models wrapped in high-tech trading services, trading software applications and niche offerings advanced by trade execution providers throughout the global financial markets. As a consequence, “button-pushing” has displaced a myriad of traditional “high-touch” broker-dealers whose value-add had been completely dependent on human capital; professional traders who are experts at navigating markets and skilled at sourcing liquidity via networks of embedded relationships throughout the trading market ecosystem. One need only count the number of sell-side traders who have been “put out to the dinosaur pasture” to appreciate the impact of ‘progress.’ But, any industry trading technology wonk who insists they can hear the fat lady singing  “the last nail is about to be placed in the coffin of high-touch trade execution”, a recent survey conducted by Consultancy Aite Groupe suggests that a significant number of buy-side managers greatly prefer high-touch to high-tech. Aite’s study is based on an online survey of 42 buyside firms throughout the second half of last year, with the majority of firms managing assets of more than $50bn.

Below excerpt from latest MarketsMedia.com story “High-Touch Hangs On in Equities” by Shanny Basar frames the story..

Fund managers still prefer high-touch, rather than electronic execution for more than a third of US cash equities and non-US cash equities according to new research.

Consultancy Aite Group said in a report Buy-Side Front-Office Trends: The ABCs of Trading Behavior that it is “mildly surprising” that high-touch execution styles are still preferred by investors for as much as 38% of US cash equities and 41% of non-US cash despite equities having the longest history of electronic trading and the earliest adoption of algorithms.

High-touch typically involves agency execution with discretion, principal/capital commitment and investors requesting a direct quote over the phone from a sales trader or passing an agency order for them to work.

“This may partially be explained by the increasing complexity associated with market fragmentation in the US equities market and the proliferation of dark pools and exchanges, all competing for order flow,” added Aite. “Average trade sizes have shrunk to less than 200 shares per trade, typically a small fraction of total order size. And at the same time, there continues to be challenges with sourcing liquidity for mid- and small-cap stocks.”

“As a result, sales traders remain relevant in assisting with trade facilitation and intermediating an agency block trade between two buyside customers with opposite sides of an equities trade.”

Sales traders are also sometimes asked to intervene in algorithmic orders, although intervention or suspension are both very rare. For example, human intervention may be required if intraday market conditions, such as extreme volatility, affect an algorithm’s performance.

However, the study also found that electronic trading continues to gain its footing across all asset classes at a steady pace across the globe. Therefore investors investors need to continue in invest in upgrading technology to find new sources of alpha, comply with new regulations, cut costs and increase efficiency. “The days of phone-based or plain vanilla chat-enabled trading are numbered,” added Aite.

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Matt Villarreal, Mischler Financial Group

 

However many broker-dealers have failed to keep up and have since gone the way of the Ford Pinto,  there is a cadre of always-forward-thinking sell-side desks who refrained from making “all-in high tech” bets, and instead, embraced the proposition of combining the best of both high-touch and high-tech applications. According to Matt Villarreal, the head of global equities for agency-execution firm and boutique broker-dealer Mischler Financial Group, “Most thoughtful fund managers understand that risk-reward analysis applies not only to the underlying investment style or strategy, but also when mapping out execution strategies, and whenever “best execution” is a component that has to be weighed.” Added Villarreal, “Because “best execution” has become a ubiquitous phrase, every manager has their own opinion as to the meaning, often boiling down to “the right price at the right time when considering all of the factors.” The institutional managers we work with truly embrace the value of our combining bespoke, high-touch capabilities that extend across US domestic as well as international stocks, with best-in-class trading technologies in order to achieve their view of true best execution.”

To continue reading the entire story from MarketsMedia.com, click here Continue reading