And The Winner Is….Institutional Investor Presents 2017 Top 40 Trading Tech Top Guns
Who says trading technology wonks are under-appreciated within the context of recognition by industry followers? Certainly not MarketsMuse fintech curators, and definitely not Institutional Investor Magazine, which brings us their annual ranking of the top trading technologists on the planet.
“The Trading Technology 40 were selected by Institutional Investor editors, taking into account nominations and input from industry experts. The leadership criteria include recent and career accomplishments and contributions to individual companies and to the industry at large; scope and complexity of executive responsibilities; and pure technological innovation.”
The 2017 ranking was compiled under the direction of II Senior Contributing Editor Jeffrey Kutler. Profiles were written by Kutler; Asia Bureau Chief Allen T. Cheng; Staff Writer Jess Delaney; and Senior Writers Frances Denmark, Imogen Rose-Smith, and Julie Segal.
Here’s an excerpt from the just published findings..
Modern financial markets could not function without automation. Traders, counterparties, and transaction-processing infrastructures depend on automation to cope with the avalanches of data that are both generated by the markets and essential to their reliability and integrity. Despite occasional glitches — which have become progressively less frequent and less severe since the disastrous flash crash of May 2010 — it all happens so smoothly that it is easy to take the technology for granted.
That’s a credit to the technologists of the trading world featured in this year’s Trading Technology 40. Whether they work in equities, fixed income, currencies, commodities, or derivatives, the executives listed here are pioneering solutions to countless problems presented by the size and complexity of markets.
Whether your fintech or trading technology company is planning a private placement offering available to a select universe of friends and family, qualified investors or an initial public offering (IPO) via an exchange listing, a prospectus or offering memorandum is required by your investors and industry regulators that govern securities offerings. The experts at Prospectus.com have prepared business plans, offering documents and more for a discrete universe of financial technology start-ups.
To view the winners and their biographies, go straight to II’s article via this link
Those of us who have worked in and/or around the world of electronic trading for more than 15 minutes readily know about REDI, the ubiquitous direct access execution platform for stocks and options that was introduced by Spear Leeds & Kellogg in 1987 to its professional clearing customers, a universe that grew to thousands of professional traders across the globe. For those not old enough to remember Spear Leeds aka SLK, it was one of the financial industry’s largest specialist firms with it biggest boots on the ground on the NYSE and Amex, and for decades, one of the largest clearing agents for stock and options exchange members and upstairs prop traders. SLK was also one of the industry’s most recognized upstairs market-makers until being acquired by Goldman Sachs in 2000 for a whopping $6.5bil. For those in the know, Goldman’s record-setting acquisition was attributed in part to a fellow by the name of Neil DeSena, “a boy from Bayonne” whose name was synonymous with REDI from the day it was first introduced in 1987, to the day the platform came under Goldman Sachs stewardship, to the day in 2016 when REDI was sold by GS for $1bil to Reuters Plc, and for every day in between, including now, when a trader somewhere in the world uses REDI to send a buy or sell order for stocks, options and/or futures into the now global OEMS platform.
History has already shown that the usually prescient Goldman Sachs wanted not only SLK’s prop-trading business and its clearing customers-which delivered hundreds of millions in high-profit revenue , GS also wanted to be at the forefront of electronic trading and SLK provided that. And, it was Neil DeSena who offered that entree. Until his untimely passing last week, barely three months after celebrating his 52nd birthday, Neil DeSena’s name and the brand name REDI remained forever intertwined, despite the fact that Neil had retired from his role as a Goldman Sachs MD several years ago. It was DeSena who was widely-credited for taking the REDI electronic platform from a closed stock and options order routing system for SLK clearing customers to a a billion-dollar, global OEMS platform synonymous for trading stocks and listed equity options. Upon Goldman’s acquisition, Neil became a GS managing director and under their banner, he built REDI into the industry leading global multi-asset trading system, expanding data centers and global networking through Europe and Asia with full interdependency/redundancy, creating a fully 24×7 global institutional trading platform. In 2015, Goldman sold REDI to Reuters for a cool $1bil.
Ironically, Neil DeSena was not an inventor, nor a prodigy software wonk, and not an MIT-educated computer geek or a Harvard MBA. Neil came to the financial industry as most did ‘back in the day’; he was a humble, but eager “boy from Bayonne” who came from a middle-class family and like so many others from the hamlets near the world’s trading centers, he aspired to work on Wall Street’s trading floors. As noted in his bio at SenaHill Partners, the fintech merchant bank Neil co-founded in 2013 with Justin Brownhill after retiring from Goldman, Neil’s first Wall Street job was typical to that of other 23 year olds; he scored an entry-level, back-office clerk (for retail broker Quick & Reilly). After rising through the ranks and learning how to leverage technology and lead people, Neil joined SLK in 1992, where he became the first employee of REDI. To the tens of hundreds that Neil since touched throughout his personal and professional life, ‘the rest is history’, but Neil’s history and the legacy he leaves behind cannot go without mention.
Neil DeSena was a classic innovator and entrepreneur who always maintained a prescient view when it came to the future of marrying technology and financial markets. He was less a student of technology than he was a student of human behavior and the inherent opportunities that technology-based solutions could provide to one of the world’s biggest industries. Better than most, including the legions of Wall Street technology and business development gurus, Neil had an innate and intimate understanding of the the mindset of those who navigated stock and options marts and what they would need to be more efficient and more effective, before those savvy-traders knew themselves. It was Neil’s thought-leadership, his uncanny ability to gain the trust and confidence of those around him, his foresight as to how/where/why technology could be leveraged, and perhaps most of his all, his endearing personality and sense of integrity that served as a benchmark for so many people he encountered.
Never one to rest on his laurels and certainly not like so many from the finance industry who aspire to build wealth for themselves and retire to a life of luxury, when Neil left Goldman Sachs, it took little time to decide “What’s Next?” Joining hands with Justin Brownill, one of the trading tech industry’s most successful entrepreneurs, the two formed SenaHill Partners in 2013 and framed the firm to be one of the very first fintech merchant banks focused on fostering upstart and industry disrupting financial technology firms. Since the firm’s creation barely four years later, more than two dozen finance industry tech pioneers have joined as network advisory board members; each contributing expertise, relationships and insight in their respective areas and helping to review nearly 2500 business plans submitted to SenaHill. The collective of professionals has gained the attention of finance industry and tech industry titans and has put wind behind the sails of dozens of disruptive startups focused on areas from bitcoin and distributed ledger to financial-flavored media platforms.
Irrespective of the degree of success enjoyed by enterprising start-ups that DeSena and Browhill have helped guide, Neil DeSena’s truest success is illustrated less by counting the literally hundreds of people who came to offer kindness and support this past weekend to Neil’s wife Carolyn and his three young children, Madeleine, Neil Anthony, and Jack, but more by the legacy he leaves; Neil always reminded those who were smart enough to listen that “material success is fleeting; honor and integrity are the most important virtues, as it those qualities that we should all be remembered for.”Continue reading →
Fintech Fixed Income Trading & Fragmentation-What’s Next? A Venue for Private Placement Bonds & MTNs
Despite the seeming oversupply of electronic bond trading initiatives, the convergence of fintech and fixed income trading continues to spawn new electronic trading start-ups, bringing the total industry count to 128 venues. The latest player, dubbed “Origin Markets”, aims at filling a void in the $1.5 trillion Medium-Term Note space aka private placement bond market. The “still-in-beta mode” initiative is based in the UK and backed by a consortium of global banks led by BNP Paribas, Bank of America Merrill Lynch, Societe Generale and Credit Suisse.
Origin’s founder and quarterback is Raja Palaniappan, a former Credit Suisse flow trader and MIT wonk who cut his teeth trading MTNs at various firms during the past 9 years and was most recently a VP responsible for making markets in investment grade and crossover corporate bonds and CDS at Credit Suisse.
A spokesperson for UK-based Origin said its platform “simplifies issuance in the medium-term note private placement market by acting as a central information source.” The business model allows dealers to receive targeted funding levels from issuers on a single platform and allows users to foster new relationships through cloud-based technology and bank-grade security.
“[Issuers] can optimise their funding using the built-in cross-currency pricer, comparing their funding levels to their own and their peers’ levels in the secondary markets,” Origin said.
Joakim Holmstrom, head of funding at Municipality Finance, explained the platform makes the medium term note process more efficient and provides access to a broader pool of dealers. Ben Powell, head of funding for IFC, added that Origin’s platform “simplifies what was once a manual process prone to inefficiency. It allows us to manage our dealer communication in one central place.”
The platform’s full launch is expected later this year and brings the total number of electronic fixed income platforms to 128, according to a recent compilation of platforms by front office trading consultant John Greenan.
Bob Mahdavi, the CTO for private placement bond documentation firm Prospectus.com stated “The MTN market is indisputably one of the largest sectors in terms of number of issues, yet it is populated by thousands of private issues that don’t typically lend themselves to being traded in an electronic venue.” Added Mahdavi, whose firm works with tens of dozens of Issuers, as well as attorneys and boutique investment banks throughout Europe and Asia in preparing debt offering documents, “You can build it, but will they come?”
According to fintech merchant bankers at SenaHill Partners “When considering the still nascent stage impact of electronic venues focused public company investment grade corporate bonds, including the likes of startup Electronifie among others, a platform that can prove truly effective and liquid for MTNs can prove to be a big challenge, albeit the backing of big banks does provide some wind in the sail.”
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As noted in a 11 Jan story in TheTradeNews and citing the work of Greenan, between November 2016 and January this year alone, 14 new fixed income trading platforms joined the market.
“…The asset class is overcrowded with trading venues as regulation forces the structure of fixed income across instruments away from a centralised model – mostly due to bank balance sheet constraints – towards a decentralised model….Market participants have said the explosion of venues is causing fragmentation and a ‘liquidity drought’ in global bond markets.”
Large buy-side firms and asset managers have the opportunity to act as price makers rather than price takers, according to a quarterly report published by the International Capital Market Association (ICMA) this week.
The report said the bond market has seen a decrease in ratio turnover, despite an increase in market size and overall turnover against a backdrop of bond issuance, as issuers take advantage of low interest rates globally.
Joanna Cound, head of public policy EMEA at Blackrock and a member of the ICMA board, explained this has led to liquidity in fixed income markets suffering, something regulators have taken a greater interest in over the last year.
Identifying the top fintech financiers is no easy task these days. It seems like only yesterday when MarketsMuse curators were among the first to advance the phrase “fintech” in the course of profiling startups seeking to disrupt the financial services sect, many of which have been led by sell-side veterans who made their best trades building innovative financial technology applications for bulge bracket banks and institutional brokerage platforms. At the outset of this now mainstream trend towards disruption of legacy financial technology tools and applications, fintech was a label given to trading system firms; now it is a ubiquitous moniker used to categorize a full-blown industry that counts more than 3000 start-ups and fast growing enterprises across the globe.
(feature images courtesy of YANN LEGENDRE)
Fintech is still the term used to to describe fast-moving firms that deliver Web 3.0 trading system and institutional broker tools, but also now includes enterprises that have brought peer-to-peer lending, crypto currency, distributed ledger companies and other offerings that are rapidly changing the way financial industry firms operate, and more important, the behavior of end-users across the globe. Along the way, this evolution has also created a cottage industry of bankers, private equity firms and VCs who share the catchphrase “What’s Next?” and whose respective vision is focused on the “next great thing” within the context of the way we interact when conducting a financial-centric task.
“Many of the Fintech Finance 35 — those ranked by Institutional Investor as the leading financiers and facilitators of the ongoing entrepreneurial explosion in financial technology — have “partner” in their titles. Their firms are structured as partnerships, but all on the list are partners in a practical, day-to-day sense. They are as much strategic advisers and collaborators as they are funders; “partnerships” are what they offer to companies they invest in and usher toward growth and maturity.” Jeffrey Kutler, Institutional Investor Magazine
With that, its no surprise that Institutional Investor Magazine, which for years has been the harbinger of the financial industry’s best-in-class people (e.g. Institutional Investor All America Research Team is the bible used to benchmark equity and fixed income research analysts) has more recently started tracking the top funders and dealmakers from across the fintech ecosystem via II’s Annual Fintech Finance 35. And, hot off the press: II’s 2016 Top Influencers in Fintech Finance! With 35 top guns highlighted, MarketsMuse team arbitrarily picked out one of the profiles from the middle of list of 35 to share with our readers. The folks who have risen from last year’s #19 spot to this year’s #16 spot are the principals of SenaHill Partners, which is arguably one of the fintech industry’s leading pioneers. SenaHill positions itself as part investment bank, part PE investor, part adviser and part incubator. Below is the excerpt courtesy of II’s Jeffrey Kutler.
Principal investor, strategic adviser, and business accelerator, SenaHill Partners gets a lot of mileage out of just 14 people. “We’re hiring,” managing partner Justin Brownhill says — an auspicious indicator for the New York firm and perhaps for fintech deal flow overall. Founded by Brownhill and co–managing partner Neil DeSena in 2013, SenaHill is staffed by people with extensive banking, brokerage, and operational experience, further leveraged by an adviser network of dozens of industry veterans, who contribute strategic insights and help identify and vet investment candidates. “Two to three generations of knowledge,” hands-on experience and a roll-up-the-sleeves attitude set SenaHill apart, says Brownhill, 45, who was an investor in and executive at Lava Trading, which Citigroup acquired in 2004, and CEO of the Receivables Exchange from 2007 to 2012. “Venture capital in financial technology is a journey, not a me-too business,” says DeSena, 52, who started the REDI institutional trading business in 1992 and ran it until 2006, the last six years as part of Goldman Sachs Group. “ ‘Five years and exit’ isn’t the way it works.” SenaHill’s 22-company portfolio includes investment research and analytics site Market Realist, where Brownhill is a board member; blockchain smart-contracts company Symbiont, where DeSena is a director and former Morgan Stanley capital markets executive Caitlin Long recently became chairman and president; and WealthForge, a private capital–
raising platform that placed third in last year’s UBS Future of Finance Challenge (see Hyder Jaffrey, No. 30). Another holding, know-your-customer platform Trunomi, represents “reg tech,” the emerging regulatory-and-compliance category that Brownhill and DeSena are following alongside other fintech themes in capital markets, banking and payments, insurance, wealth management, and infrastructure. “The interest is now top-down,” Brownhill observes, referring to incumbent financial services companies’ openness to investing in or partnering with entrepreneurs. “They are hiring us to connect them with young, emerging technologies.” Says DeSena: “The incumbents need help. Their budgets are big but shrinking.”
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 Fintech Finance 35 will be honored at the iiFintech Awards taking place on December 1. The awards program was designed to bring together the honorees of the Tech 50, Fintech Finance 35, and Trading Technology 40 to explore how financial technology will continue to transform the industry.
This ranking was compiled under the direction of Senior Contributing Editor Jeffrey Kutler. Individual profiles were written by Kutler, Asia Bureau Chief Allen T. Cheng, Senior Writers Frances Denmark and Julie Segal, and Staff Writer Jess Delaney, as well as by former Editor Michael Peltz, Content Editor Anne Szustek, Associate Editor Kaitlin Ugolik, and Assistant Editor Jen Werner. To read the entire story from II, please click here
2016 Top Fintech Financiers According to Institutional Investor
Nobody can accuse veteran government bond market broker and fintech poster boy David Rutter of being single-minded. The former Prebon Yamane exec, who later migrated to inter-dealer broker ICAP where he became of head of electronic trading, then did a stint as CEO of fixed income and FX platform BrokerTec, and who more recently has positioned himself as a blockchain empressario via his role as co-founder and head of R3, the industry consortium dedicated to normalizing the use of distributed ledger technology across the financial ecosystem remains determined to set the standard for how UST’s and related futures contracts are electronically traded. His latest axe is to cut down on the noise and disruption created by high-frequency trading (HFT) tools used by so-called predators that have ‘undermined’ how government bonds are traded in the OTC marketplace.
(Bloomberg) via reporting by Eliza Ronalds-Hannon : David Rutter, the former head of the biggest electronic venue for Treasuries, says his startup will launch a new trading platform called LiquidityEdge Select this week. According to Rutter, a big draw is that it will enable clients to shut off bids and offers from firms they suspect are using hair-trigger algorithms to trade against their orders. He’s enlisted Cantor Fitzgerald to backstop the transactions and signed up about 90 clients, including most of the Treasury market’s 23 primary dealers and several high-speed trading firms.
“There’s a lot of pent-up demand to fix the inherent disadvantages” on some of the existing venues, Rutter said from his midtown Manhattan office. Going up against certain kinds of speed traders can be “a huge frustration.”
Success is far from guaranteed and there’s considerable debate over whether high-frequency traders, or HFTs, actually do more harm than good. But one thing is undeniable: technological advances and post-crisis bank regulations designed to limit risk-taking are transforming the inner workings of U.S. government debt trading. What’s resulted is a sense of disorder among the more traditional players in the world’s most important bond market.
“The game is changing every day,” said Tom di Galoma, the managing director of government trading and strategy at Seaport Global Holdings. On electronic platforms, the rise of HFTs “concerns anybody else who trades on them.”
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Regardless of who or what is responsible, there are signs U.S. government bonds have gotten harder to trade, even as Treasury Department officials say the $13.7 trillion market is sound and the ability to transact remains robust.
An average of $491 billion of Treasuries have changed hands each day in the past year, down from $600 billion in 2011, according to JPMorgan Chase & Co. The ability to trade without moving prices has also deteriorated, with another measure indicating Treasuries are now 50 percent more sensitive to price fluctuations than they were five years ago.
At the same time, the market itself has become more prone to sudden shocks, with the Oct. 15, 2014, “flash crash” in Treasury yields the most prominent example. While regulators still haven’t figured out what triggered it, they concluded that automated trading firms made the wild ride that much worse.
All these changes have come as regulations imposed in the aftermath of the financial crisis prompted Wall Street banks to retreat from dealing. Computerized firms have swept in to fill the void.
Electronic platforms like ICAP Plc’s BrokerTec and Nasdaq Inc.’s eSpeed now account for almost half the volume in the Treasury market. Bloomberg LP, the parent of Bloomberg News, and its affiliates also provide trading in Treasuries.
On the main venues that cater to dealers, eight of the 10 biggest firms by volume last year were non-bank proprietary trading firms, according to Greenwich Associates, a financial services consulting firm. Their influence has led HFT critics to blame computerized traders for providing “phantom liquidity.”
That occurs when those firms use their speed to suddenly change the amount they are willing to buy (or sell) once they detect incoming orders. And it can be costly for slower-footed investors who enter the market thinking there’s a certain amount they can trade, only to have it disappear. In some cases, predatory firms use sophisticated algorithms to decipher a counterparty’s intentions and race ahead of its orders.
The problem was underscored by the Bank for International Settlements, which concluded in a January paper that such strategies have the potential to depress bond-market liquidity. According to Greenwich, less than half the trading activity on inter-dealer platforms last year consisted of “true market making,” which the research firm defined as the willingness of firms to buy and sell a specific security on demand.
“A lot of the intermediaries that had balance sheets to absorb risk and trade, they’re gone,” said Ed Al-Hussainy, senior global interest-rate analyst at Columbia Threadneedle Investments, which oversees $460 billion.
That’s where Rutter comes in. LiquidityEdge is the first of at least four companies that are planning to start trading platforms by year-end.
LiquidityEdge Select differs from traditional electronic platforms in a few distinct ways. First, clients can pre-select counterparties and trade with them using anonymous user IDs, rather than sending an order into a central market that everyone can see. That maintains confidentiality and enables clients to receive bids and offers only from parties they want. Second, the system allows customers to exclude any streams at any time.
Rutter says this kind of self-policing gives non-bank traders a greater incentive to provide firm orders, while weeding out predatory firms that try to game the system.
LiquidityEdge will also use Cantor Fitzgerald as a central clearing counterparty, settling trades via the Fixed Income Clearing Corp. That means trades are guaranteed even if one party fails to deliver on either payment or bonds. The lack of a such an arrangement precipitated the demise of Direct Match, a Treasuries trading startup that shut down in August.
To be sure, a proliferation of trading platforms could potentially harm liquidity more than help it.
New venues may poach clients from the incumbents — BrokerTec, Rutter’s former employer, and eSpeed — but that may just lead to shallower liquidity across more venues and result in a Treasury market that’s more fractured than it is now. LiquidityEdge Select will be the firm’s second trading venue for Treasuries. It will sit alongside the firm’s one-year-old bilateral platform, LiquidityEdge Direct.
“Is it a case of, the more liquidity pools the merrier?” said Anthony Perrotta, global head of research and consulting at Tabb Group, which specializes in market-structure research. “Some would say yes. At the same time, people’s bandwidth is only so great.”
The Treasury market’s two incumbents, BrokerTec and eSpeed, already have plans to launch competing trading venues later this year.
To continue reading the Bloomberg story, click here
The FinTech Sector is red hot now in Japan as Land of Rising Sun Banks now looking to pour hundreds of millions of dollars into fintech start-ups after the abolition of a law that prevented them from owning more than 5 per cent of a technology company.
(FT) 25 September The changes are part of a national effort to push into the fintech sector and pursue investments in financial technology startups, highlighting fears in Tokyo that Silicon Valley could decimate Japan’s banking sector as it did the country’s mobile phone industry.
“Japanese institutions are concerned that a Google Bank or Facebook Bank will conquer Japan,” said Naoyuki Iwashita, head of the FinTech Centre at the Bank of Japan.
It means that Japan could become a big new source of funding for start-ups, especially in Asia, that are experimenting with technologies such as blockchain or artificial intelligence.
Yasuhiro Sato, chief executive of Mizuho, told a conference in Tokyo last week that Japanese banks had been constrained by regulators wanting to preserve old, but tried-and-tested, IT systems.
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“I think [regulators], especially the Japanese Financial Services Agency, are now changing their thoughts on that,” he told the FinSum conference, organised by the FSA and Nikkei, owner of the Financial Times.
The change in the law means banks can ignore a 5 per cent limit on stakes in non-financial companies if their purpose is to apply information technology to finance.
The FSA is considering a further legal change that would make it easier for fintech companies to engage in regulated financial activities. “In order to obtain more technological advances from outside participants,” said Mr Sato. “That’s the reason why the banking law will now quite likely be changing.”
Mizuho established a presence in Silicon Valley three years ago and this year added an innovation-focused office in New York. Mr Sato said the rule changes would accelerate that. “We have created a specific team, which is the innovation product team, to make significant investment in venture companies. We are sending many many persons to the US.”
Rakuten, the Japanese ecommerce group, has launched a $100m fund to invest in fintech companies and SBI Holdings, a financial group, raised a ¥30bn ($299m) fintech venture fund earlier this year.
Other global banks have opened outposts in California. BBVA, the Spanish bank, is one of the most aggressive, acquiring Simple, an Oregon-based digital lender in 2014, and investing in Prosper, the San Francisco-based peer-to-peer platform. It also set up a venture capital company, Propel Ventures, to pursue investments in other start-ups. SenaHill is a leading merchant bank boutique specializing in fintech initiatives and focused on fast growth companies that are producing revenue and/or startups that have at least one year of business operating metrics.
To continue reading the story Land of Rising Sun Embraces FinTech Sector from FT.com, please click here
“What’s Next? Well, for those familiar with Patrick Byrne, the controversial and innovative founder of Overstock.com, one of the first online retailers to embrace the use of bitcoins, it should not be a surprise that Overstock’s chief honcho would ‘get the joke’ and realize its all about the underlying technology that powers cryptocurrency applications, known as distributed ledger. While bitcoin currency continues to encounter challenges in terms of mass embracement, the real grease that makes the makes the wheels turn is under the hood. With that, Overstock subsidiary “T0” (T-zero) is taking a page from both the industry consortium formed by R3 and the Senahill-backed Symbiont –both of which target institutional capital markets usage–and aiming it’s own sights on retail investors by setting to launch an equities-centric Alternative Trading System aka ATS powered by their own blockchain formula.
A distributed ledger is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, and/or institutions.
A blockchain is a type of distributed ledger, comprised of unchangable, digitally recorded data in packages called blocks.
Rob Daly of MarketsMedia (not related to MarketsMuse) provides the scoop..
Online retailer Overstock.com expects trading to begin on its blockchain-based alternative trading system before the end of the year, according to company officials.
The ATS will be operated by Overstock.com subsidiary TO as part of the company’s Medici Project, and it will only handle trades in the company stock, at least at first. So while it’s not an immediate competitive threat to the existing field of 13 U.S. stock exchanges plus several dozen ATSs, the initiative will be closely watched as a gauge of the potential of distributed-ledger technology in capital markets.
The ATS will write completed trades to its blockchain instead of routing them to the National Securities Clearing Corp., a subsidiary of Depository Trust & Clearing Corp., for clearing.
Overstock.com plans to prime the liquidity on the ATS through a new issue of corporate shares to existing shareholders the day before trading commences on the new trading venue.
T0 officials plan to formally announce its partnership with a broker-dealer on Sept. 12. “For those who want to trade on the ATS, they will have to create an account with the broker-dealer,” said Overstock’s man-in-charge Judd Bagley, who declined to name the brokerage firm.
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Investors will be able to select from multiple “very vanilla” order types, which are still in development, he added. T0 may use a so-called maker-taker rebate model to encourage liquidity, but officials have not made a final decision.
The new trading venue is a mix of internally developed technology and the technology T0 acquired with its purchase of order-routing firm SpeedRoute in October 2015. T0 built its matching engine internally as well as the necessary interfaces to the rest of the U.S. equity marketplace.
The company, in conjunction with Bay-area consultancy PeerNova, also developed a proprietary blockchain architecture for the ATS instead of using Bitcoin, Ethereum, or Ripple.
To continue reading the story from MarketsMedia, please click here
Just when you were about to ask “What’s the next type of exchange-traded fund that nobody else has come up with?, PureFunds has launched a fintech ETF!
If you’re not familiar with the phrase ‘fintech’, you’re likely not qualified to put assets into this latest exchange-traded fund that specializes in one of the hottest trends-financial technology companies.
Caveat: According to 4 Pinocchio star winner Donald Trump, “Many people are saying..” that “fintech” is a phrase associated with start-up companies focused on delivering innovative software applications used to streamline financial industry centric services. The fact is that ‘fintech’ is a term that is applied to the full gamut of companies that specialize in financial industry technology solutions, as evidenced by the criteria for constituents within PureFunds latest ETF product, Solcative Fintech ETF (FINQ).
“FINQ allows investors to invest in this fast-growing segment of the industry without having to select individual companies. The rules- based index approach allows us to capture exposure to companies at the forefront of innovation in the financial industry.”
But don’t just take our word for it, below is the press release that just crossed the tape..
SUMMIT, N.J.–(BUSINESS WIRE)–ETF Managers Group in partnership with PureFunds today debuted their newest fund, the PureFunds Solactive FinTech ETF (FINQ).
“FINQ allows investors to invest in this fast-growing segment of the industry without having to select individual companies. The rules- based index approach allows us to capture exposure to companies at the forefront of innovation in the financial industry.”
Trading on the NASDAQ, the fintech ETF “FINQ” invests in global companies disrupting the multi-trillion dollar financial industry by offering technology-based solutions designed to revolutionize how financial industry firms interact with their customers and run their businesses.
The fund’s holdings include technology services companies that principally derive revenue from the sale of financial-related information, financial data analysis services, financial services software tools or platforms or web-based financial services. Each company in the fund and its corresponding index – 31 in total – has a minimum market cap of $200 million.
“Financial technology is a rapidly growing subsector of the overall financial services industry, and our fintech ETF FINQ seeks to tap into the potential investment opportunity created by these disruptive, forward- thinking companies,” Andrew Chanin, CEO of PureFunds, said. “FINQ allows investors to invest in this fast-growing segment of the industry without having to select individual companies. The rules- based index approach allows us to capture exposure to companies at the forefront of innovation in the financial industry.”
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Sam Masucci founder and CEO of ETF Managers Group said, “The idea behind PureFunds ETFs is to make available – in a single diversified investment – unique areas within markets that have been greatly enhanced by technology. Technology allows businesses to offer new innovative services that can positively affect a consumer’s experience.”
FINQ will cost 68 basis points* and will be equal weighted. It joins PureFunds’ suite of products, BIGD, GAMR, HACK, IFLY, IPAY, SILJ and IMED, which also begins trading today on the NASDAQ.
* A basis point is one hundredth of a percent
As an innovator of ETF concepts, PureFunds® strives to provide the market with easy access to in-demand industries through pure-play ETFs. We are a New York City-based research and business management firm, serving as the Manager and/or Sponsor to the suite of PureFunds ETFs. We aim to provide investors with tactical ETFs that may offer attractive investment opportunities in sectors that traditionally have been difficult to invest in. With vast experience in global equity investing and ETF trading, PureFunds has a refreshing and alternative insight into the growing world of ETFs. We have constructed our distinct suite of products in an attempt to meet the needs of investors and traders alike.
About ETF Managers Group
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BlackRock is the latest firm to embrace Symphony Chat Platform; Another Shot Across Bloomberg Bow
In early 2014, when David Gurle, a former Reuters exec started to chat up a scheme with prospective banking industry investors that would offer a low cost alternative to Bloomberg LP’s ubiquitous instant message / chat application, prospective strategic investors were more than intrigued. After all, Bloomberg had long held a virtual monopoly on the most critical application used across financial markets, one that enables traders and managers to rapidly communicate indications of interest for large-scale transactions And, because Bloomberg only provides bundled applications within its subscription model, many terminal subscribers who only use that platform for instant messaging have long been handcuffed to annual terminal fees that approach $25,000 per user for the simple privilege of instant messaging. Guthrie’s idea was not only intriguing, it was seen as an epiphany moment by a start-up investing group within Goldman Sachs led by a fellow named David Cohen, who long expressed concerns about Bloomberg’s toe-hold on trading desk communications.
Soon thereafter, a consortium of banks and buyside firms pumped nearly $70 million into the startup named Symphony, each sharing the same goal of hoping to save millions of dollars on Bloomberg subscription fees and via a more secure way to communicate with trading desk counterparts away from watching eyes of Bloomberg’s black box. Nearly 2 years since that first funding round, the company has received approximately $100mil to fund its David v. Goliath battle. Now that Blackrock has joined the Symphony party, the fintech company’s still slow path to prominence is hoped to hasten. Below excerpt from WSJ frames the latest chapter..
By JUSTIN BAER and SARAH KROUSE
June 23, 2016 7:00 p.m. ET
The world’s largest money manager is trying to change the way Wall Street chats.
BlackRock Inc. will urge banks, brokers and others who interact with it to communicate via a messaging platform backed by banks and investment firms called Symphony Communication Services LLC, according to people familiar with the matter.
The asset manager, also an investor in Symphony, started testing the system with thousands of employees internally last year and now has moved all internal chat messaging to the service, the people said.
The hope from those backing Symphony is that BlackRock’s push will help jump-start the service’s use across the financial-services industry.
Symphony was created as an alternative to Bloomberg LP terminals, long a hallmark of trading floors and an expense banks have struggled to trim. The firms also like Symphony’s secure-messaging technology.
Despite the fanfare that followed Symphony’s late-2014 launch and last year’s $100 million funding round that included an investment from Alphabet Inc.’s Google, Symphony has yet to gain widespread use, according to traders across Wall Street.
At Goldman Sachs Group Inc., a Symphony investor that contributed its own messaging developments to the platform, the service is now used by most of the firm’s employees across all of its businesses, according to a person familiar with the situation. Goldman traders, for instance, use Symphony to communicate with back-office employees charged with settling trades.
Elsewhere, though, Symphony remains little used or, in some cases, virtually unknown.
The electronic exchange playing field is not for boy scouts. All is fair in love and war. That’s the message NYSE is sending to upstart “Investors Exchange” aka IEX, as the world’s most formidable financial market trading platform is simultaneously lobbying SEC regulators to block IEX’s application to be designated as a full blown exchange because its speed bump technology slows down important liquidity providers from the HFT world, and at the same time, ICE-controlled NYSE Group is picking the pockets and hijacking IEX’s most compelling order technology for its own use. IEX, which developed a new discretionary peg order type known as “D-Reg” and designed to deliver even sharper pricing for those executing block trades is a secret sauce that purportedly delivers a noticeable $68k in savings on a typical $1bil portfolio execution strategy. Pennies perhaps, but pennies add up when being counted by both buy-side and sell-side commission revenue bean counters. And it’s the buyside who count the most, simply because they provide the fuel that feeds the Wall Street trade execution engine.
In case you’ve been asleep for the past several years, IEX, whose brand was burnished when the firm was profiled in the HFT-slam book “Flash Boys”, is backed with nearly $100mil provided by buy-siders for this value proposition: “Unlike all other U.S. equities trading venues, IEX does not adhere to the principle of price-time priority. Instead, the IEX prioritizes orders by price, followed by broker trades, and lastly time.”
When considering the not-so-subliminal Bronx Cheer filing made recently by NYSE to SEC to promote a new application based on IEX technology, the NYSE unabashedly stated: “we want to create a new order type based on IEX technology. The new order would allow market participants “to serve their customers better, thereby protecting investors and the public interest,”
Fintech wonks might like to believe that intellectual property means something that protects proprietary innovation that others cannot infringe on, but in the regulated world of financial markets, the so-called “what is in best interests of investors” always trumps IP. The take-away message for Brad Katsuyama, the former electronic trading and sales wonk for RBC Capital Markets and brain child of IEX of the ‘altruistic’ platform backed with nearly $100 mil thanks to a group of buy-side flavored investors “All is fair in love and war when it comes to so-called intellectual property within the world of regulated financial markets.”
IEX investors include an assortment of buy-side firms, along with world-famous technology entrepreneurs and even casino magnate Steve Wynn. That said, MarketsMuse curators have a personal note for Wynn:
Dear Steve: Good news. Playing in the world of electronic stock markets is a contact sport. Get your elbow pads on.”
Gretchen Morgenson of the New York Times tells the story in detail via her 10 April NYT column here
If you are into fintech, that means you ‘get the joke’ when it comes to using algorithms aka “algos” and for institutional investors having an ax with regard to environmental, social and governance factors (commonly known as ESG investing), Arabesque Partners, a new player in the fund management space might have a solution for you.
(NYT)-Cracker Barrel Old Country Store, the company behind a chain of down-home restaurants, might not seem an obvious model for advanced financial technology. Its specialty is vintage: vintage food, and in its gift shops, vintage toys and vintage music in the form of hymnal CDs.
Yet an upstart fund manager called Arabesque Partners has determined that Cracker Barrel is among the most attractive investments out there in a special category that takes into account environmental, social and governance factors — known in the industry as ESG.
And even more intriguing: The calculation was not made by a human analyst, but by a robotic one.
In the most recent full quarter for which data was available, Cracker Barrel represented 1.31 percent of the Arabesque Prime fund, which factors in a company’s sustainability and corporate responsibility track record before investing. That was more than any other stock, including more obvious suspects like Unilever, the consumer goods giant that is obsessed with sustainability, and Xinyi Solar Holdings, a big maker of solar panel components.
Arabesque is one of a growing number of investors that are leaning on mountains of new data about companies’ environmental, social and governance performances in hopes of making more profitable trades.
New firms like Arabesque are making ESG data a core part of their strategy. Goldman Sachs has filed with the Securities and Exchange Commission to start an ESG-focused exchange-traded fund. And the biggest money managers in the world, including BlackRock, now regularly incorporate ESG analysis as they compose their portfolios.
Keep reading the NYT DealBook column by David Gelles here
(RaiseMoney.com)-French broker-dealer BNP Paribas “gets the joke” when it comes to fintech applications for equity crowdfunding and is embracing blockchain technology to advance their vision.
A subsidiary of BNP Paribas Group has announced a partnership that will find it leveraging blockchain technology to enable private companies to issue securities via equity crowdfunding.Revealed today, the partnership finds BNP Paribas Securities Services, its asset services division, working with investment platform SmartAngels on a pilot the firms said would be launched in the second half of 2016, pending regulatory approval.
In statements, BNP lauded the effort as a “major step” in advancing crowdfunding. The project will see BNP Paribas developing and managing a registry for shares in private companiesusing the blockchain that in turn will automatically register securities issued by SmartAngels.
Smart Angels will serve as a secondary market for shares registered on the BNP platform, a move the partners said would make it easier for startups and small businesses to access financing.
“Investor payments will be processed immediately and e-certificates will be issued to them straight away. Financial transactions made via the platform will therefore be performed simply, quickly, securely and for a lower cost.”
Philippe Ruault, head of product for clearing at BNP, emphasized his belief the program would accelerate trading in the private securities market.
“This is a major innovation for the custody and account-keeping of unlisted securities,” he said.
The project is not the first that finds a major financial firm seeking to leverage the blockchain as a way to ease aspects of the private securities process. The effort notably follows Nasdaq Linq, a pilot designed to allow entrepreneurs the ability to issue and manage private shares using a private blockchain system.
Blythe Masters, the former grand dame of derivatives for investment bank JP Morgan, who after a less-than-glorious exit from her senior role overseeing credit derivatives for House of Morgan and who reinvented herself as a blockchain babe and leads digital ledger startup Digital Asset Holdings, has proven that every cute cat has nine lives. In a press release issued this week, Depository Trust & Clearing Corp. aka DTTC, the industry-owned utility that processes transactions across the multi-$trillion repurchase agreement and government securities markets has entered into an agreement with the startup to test their blockchain application for use within the $2.6tril repo market sleeve so that lenders and borrowers across the often illiquid repo market can have a more efficient tool to track securities and cash flowing between counterparties.
Digital Asset Holdings, for which Masters is Chief Executive Officer, is considered one of the top 3 fintech companies focused on leveraging digital ledger technologies, the basic foundation of the cryptocurrency bitcoin. R3 Blockchain Group, whose investors include a consortium of 42 investment banks and financial service firms and is led by former inter-dealer broker David Rutter, along with Symbiont, the creator of Smart Securities and sponsored by merchant bank SenaHill Partners, are considered to be the other leading players in the space seeking to ‘institutionalize’ the value proposition of the technology that powers bitcoin.
(WSJ)-Depository Trust & Clearing Corp., a firm at the center of Wall Street’s trading infrastructure, is about to give the technology behind bitcoin a big test: seeing whether it can be used to bolster the $2.6 trillion repo market.
DTCC said in a statement Tuesday that it will begin testing an application of blockchain, the digital ledger originally used to track ownership and payments of the cryptocurrency bitcoin, to help smooth over problems in the crucial but increasingly illiquid corner of short-term lending markets known as repurchase agreements, or “repos.”
Repos play a critical role in the financial system by keeping cash and securities circulating among hedge funds, investment banks and other financial firms.
DTCC, an industry-owned utility that helps settle trades in the repo market and elsewhere, wants to apply blockchain technology to the market, so that lenders and borrowers can keep track of securities and cash flowing between firms in real time.
To test blockchain’s ability to improve repo trading, DTCC has tapped Digital Asset Holdings LLC, a startup run by former J.P. Morgan Chase & Co. executive Blythe Masters. Earlier this year, DTCC invested in the firm focused on blockchain applications, along with a range of banks including J.P. Morgan, Goldman Sachs Group Inc., and others.
MarketsMuse fintech and fixed income curators are both noticing increasing upticks in stories relating to the use of blockchain technology specifically for use within the corporate bond issuance process. We might have been one of the first to focus on this application despite the early stage push back from IT blockheads within the securities industry who “didn’t get the joke”–but for those who missed the first memos, below is a good primer. The real meat is at the bottom.
(AllCoinNews)–This month, a paper examining how blockchain technology might be used to issue and trade bonds more effectively was published by the 2015 Freshfield Steven Lawrence Scholars. Aimed at first year law students in the UK, the Freshfields Stephen Lawrence Scholarship Scheme is designed to address under-representation of black men from low-income households in large commercial law firms.
In the paper, the scholars propose and analyse two different blockchain-leveraged bond trading systems, one that utilizes a closed pool of banks to verify transactions – Bond Blockchain 1.0, and another that relies on a open pool of individuals to verify transactions – Bond Blockchain 2.0.
According their paper, these two bond systems would have the same core characteristics. All bond issuers will have a user profile with two types of wallets, one for transferring bonds and the other for transferring money. Both wallets would contain the same unit types so they can be transferred on the same blockchain. To add units to the wallets, money needs be deposited or bonds need to be created through the the user interface. Metadata embedded in the units will distinguish whether units are currency or bonds. As a bond is purchased, two transactions take place in the system. Currency units are transferred from the investor’s money wallet to the issuer’s money wallet, while bond units are transferred to the issuer’s bond wallet to the investor’s bond wallet.
The major distinction between the closed and open pool systems is in who they serve. InBond Blockchain 1.0, the system using a closed pool of banks to verify transactions through blockchain technology, the bonds would only be available to institutional investors. This system’s innovation is the disintermediation of the clearing and settlement functions of the legacy bond trading system. The legacy system will no longer be needed as as the transfer and proof of bond ownership will be recorded in the blockchain and the digital account of the new owner. The benefits of Bond Blockchain 1.0 would be a reductions in costs resulting from removing intermediaries and a much quicker settlement time resulting from instant account transfers and blockchain verification in around 10 minutes.
MarketsMuse Editor Note: Towards understanding how/where/why blockchain technology is actually being implemented for use in corporate bond issuance, our curators encourage you to go directly to the source: fintech firmSymbiont–which is backed by among others, SenaHill Partners.
(MarketsMedia : not to be confused with Madmen Media, owner of MarketsMuse.com)– In order to keep up with the demands of today’s high-volume electronic markets and leverage their fintech muscles, the Chicago Board Options Exchange, the top options mart player plans to migrate its CBOE and C2 options markets as well as its CBOE Futures Exchange to an internally developed matching engine beginning in August, according to CBOE senior management.
The new system, dubbed Vector, will replace the current internally developed CBOE Direct platform, which the exchange launched in November 2001 and runs all three markets.
“Trading volumes on the exchanges have grown and the growing demands of the higher-frequency trader require us to keep up,” said Ed Tilly, CEO of the CBOE. “It’s difficult to keep up a system that was designed with your customers’ needs from 14 to 15 years ago, and meet their needs for today and tomorrow.”
The current trading engine served the CBOE community very well, but the CBOE leadership decided it was time for an overhaul. “We developed Vector starting from a blank piece of paper beginning in 2014,” Tilly said.
The buy-or-build decision was a close call, as at least one unspecified third-party technology provider delivered a very impressive pitch to handle the job. Ultimately, the call to stay in-house was made in deference to the customization of the CBOE product suite, Tilly said.
Besides improved transaction speeds and scalability, the new matching engine will also incorporate new risk management tool for trading firms.
(MarketsMuse courtesy of Chicago Tribune)-The notion of a secondary trading market for crowdfund investments is not new–a topic that MarketsMuse has profiled more than once during past several months, but those efforts have been more noticeable outside the US. That’s now changing. Chicago-based CFX Markets launched a platform Tuesday allowing crowdfunding investors to sell their shares online. The new platform gives users a way to resell their shares on a secondary market if they want to get out of the investment in a pinch.The new site will initially focus on real estate crowdfunding platforms.
“Our goal in creating a secondary market for crowdfunding investments is basically to make it as easy to buy somebody’s private investments as it is to buy and sell shares of Microsoft,” said Juan Hernandez, CFX Markets managing director. Hernandez is a former algo trader specializing in FX and Equity markets. The company has gained increasing notoriety since its April 2015 soft launch, when it introduced its open source application known as CFX,Crowdfunding Crossmarkets.
“There’s this tremendous number of new platforms out there that have high-quality investment opportunities that people can now participate in, but what happens after you’ve invested in one of these properties and it’s one to two years later and you need to cash out on your position for whatever reason?”
CFX Markets is an affiliate of Chicago-based real estate crowdfunding platform PeerRealty, which lets investors buy stakes of real estate offerings.
The new market will allow members of PeerRealty and Chicago-based platforms American Homeowner Preservation, CrowdFranchise and PropertyStake to resell their shares. It will announce other partners this year, Hernandez said.
Investors on member platforms can log into CFX and sync accounts so their shares show up on the secondary market. Investors can list the assets they want to sell and pick a price for them; then buyers can review the assets and performance, match a bid or make an offer. Buyers don’t need to be existing members of affiliated platforms.
Jorge Newbery, founder and CEO of American Homeowner Preservation, said he expects the option of selling shares on the secondary market will draw more individuals to invest on his platform and encourage existing investors to put in more money.
Kendall Almerico, a Washington D.C.-based lawyer focused on crowdfunding, said buyers aren’t likely to immediately flock to what is still new territory for many investors.“We’re maybe a year, a couple years away before this becomes more commonplace,” he said.
But Almerico believes secondary markets will become an integral part of the new crowdfunding economy. “This is kind of that missing piece of the puzzle,” for equity crowdfunding, he said. “That liquidity is what makes this potentially such a great, attractive offer to get into: They can actually sell it if they need to.”
Being a fintech thought-leader is ‘non-trivial’ as they say in the software world, but expressing vision, domain fluency and passion is arguably the first step that any aspiring thought leader, or for that matter, any already-established banker who navigates the deal world of Wall Street and surrounding areas needs to master–before believing that you can simply send a deck and get a check for A-round funding..
Taken from the playbook of MarketsMuse mentors at The JLC Group, “Sizzle Reel Strategy 201-How ‘old-style’ Wall Street firm uses contemporary, new media approach to burnishing their brand..”, below is a solid example of how merchant bank SenaHill Partners is rapidly becoming one of the top five firms in the rapidly evolving fintech universe.
Anyone who has followed the blog posts from The JLC Group for more than 15 minutes during any part of the last 10 years already knows that corporate make-over artisan has long advocated the use of digital media tools that incorporate sight, sound and motion as a way for enterprise executives to tell your brand story and frame your value proposition…Throughout the ad agency hallways in “LaLa Land” as well as along Madison Avenue, short-feature video, often known as ‘sizzle reels’ pack a punch that enables aspiring brands and thought leaders to fight above their weight class. The following ‘reel’ is a perfect illustration of this simple point.
Disclaimer- JLC Group’s senior principal is an “Advisory Board Member” for SenaHill Partners, the fintech merchant bank profiled in below clip–which was produced by Institutional Investor Films-
(TradersMagazine) Trading settlement and clearing could go the way of bitcoin, as white glove bulge bracket brokerdealer Goldman Sachs and fintech aficiondo has filed a patent for technology to settle securities in the cyber cryptocurrency.
As first reported in Bitcoin Magazine on November 19, the United States Patent & Trademark Office (USPTO) published Goldman, Sachs & Co.’s patent application 20150332395 or “Cryptographic Currency For Securities Settlement.” The patent described “ […] methods for settling securities in financial markets using distributed, peer-to-peer, and cryptographic techniques ” using a cryptocurrency named SETLcoin.
The application lists Paul Walker and Phil J. Venables as the inventors of the technology.
Walker is the co-head of technology at Goldman and a member of the Board of Directors of the Depository Trust and Clearing Corporation (DTCC). Venables is managing director and chief information security officer at Goldman Sachs.
The patent application addresses chain of custody of an asset, counterparty risk and settlement through a cryptocurrency called SETLcoin. According to the patent application viewed by Bitcoin Magazine, SETLcoin ownership can be used to prevent fraud, including float fraud such as kiting.
Goldman Sachs and IDG Capital Partners co-led a $50 million strategic investment round in Bitcoin company Circle in late April of this year. This was the first publicly announced cryptocurrency investment by Goldman. However, as reported by CB Insights, Goldman’s investment activity into fintech startups has been intensifying.