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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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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.

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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..

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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

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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

hooray-high-touch-trade-execution-marketsmuse

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

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Institutional Investor 2017 Top 40 Trading Tech Top Guns

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

Continue reading
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Interactive Brokers to Retreat From Options Market-Making

(FinanceMagnate)–Electronic trading firm Interactive Brokers Group, Inc. (NASDAQ:IBKR) aka “IB”has announced its plans to put an end to its options market making activities globally.

The operations, which are conducted through the Timber Hill companies, are expected to be phased out over the coming months. The broker will continue carrying out certain trading activities in stocks and related instruments.

In a press release, Thomas Peterffy, Chairman and CEO, explained that “Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity”.

Added Peterffy, an immigrant from Hungary who was recently featured in Forbes for having a net worth north of as much as $15bil, “Having initiated the first automated option market making operation in the mid ’80s, which grew into the largest such business on a global scale over the next 25 years, it’s been painful for me to see it deteriorating in the last few years. But we do not have a choice in this matter. Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity.

“We must focus on continuing to build our brokerage platform to empower our customers with first rate execution and account management capabilities at very low cost. This remains our mission, to which we must devote our full attention. In retrospect, 40 years of market making gave us the financial resources and the unique expertise to develop our superior brokerage platform for cost and execution sensitive, professional investors and traders, and to give them the edge to successfully compete in the marketplace.”

In addition, Interactive Brokers’ management is conducting a review of the facilities and staffing, with the review set to be completed in the near future. The goal, as the broker put it, is “optimizing the deployment of the Company’s resources”.

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Along with this shift toward electronic brokerage, Interactive Brokers said it planned to rebalance the composition of currencies in the GLOBAL, a basket of 15 major currencies in which it holds its equity, by increasing the relative weight of the US dollar vs. the other currencies to approximately 70% from the current weight of about 47%. The new composition is set to become effective at the close of business on March 31, 2017, whereas the conversion to the new targeted currency holdings will happen soon after that. Continue reading

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Will God Bless These Biblically-Responsible, Sin-Free ETFs?

sin-free-etf-gekko-marketsmuseIt didn’t take Michael Douglas aka Gordon Gekko to remind investors that Greed is Good or that Sin Stocks (aka Vice Stocks) have long been the traditional vehicle to benefit from this investing thesis. Those trafficking in Booze, Butts, the other kind of Butts, Betting, and Bullets (as well as companies within Warren Buffet’s Berkshire Hathaway portfolio!) are notable components to the leading equity market indices and its easy to pick out a wide swath of companies within  the S&P 500 and Russell 2000 that are selling so-called sinful stuff and performing just fine, thank you. But, even if so-called President Trump made it perfectly clear that crotch-grabbing is permissible for [certain] people, POTUS does eschew smoking and drinking (but not gambling!) and companies whose products or services offend faith-based focused investors are blasphemous to the truly compliant. So what’s a God-fearing or God-loving investor to do? They can go to Global X and embrace The Global X S&P 500® Catholic Values ETF (NASDAQ:CATH) –which has returned nearly 15% since its April 2016 launch (inclusive of dividend) or you can get even more inspired by taking communion with Inspire Investing, the newest exchange-traded fund Issuer that is offering two Sin-Free ETFs.

Northern Lights Distributors LLC, an institutional brokerage firm based in Warren Buffett’s hometown of Omaha, Nebraska is the sponsor behind Hollister, Calif-based Inspire Investing’s just introduced biblically-responsible funds; a small- and medium-size company fund and a large-company fund called Inspire Global Hope Large Cap ETF. The Inspire Global Hope Large Cap ETF, symbol NASDAQ: BLES, and Inspire Small/Mid Cap Impact ETF, which goes by NASDAQ:ISMD, made their trading debuts on Tuesday, as first reported by ETF.com. The Inspire Core Bond Impact ETF is likely to launch in March, completing the trinity. The precise holdings of the funds haven’t been determined yet.

The holdings of these funds are determined by Inspire Investing’s “Inspire Impact Score.” The gauge evaluates securities based on what the firm sees as their “alignment with biblical values and the positive impact the company has on the world through various environmental, social and governance criterion.”

The prospectus for the three ETFs filed with the U.S. Securities and Exchange Commission discusses some corporate behaviors or affiliations that would exclude a given security from the funds. The methodology removes any company that has any degree of participation in certain activities:

  • abortion
  • gambling
  • alcohol
  • pornography
  • the LGBT lifestyle
  • rights violations such as association with or doing business in terrorist-sponsoring countries, countries having oppressive systems of government, and countries where there are known human rights violations related to the persecution or severe discrimination against Christians, and poor labor practices

As the Bible says “Give credit where credit is due”, this MarketsMuse curator is obliged to credit Bloomberg LP’s Luke Kawa and NYT Dealbook’s Liz Moyer with the coverage…

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(DealBook) By LIZ MOYER 01 March 2017 Serving both God and money has long been an aim of fund companies that exclude “sin stocks” of companies dealing in tobacco, guns, gambling and the like in their investments.

Now, two new exchange traded funds offer a conservative evangelical — what is called “biblically responsible” — tilt to that investing approach. The funds explicitly say in their regulatory filing that they will avoid buying shares in companies that have “any degree of participation in activities that do not align with biblical values,” including what they call the lesbian, gay, bisexual and transgender “lifestyle.”

The approach is squarely at odds with that of nearly all of corporate America, and there is plenty of academic evidence that supports the notion that Vice aka Sin Stocks provide compelling returns, per excerpt below from Forbes April 2015 edition

Academic studies support the argument for vice stocks that underpins the Barrier Fund, finding the group has “less institutional ownership and less analyst coverage than otherwise comparable stocks” and that social norms have “significant price effects.” According to researchers from Princeton University and the University of British Columbia, “sin stocks outperform comparables even after controlling for well-known return predictors.”

In February, Credit Suisse published a study out of the London Business School that found more of the same. The piece, authored by Elroy Dimson, Paul Marsh and Mike Staunton, noted that Sullivan’s vice-focused fund easily outpaced the returns of a Vanguard fund tracking a socially-responsible index of stocks since 2002.

“[M]uch of the evidence that we review suggests that ‘sin’ pays,” the study found, highlighting the key elements that make vice stocks compelling investments. “The rationale for ‘vice’ investing is that these companies have a steady demand for their goods and services regardless of economic conditions, they operate globally, they tend to be high-margin businesses, and they are in industries with high entry barriers.”

Ninety-two percent of the Fortune 500 companies include “sexual orientation” in their nondiscrimination policies and 82 percent include “gender identity.” For the first time, half of Fortune 500 companies offer transgender-inclusive health care benefits, including for surgical procedures.

“There are millions of people, including people of faith, for whom discrimination is not a biblical value,” said Mark Snyder, the director of communications for the Equality Federation, a national advocacy group. “Businesses have been leading the fight for full equality over the last few years. L.G.B.T. people are part of the fabric of our nation. We have families, we go to work, we simply wish to be treated equally.”

The chief executive of the company that introduced the two new funds, Inspire Investing, says he has no problems with companies providing benefits to lesbian, gay, bisexual and transgender employees and having nondiscrimination policies. “As Christians, we love our neighbors in the L.G.B.T. community and encourage companies to provide equal employee benefits for all,” said the chief executive, Robert Netzly.

But he added, “A company deciding to spend money and time to pursue a hard-line activist agenda that has nothing to do with their core business is a different issue, and is a waste of investor dollars.”

Issues investing — some call it “socially responsible investing,” which includes the “E.S.G.” (environmental, social and governance) style of investing — has been a hot business in recent years. Major investors like the pension fund behemoth known as Calpers have made it a part of their philosophy, even though the strategy has costs in lost investment opportunity. Last year, for example, Calpers re-endorsed its ban on tobacco stocks, though staff recommended the opposite.

“The minority are a success, and the majority are flops,” said Ben Johnson, the director of E.T.F. research at Morningstar. “It’s spaghetti slinging.”

The new funds would hardly be the first religion-oriented investment products. An earlier group of funds tracking Baptist, Catholic, Lutheran, Methodist and, more generally, Christian, values came out in 2009 but folded in 2011 with just $2 million, Morningstar said.

There are also the $790 million iShares MSCI KLD 400 Social ETF and the $500 million iShares MSCI USA ESG Select ETF, which look for stocks of companies with good labor policies or sustainable and renewable products. There are also longstanding mutual funds, such as the $927 million Domini Impact Equity fund.

Last year, Global X introduced a fund that adheres to the values of the Roman Catholic Church, and it has taken in $87 million in assets, according to Morningstar. The idea came from conversations with clients that invest on behalf of Catholic groups and foundations, which follow the guidelines set out by the church, he said.

The large-company fund tracks an Inspire-created index of 400 companies it screened to match its investment criteria, which follow conservative Christian values, Mr. Netzly said.

Shares of Berkshire Hathaway, whose chief executive, Warren E. Buffett, has been a major donor to Planned Parenthood, would not make the cut, he said. Nor would Apple, Mr. Netzly said, claiming that pornography can be purchased through iTunes. (An Apple spokesman said pornography is not permitted.)

Companies like Amazon that have publicly supported gay marriage also would not pass muster. “Any company that takes a hard-line approach” to the issue would not pass the test, Mr. Netzly said.

On the other hand, shares of Tesla Motors and Under Armour would.

Continue reading the main story Continue reading

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Bitcoin Price Surge in Advance of SEC Decision to Approve Bitcoin ETF

Speculators betting on the SEC approving the very first Bitcoin ETF listing helped push the price of the digital currency aka crytopcurrency to a record high in advance of a March 11 SEC meeting in which regulators are scheduled to determine whether the Winklevoss Bitcoin Trust ETF [proposed ticker NASDAQ:COIN] is fit for every day investors to purchase and trade on public markets.  In over-the-counter trading on Friday, the price of a single bitcoin soared to as high as $1,200 per bitcoin i Europe’s Bitstamp exchange, before easing to about $1,190. Aggregated bitcoin exchange prices pegged the price at closer to $1174. That put the total value of all bitcoins in circulation — or the digital currency’s “market cap”, as it is known — at close to $20 billion, around the same size as Iceland’s economy.

bitcoin-etf-sec-decision-marketsmuseThe bitcoin ETF is the brainchild of Harvard-educated investors Cameron and Tyler Winklevoss, the twin brothers who for years claimed to be the genius behind the creation of Facebook (NYSE:FB). The pair first submitted their initial offering prospectus for a bitcoin exchange-traded fund nearly four years ago. They have since modified the offering documents several times in an effort to appease securities regulators. If approved, everyday investors will have simple access to the cryptocurrency on a major exchange for the very first time, which would no doubt legitimize Bitcoin’s existence and according to some, likely push its value much higher.

Two other prospective bitcoin ETF issuers have more recently filed offering prospectuses with the Securities & Exchange Commission. SolidX Partners sought SEC approval last July for its bitcoin ETF, SolidX Bitcoin Trust , which also would be listed on the NYSE. In January, Grayscale Investments filed to list its own Bitcoin Investment Trust on the NYSE.

According to ETF Daily News, “A ten-day rally for the cryptocurrency has narrowed its gap with the precious metal to the smallest on record. Each asset has been touted as an alternative to regular currencies, because of constraints on their supply and the capacity they offer to sidestep governments.”

bitcoin-price-vs-gold-price

First invented in 2008, the price of a bitcoin has performed better than any other currency in every year since 2010 apart from 2014, when it was the worst-performing currency, and has added almost a quarter to its value so far this year.

Per ETF Daily News, many hurdles remain for the ETF to pass regulators’ tests. “The SEC is worried about Bitcoin’s safety, security, volatility, and shareholder protection. “Traditional financial players have largely shunned the web-based “crytpocurrency,” viewing it as too volatile, complicated and risky, and doubting its inherent value. ” On the other hand, some analysts say regulatory approval of a bitcoin ETF would make the currency relatively attractive to the often more cautious institutional investor market.

But despite potentially high returns, low correlations with other currencies and assets, falling volatility and increasing liquidity, there is scant evidence so far that most major players are considering investing in the digital currency.

“Bitcoin is just not liquid enough for us to even think about,” said Paul Lambert, fund manager and head of currency investment at Insight, in London.

“We manage billions and billions of dollars we’d need to be able to go into that market and trade in hundreds of millions of dollars at a time, and my sense is it’s not like that.”

 

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Marijuana ETF Issuer Tokes On Listing-Trump SEC Head Could Get Stoned

Let’s guess that more than 65% of ETF traders and investors have been clamoring for a marijuana ETF, but just when it seemed to be on the verge of happening, a bunch of folks sponsoring such an exchange-traded fund got hit with what could be a ‘bad high.’ The ink was barely dry on the prospectus filed with the SEC last week by ETF Managers Group LLC for its  Emerging AgroSphere ETF, the proposed first marijuana industry exchange-traded fund and then, “BAM!”–so-called President Donald Trump tweeted yesterday morning that he has charged so-called US Attorney General Jeff Sessions with cracking down on the marijuana industry.  Trump’s plan to stone stoners was confirmed by White House spokesperson Sean Spicer later Thursday afternoon.

Yes, that ‘s right–the creative folks at ETFMG, the sponsor behind the planned pot-flavored ETF apparently didn’t get the memo that among the “traditionalist policies” that country-club mogul-turned-POTUS seeks to advance includes cracking down on cannabis!

That’s all despite the fact more than two dozen U.S. states have legalized some form of marijuana for medical or recreational use and despite support for legalization of marijuana has risen to nearly 60 percent among U.S. adults, according to the Oct 2016 study by Pew Research Center, and let’s not forget the poll released Thursday Feb 24 by Quinnipiac University which showed 71% of Americans oppose efforts to enforce federal marijuana laws in states where it’s legal.

According to ETF Managers Group LLC, the Emerging AgroSphere ETF would give investors an opportunity to buy a group of companies making prescription drugs using cannabis extracts, selling hemp derivatives and other related stocks. The investment company did not disclose a ticker symbol, its fees or a launch date but said the fund will be listed on NYSE Arca. A spokesman for ETF Managers Group LLC declined to comment.  US AG Jeff Sessions, located sipping bourbon at a downtown DC saloon, refused to comment on the news. Also not commenting on whether the SEC filing will pass muster is recently-appointed SEC Commissioner Jay Clayton,  who until his appointment to join the cadre of other Goldman Sachs- connected top advisors to Trump was a partner at law firm Sullivan & Cromwell and a specialist in public offerings and private placements.

The only White House team member who does not stop commenting on anything is spokesperson Sean Spicer, who stated during a Thursday news briefing “I do believe that you’ll see greater enforcement of recreational marijuana and a closer look at medical marijuana as well.”

Despite initial concerns expressed by some within the industry, un-named sources close to the White House have suggested that if they haven’t already, Trump and his inner-circle, including son-in-law Jared Kushner will quickly discover that at least several of Trump’s favorite supporters have close business ties to investors in the cannabis sector, including Trump’s nominee for US Army Secretary and former New York Mercantile Exchange (NYMEX) Chairman Vincent Viola.  The ‘smart money’ with ties to Trump insiders are betting that the recent bluster will have a positive impact on parts of the industry that have been financed by Wall Street top investors, including fintech companies that are entering into the space.

Better known as “Vinny”,  Viola is the Chairman of electronic trading firm Virtu Financial, a $2.5billion market value publicly traded company (NASDAQ: VIRT) Viola, a West Point grad who became a Wall Street billionaire, withdrew his name for consideration soon after being tapped by Trump for the Cabinet-level spot. The walk back was attributed to the financial disclosure process imposed on cabinet-level designates. Viola associates from the NY Merc are investors in Americanex, aka American Cannabis Exchange, a fintech company competing with other upstarts to create a centralized electronic cannabis-trading platform. Americanex, with upwards of $10mil in backing from Wall Street executives, hopes to bring growers, packagers and distributors together in a manner much like that of the world’s leading commodities futures exchange.

““I look at this as an early Nymex,” says Richard Schaeffer, a former chairman of the New York Mercantile Exchange. “I look for this to become a very substantial matching engine bringing buyers and sellers together.”

 

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. The firm’s cannabis market domain expertise includes fluency in state rules, regulations, business plan formation and stock exchange listing for medical marijuana and recreational cannabis companies. More information is available via this link

According to a late Thursday poll by MarketsMuse of more than five dozen Wall Street ETF traders, one common theme prevailed: “Trump must be smoking crack if he thinks he can put the genie back in the bottle when it comes to commercializing cannabis.” One ETF market pioneer (who refused to be named for fear of a POTUS twitter attack) suggested “Jay Clayton could get stoned–with big rocks– if he blocks investors from taking stock in an industry that is on track to create thousands of jobs and deliver new found tax revenue that will result from this rapidly emerging multi-billion industry.”

marijuana-etf-emerging-agrosphere Continue reading

paul-azous-borders.org

Finance Industry Vet Behind Non-Profit Borders.Org

Business Plans Without Borders aka Borders.org is a novel non-profit intended to provide wind in the sail for startups launched by immigrants, refugees and under-served inner-city entrepreneurs.  Created by long-time finance industry veteran Paul Azous, the altruistic initiative defies current political in-sensibilities and embraces the simple notion that small businesses are the lifeblood of a vibrant economy.

The spirited debate surrounding immigrants vs. legal immigrants, nationalism vs. populism and let’s not forget the philosophy embraced by White House Svengali Steve Bannon’s  and his leaning to  ‘traditionalism*’, MarketsMuse Curators were inspired to spotlight a news story profiling what is perhaps an easy idea to digest:  it’s all about altruism, or at least that is the thesis being advanced by a long time finance industry consultant who has accrued more domestic and international frequent flier miles than most.

Finance industry veteran Paul Azous, a Seattle-based self-made entrepreneur who is often referred to by polls across the private placement industry for being a  “Top 40 Under 40” has a view that both sides of the aisle should embrace when it comes to putting the wind in the sails of folks who aspire to achieve the American Dream. The thesis that drives the non-profit “Business Plans Without Borders”  is simple: “..if those with passion, focus and entrepreneurial aspirations who want to do good for themselves and their communities lack the compass that can point them to the on ramp are not embraced and given a lift by those who understand the obstacles faced by [legal] immigrants,  refugees and the under-served from within our very own borders, who can we support?!”

Per below news release, Azous and his wife launched the non-profit in Q4 2016 with the goal of providing business plan preparation, mentoring as well as awarding startup grant funding to inner-city entrepreneurs as well as incoming immigrants and refugees who are able to meet merit-based criteria and applicant requests are reviewed by a volunteer Advisory Board comprised of start-up gurus and thought leaders from across various industries. Azous is looking to aggressively add to the advisory network whose members not only review applicants, those advisors are also committing to match grants extended by the non-profit.

SEATTLE, Feb. 15, 2017 (GLOBE NEWSWIRE) — Serial entrepreneur and veteran business plan advisor Paul Azous announced that he has recently launched a non-profit organization dedicated to assisting the most vulnerable in society with their business startup needs. The organization, Business Plans Without Borders  assists refugee, immigrant, and inner-city, low income aspiring entrepreneurs with business plan writing assistance in the form of business writing collaboration, the allocation of grants and facilitating networking opportunities with seasoned industry professionals. Aspiring entrepreneurs who qualify for assistance can apply directly via the organization’s website, www.borders.org . Grants are awarded based on merit.

Paul Azous is an 18 year finance industry veteran and Founder/CEO of Prospectus.com, a global consulting firm that assists startups and later stage private and public companies with a broad range of professional services, from business plan and prospectus writing to initial public offering and stock exchange listings.  During the past 15 years, Paul and his firm have guided scores of companies across multiple industries and geographic regions in helping to launch start-up and fast-growth businesses. His primary focus has been on developing business plan summaries, financial and business models, conducting company valuations and assisting with debt or equity offerings. Through a global consultancy framework, Azous has been credited with fast-tracking nearly 5,000 companies in over 50 countries with their business planning and investor documentation needs.

“Creating Borders.org has been a goal of my wife, Tamar and myself for several years, as we’ve always been determined to mentor and back aspiring entrepreneurs who have not had the benefit of a support system,” says Azous. “With Tamar’s background in micro finance and her own “momtrepreneur” experience, coupled with my background, Borders was just a matter of time.”

Entrepreneurs within Border.org’s target demographic typically lack the resources necessary to launch a successful business, even if the business fills a market need. This leaves them unable to raise sufficient funding to adequately develop and market their products or services and consequently, those initiatives are short-lived. Borders.org assists with the most important document that a business owner or entrepreneur must have: the business plan. A business plan enables entrepreneurs to build a roadmap for their company, and is a necessary component to raise capital from qualified investors and/or lending institutions. Borders.org guides entrepreneurs through the strategic business planning process and links them with a wide network of volunteer industry professionals who provide free business startup services, including legal work, accounting, and marketing.

About Borders.org

Business Plans Without Borders aka Borders.org – is a 501(c)(3) non–profit organization. The organization was created to assist low income, refugee and immigrant entrepreneurs with writing and developing their business plans. Borders.org staff works one-on-one with aspiring entrepreneurs, helping them formulate, structure and develop cohesive business models, provides merit-based grants to awardees and networking opportunities with accomplished mentors who can bridge the gap between a strong idea and successful implementation. Continue reading