All posts by MarketsMuse Curator

Strike Price, Tech Talk

Securities Regulations 3.0 Digital Token Offerings, ICO vs. STO

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Digital Token Offerings & Securities Regulation: Are you an ICO or STO? (the following is courtesy of Prospectus.com LLC) 

A question that is harder to ask than whether asked if your product is butter or margarine. Blockchain token sales (aka initial coin offerings or “ICOs”) reportedly topped $5 billion in 2017, with approximately $1 billion ICO offerings originating in the United States, according to a December 2017 report by Ernst & Young. Blockchain technology has a variety of prospective applications, and blockchain tokens can have a variety of features and functionality. For example, some blockchain tokens may function as a virtual currency, or as a license or right to receive a good or service or to use certain software. Even traditional assets like real estate or stock in a company may be “tokenized.” That said, a token’s characteristics and the manner in which the token is sold drives the determination as to whether US securities laws –as well as a growing universe of securities regulations in other jurisdictions-may be applicable, explaining the more recent industry labeling:“securities token offering” , also known as STO.

Evan Fisher prospectus.com
Evan Fisher, Prospectus.com LLC

While much has been said and much has been written on the topic of securities regulations within the context of digital token offerings, it would seem that many are still clueless (or perhaps have bananas in their ears and blinders on their heads). Evan Fisher, a finance industry veteran  and business plan consultant at Prospectus.com LLC stated, “Of the several dozens of initial conference calls between the staff at Prospectus.com LLC and crypto cool kids seeking white paper writing and/or investor offering document preparation for respective ICOs,  the take away is that many crypto entrepreneurs still suffer from blind eye syndrome and are advancing capital raises in direct violation of established law. ” Adds Peter Berkman, a US securities and real estate attorney who also advises clients of Prospectus.com LLC, “Regrettably, ignorance of the law is not a viable defense strategy for those charged with violating securities laws and/or anti-money laundering laws.” Added Berkman, “the popular argument held by many start-up entrepreneurs in ‘crypto land’ is that their token is not actually a security-which is fine-as long as they’ve set aside several hundred thousand dollars to defend that argument when they wind up wearing court order to appear.”

That said, there should be two rules of thought for those who aspire to advance digital token offerings and who believe they have a great, industry disrupting idea that leverages their fintech fluency and the blockchain ecosystem. First, consider the 3 Duck Rule-If it looks like a duck, walks like a duck and quacks like a duck, regulators will call it a duck and second, advancing the notion that your ‘token’ is a utility device and the pitch to investors is “the value of the token will increase as usage of the token increases”–hence the reason for investing in it-is a thesis that has been advanced by each of the 800+ digital token offerings that have died on the vine before reaching puberty.  Leading many investors to ask in retrospect, “What the f*&k happened to the money I invested?!”  In turn, leading this author to answer: “Your money has been carefully distributed to a variety of real world assets, including luxury homes, vacation homes, cars, NetJet contracts and other toys purchased by the folks who you sent your money to.” If you’re a crypto cool kid and your value proposition is “If we build it, they will come and they will play” and hence,  “its the balls and bats that we provide that will have value and the more folks play, the greater the value of the bat and balls,” we congratulate you for socialistic leanings.

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.

On the other hand, sophisticated investors are rapidly losing interest in pitches for digital token offerings that are based on the same premise advanced by dot-com busters–the one that suggested “if we get enough users, we’ll be profitable!” Yes, that proved true for whose business models were based on advertising sales and were able to attract enough eyeballs to appeal to advertisers. And yes, this model has worked beautifully for Alphabet Inc, FaceBook, YouTube and a select universe of others. Yes, you can also go to the dot-com graveyard and locate the thousands of others who never got enough users, or never got advertisers to pay those sites to install a click-able link. In the Software as a Service (SaaS) model, people pay for using a software application on a subscription basis. In the utility token construct, payment to use the software application and those who receive payments is often complex; but investors in the token are generally not sharing in that revenue. They can only look to a return on their investment if a whole bunch of people are using it and if a whole bunch of people are using it, they will need to procure more tokens for continued usage. If  there are a limited number of tokens available for using the application, the value of the token will therefore increase.  Not to suggest the ‘pay-to-play’ model is bad (its arguably a good business model), the rubber meets the road at the point where users don’t want or don’t need to play with your token–because nobody else cares to play with it.

To read the entire article from Prospectus.com LLC, please click here

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ETF News, People Profiles

ETF View: What’s Next: Telecom-Media Merge Into XLC

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Extra! Extra! XLC is the new ETF that ties telecom and media constituents into one exchange-traded fund! For those with a view towards latest and greatest ETF products, eyes and ears are on the Communications Services Select SPDR Fund (NYSEARCA: XLC) — “it tracks the Communication Services Select Sector Index and “seeks to provide precise exposure to companies from the media, retailing, and software & services industries in the U.S.”

etc-xlcWow. That’s a bucket full of precision when considering the constituents of XLC include among others, Facebook (NYSE:FB), Alphabet Inc (NASDAQ: GOOGL), Activision (NASDAQ: ATVI), Verizon (NYSE: VZ), Comcast (NASDAQ: CMCSA), Netflix (NASDAQ: NFLX) The good news is that ETF maestro Andrew McCormond, Managing Director ETF Solutions for WallachBeth Capital distills the appeal of XLC, the latest innovative exchange-traded fund and one that might be the FANG-style ETF for portfolio managers who have yet to find a one-stop product that meets their portfolio allocation needs.

New ETF merges tech and media from CNBC.

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.

If you’re on a path to raise capital for a new hedge fund, a fintech initiative or a blockchain-startup, the first step is packaging your pitch and presenting the opportunity within a properly-prepared Prospectus. The go-to firm to assist you? Prospectus.com LLC. Straightforward, Smart and Bespoke Services.

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Fixed Income, People Profiles, Tech Talk

Morgan Stanley Ratchets Up Electronic Bond Trading Team

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Morgan Stanley Raises Its Hand and Appoints e-Trading Veteran to lead investment bank’s scheme for the Electronification of Fixed Income Markets. Electronic bond trading has long been a holy grail for certain folks in and around Wall Street. On the one hand, reducing head count and mitigating dependence on high-paid sales people as opposed to ‘electronifying’ the trade inquiry and execution process makes sense and save dollars. For buy-sider players, the notion of increased transparency for instruments that have historically traded ‘over-the-market’ has been widely embraced by institutional investors, albeit many buy-side bond traders have encountered logistical, cultural, and arguably, political challenges when it comes to utilizing electronic trading tools. Without counting the number of independent e-bond exchange initiatives launched (and languished) in both the US and Europe since the turn of the century (a number that extends into the several dozens), the major banks have long insisted that bond trading is their domain alone and the concept of a centralized exchange platform is generally counter-intuitive to sell-side bond traders. Other than select legacy platforms whose initial backing (and liquidity) came from a consortium of banks (such as Market Axess and prior to that, BrokerTec), the six-pack banks have been reticent to join hands and to better ‘normalize’ bond trading in an electronic manner similar to other asset classes. Instead, everyone, including established exchanges, including the NYSE have aimed at building their own playing fields.

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Phil Allison, “Captain Morgan’s” new Head of Automated Fixed Income Trading

(Bloomberg) — Morgan Stanley, which has recently thrown down its own gauntlet to advance electronic fixed income tools hired Phil Allison, previously of KCG Holdings Inc., to lead the automation of its fixed-income business. Allison will head fixed-income automated trading and report to Sam Kellie-Smith, according to a memo sent to staff Monday.

He was most recently the chief executive officer of KCG Europe, a high-speed trading business that was acquired last year by Virtu Financial Inc. Allison, who became chief executive of KCG’s European business in September 2014, purportedly received a golden parachute payment of up to $7m when he was tossed out the door when Virtu took over KCG. He was previously the global head of cash equities at UBS Group AG.

Automating bond trading is a “major priority” after Morgan Stanley succeeded in digitizing stock trades, helping it become the top equities shop globally, CEO James Gorman said earlier this month. Fixed-income businesses have been harder to switch, partly because of the market’s lower liquidity.

Morgan Stanley has been finding ways to incorporate its electronic-trading technology, known as MSET, into the bond- trading business. Kellie-Smith, who previously led equities, was picked in 2016 to revamp the fixed-income business after the bank reduced the unit’s headcount by about 25 percent.   Allison worked at UBS from 1997 to 2014, developing statistical models and playing a leading role in algorithmic trading and automated market-making.

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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People Profiles, Tech Talk

Former NYSE Prez Farley Launches Fintech SPAC IPO

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Tom Farley, the former top gun at the NYSE, has long advocated the benefits of raising capital via the construct of Special Purpose Acquisition Company aka “SPAC”, aka “Blank Check company.” Now he’s become the CEO poster boy for SPACs with the formal IPO and NYSE listing of Fintech SPAC Far Point Acquisition Corp., a financial technology-themed acquisition company, which is backed by activist investor and fintech aficiondo Dan Loeb.

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Tom Farley, Far Point Acquisition Corp

42-yearold Farley, a Georgetown University alum and former ICE senior executive and the second youngest person to serve as NYSE President when taking on that role in 2012, will serve as CEO of the ‘fintech buyout’ company. Farley is arguably one of the industry’s most fintech-fluent folks, given his role in helping to transform NYSE into a financial industry trading technology centerpiece.

Farley’s long-held view towards the future is evidenced by the fact  NYSE’s two most dominant designated market-makers aka “DMM” firms, GTS Securities and Virtu Financial are companies that are synonymous with the phrase fintech. Both firms started their journeys as prop trading firms specializing in ‘high-frequency-trading’ and their more recently attained NYSE ‘specialist’ roles are powered by next generation in-house algorithmic trading and artificial intelligence tool kits. GTS Founder Ari Rubenstein, whose NYSE DMM is responsible for maintaining fair and orderly markets in 1200+ companies and who also oversees one of the industry’s most robust, multi-asset liquidity-providing prop trading platforms, is also a founding member of industry trade group Modern Markets Initiative (MMI) 

Back to SPACs- For those who may have missed the multiple memos coming out of the biggest investment banks, the blank check company construct provides a means to create a publicly-traded ‘shell company’, whose use of proceeds is intended to acquire a private company (or companies) and seamlessly “jump the shark” by rolling the private company into the publicly-listed company without bearing the burden of the time and cost that is synonymous with taking a company public via the traditional IPO process.

First introduced in the early 1970’s, blank check companies were soon derided by securities regulators after a string of capital raises by companies that had notoriously little corporate governance, enabled unsupervised CEOs to empty corporate coffers for personal gain, leaving investors with nothing. In the early 1990’s, the construct was re-invented by small-cap investment bank GKN Securities’ founders David Nussbaum, Roger Gladstone and Robert Gladstone, who have been credited with introducing the SPAC construct (along with securing a trademark for SPAC), which is chock full of checks and balances. The GKN leadership team’s early success in floating ‘blank check’ companies led to their creating a new firm, EarlyBirdCapital which has become the thought-leader in SPAC offerings, as the SPAC template has since been emulated by the financial industry’s leading investment banks and endorsed by major exchanges across the globe.

In the past 10 years alone, tens of dozens of capital raises via the SPAC construct have delivered billions of dollars of dry powder for designated acquisition companies that have since effected tens of billions of dollars worth of ‘quick IPOs’ for companies in nearly every industry sector, including the cannabis industry,

Fintech industry veteran and startup industry consultant Jay Berkman, who coincidentally helped GKN introduce their first SPACs to institutional investors back in 1993, and now serves on the advisory boards of fintech merchant bank SenaHill Partners and investor document consultancy Prospectus.com LLC said, “Far Point Acquisition may not be the first Fintech SPAC, but its launch clearly reinforces a compelling approach to raising capital for the purpose of bringing established private companies into the publicly-traded ecosystem.”

Via video clip below, former NYSE top gun Tom Farley expresses his views on the SPAC construct and the fintech sector, and provides a glimpse at the prospective target acquisitions that Farley will be aiming for.

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.

Former NYSE president announces IPO for ‘blank check company’ from CNBC.

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People Profiles

Big Board Bets on former Bloomberg “Babe”: Betty Liu to Become Vice-Chair of NYSE

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Bloomberg’s Betty Liu Moves to C-Suite Role at NYSE

(Original story from Traders Magazine – June 6- by John D’Antona Jr.)–The women’s movement continues at the U.S.’ NYSE, the oldest public stock exchange,  announced that former Bloomberg “babe” Betty Liu, who is also founder of financial content firm Radiate, Inc., will become Vice Chair of the NYSE, the global financial industry’s most famous bourse, a subsidiary of Intercontinental Exchange Inc. (MarketsMuse Senior Editor expresses warm note to Betty and re: the phrase used in quotes above is intended to be entirely respectful and complimentary –and not to be misconstrued as ‘not PC’ or to inspire a #MeToo moment)

Intercontinental Exchange, Inc., operator of the New York Stock Exchange, announced today that Betty Liu, an award-winning business journalist and entrepreneur, is joining the New York Stock Exchange as Executive Vice Chairwoman. Her appointment takes effect July 9. Liu will also join the NYSE Group Board.

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Betty Liu, NYSE Co-Chairwoman

Liu is the Founder and CEO of corporate leadership advisory Radiate, Inc. and a 10-year veteran of Bloomberg Television, where she most recently co-anchored Bloomberg’s “Daybreak Asia” and “Daybreak Australia.” In her new role at NYSE Group, Liu will bring her global experience working with thought leaders, newsmakers and C-level executives to the Exchange. Working with NYSE President Stacey Cunningham and NYSE COO John Tuttle, along with the senior leadership teams of the NYSE and Intercontinental Exchange, Liu’s mission will focus on strengthening and building the NYSE leadership network, cultivating connections through live events and creating valuable opportunities for organizations to connect across the NYSE’s unmatched listed community of 2,400 leading global companies.

Liu will be joining the NYSE alongside its acquisition of Radiate, Inc., the company Liu founded in 2016 to empower emerging leaders with expert advice. ICE’s acquisition of Radiate is subject to customary approvals. When the deal is complete, Radiate’s team and content will become assets of the New York Stock Exchange and will be scaled across NYSE platforms. Radiate offers a library of more than 2,000 short-length video lessons taught by over 100 global CEOs and thought leaders. The Radiate platform, when it becomes a part of the NYSE, will add to the Exchange’s broad array of content and events. The transaction is expected to close in June and will not impact ICE’s 2018 results or capital return plans.

“Betty is a valuable addition to our leadership team, bringing her unique experience and perspective gained through her global postings and firsthand experience as a media entrepreneur,” said Stacey Cunningham, President of NYSE Group. “By working directly with the leadership of emerging and leading companies, and leveraging the Radiate platform, Betty will help us offer our customers even more opportunities to tap the NYSE network to connect and share ideas on our global stage.”

Liu’s years of international experience working for major news organizations include CNBC, Dow Jones, and the Financial Times. She has been stationed in Atlanta, Hong Kong and Taiwan on assignments.

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.

For the TradersMagazine story, click here

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Tech Talk

Boston Options Exchange to Launch Securities Token Mart

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Securities Token Offering to Displace Initial Token Offering Fad; BOX in JV with digital broker-dealer tZero to Create Securities Token Exchange platform

(Redistributed with permission from BrokerDealer.com; story from Traders Magazine)-Well, Matilda, the Boston Options Exchange (BOX) is plotting to create the first regulated exchange to list and traffic in securities tokens as a means to legitimatize crypto-centric assets via a just-announced joint venture with Patrick Byrne’s digital-themed broker-dealer tZero. For those who haven’t gotten the memo, Securities Token Offerings aka STOs are the next generation approach to the now de-fangled initial coin offering (ICO) construct–which have been lambasted by securities regulators in nearly every corner of the globe.

Now that crypto cool kids are finally getting the memo: “These are Securities!” ,  the proposed first fully regulated Securities Token Exchange is coming to the US-via the Boston Options Exchange.

tZERO, the digital-themed broker-dealer created by Patrick Byrne and BOX Digital Markets LLC (BOX Digital)-a subsidiary of Boston Options Exchange, announced it has formed a joint venture to launch the industry’s first regulated security token exchange.

Lisa Fall, BOX Digital Exchange
Lisa Fall, Box Digital

On May 18, 2018, the two companies entered into a letter of intent to form an exchange to list and publicly trade security tokens for companies that issue, or convert existing stock to, security tokens. The proposed joint venture would be equally owned by tZERO and BOX Digital, with each having equal representation on the Board of Directors, together with one mutually agreed upon independent director. Lisa Fall, who currently serves as CEO of BOX Digital and as president of BOX Options Exchange LLC, would be the CEO of the joint venture.

“tZERO has proven to be a pioneer in the development and practical use of blockchain technologies for capital markets for a number of years,” said Ms. Fall. “tZERO’s track record and accomplishments in this innovative area, coupled with BOX’s expertise in operating a highly efficient and transparent equity options marketplace, made partnering together an easy decision and we look forward to building a world-class platform for listing and trading security tokens.”

tZERO plans to contribute cash and license tZERO’s blockchain technology for operation of the security token market. BOX Digital will contribute expertise and personnel toward obtaining regulatory approval and operation of the security token market. Approval of the U.S. Securities and Exchange Commission will be sought following execution of definitive documentation. Creation of the joint venture is subject to definitive documentation and customary conditions.

“Our partnership with BOX Digital Markets is a significant milestone that will create the first SEC-regulated exchange designed to efficiently trade crypto securities. Lisa Fall’s leadership, reputation and deep experience in the regulated securities exchange industry will be a major asset in achieving this objective,” said Saum Noursalehi, newly appointed CEO of tZERO. “Together, we will continue to work with the SEC as we develop a first-of-its-kind platform that will integrate blockchain capital markets into the current U.S. National Market System.”

According to electronic trading market veteran Jay Berkman, an Advisory Board member of fintech merchant bank SenaHill Partners and COO of investor documentation firm Prospectus.com LLC, “Now that pragmatic securities industry thought-leaders have figured out how to package crypto assets within the construct of a security so as to conform to the US regulatory regime, nobody can dispute the fact the genie is out of the bottle .  Added Berkman, “Securities Token Offerings (“STOs”) is a much more palatable approach, making way for a new mantra, “ICOs are dead, long live STOs”, until of course, another shoe drops.”

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.

For the full story from John D’Antona Jr. of Traders Magazine, click here

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People Profiles, Tech Talk

Crypto Cool Kids Getting The Joke-Aim at Bank Licensing

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What’s Next? CryptoCurrency Bank License; Crypto Cool Kids New Goal: Stay Inside Regulatory Goal Posts

Coinbase Inc. and another cryptocurrency firm talked to U.S. regulators about the possibility of obtaining banking licenses, a move that would allow the startups to broaden the types of products they offer.

Coinbase, which operates the largest U.S. cryptocurrency exchange, met with officials at the U.S. Office of the Comptroller of the Currency in early 2018, according to a person familiar with the matter. Meanwhile, ivyKoin, a payments startup, in recent weeks sat down with officials at the Federal Deposit Insurance Corp., this person said. IvyKoin President Gary Fan confirmed the meeting.

The discussions included other topics, such as the firm’s business models, this person said. The companies might not seek a bank charter, which would significantly ramp up regulatory scrutiny. Whether they do so will depend on whether they decide the benefits of becoming a bank outweigh the costs.

A federal banking charter would let the firms swap a hodgepodge of state regulators for one primary federal one. The companies would also gain the option of directly offering customers federally insured bank accounts and other services, rather than partnering with existing banks.

A Coinbase spokeswoman declined to comment on the meeting. She said the firm is “committed to working closely with state and federal regulators to ensure we are properly licensed for the products and services we offer.” An OCC spokesman declined to comment.

IvyKoin pitches itself as a payments platform for government-issued currencies and cryptocurrencies that uses “know your customer” technology to detect money laundering. In the near term, ivyKoin is working with banks rather than trying to become one, but it asked regulators about a banking license to understand what might be necessary if it decided to apply, Mr. Fan said.

At the meeting, they “talked about our business model, what we hope to accomplish, next steps for us, key risks and how we can help banks manage that,” he said. “Our experience was really positive and [regulators] actually encouraged the discussion.”

Evan Fisher prospectus.com
Evan Fisher, Prospectus.com

“The past 18 months has seen an explosion of interest in ICOs, too many of which are unconstrained and outside the goal posts of what makes sense,” said Prospectus.com’s Evan Fisher, a former sell side investment banking veteran now consulting fintech firms on ICO best practices. “And, having the proper documentation in place for both investors and regulators is the most important part of any successful fund raise.”

Fisher is experienced in helping startups frame their value proposition properly and stresses founders need to ensure that when regulators do start to take a closer look at ICOs and cryptocurrencies, that all the necessary documentation is on file and easily obtainable.

Keep reading via 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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Global Macro Strategy, People Profiles, Tech Talk

Goldman Sachs Goes Crypto; Opens Bitcoin Trade Desk

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Goldman Sachs, the venerable investment bank and trading house, has been called lots of things, including “Squid.” But nobody on Wall Street can dispute the fact that $GS is uniquely innovative and perhaps, a firm that can smell the trail of money better than its peers and explains why Goldman is opening a bitcoin trade desk. While JPMorgan CEO Jamie Dimon has repeatedly said bitcoin and other cryptocurrencies are at worst, the foundation to a Ponzi scheme, and at best, a passing fad, Goldman’s CEO Lloyd Blankfein has a different, more open-minded view. As evidenced by last week’s announcement, Goldman is opening a digital asset trade desk to accommodate a growing spectrum of hedge funds, endowments and foundations that already own digital assets or intend to deploy funds to the alt currency asset class. The new digital asset desk will be led by a fellow named Justin Schmidt, an MIT quant jock who previously worked at several quantitative investment management firms, including a hedge fund connected to The Schoenfeld Group.

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Jason Schmidt, Goldman Sachs Crypto Trader

As reported by NYT reporter Nathan Popper, “…While Goldman will not initially be buying and selling actual Bitcoins, a team at the bank is looking at going in that direction if it can get regulatory approval and figure out how to deal with the additional risks associated with holding the virtual currency….Rana Yared, one of the Goldman executives overseeing the creation of the trading operation, said the bank was clear-eyed about what it was getting itself into…”

Ms. Yared said the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted Bitcoin millionaires and didn’t know how to handle them. The ultimate decision to begin trading Bitcoin contracts went through Goldman’s board of directors.

Whether your company is a fintech startup planning a private placement offering, a crypto concern with a custom token offering that is seeking to raise capital from qualified or accredited investors via an Initial Coin Offering (ICO), a Securities Token Offering (STO)or if you are fast growth firm setting the stage for an initial public offering (IPO), a properly prepared offering prospectus or offering memorandum is required by your investors and industry regulators that govern securities offerings. Issuers seeking expert, yet affordable investor document solutions rely on experts at Prospectus.com.

Goldman has already been doing more than most banks in the area, clearing trades for customers who want to buy and sell Bitcoin futures on the Chicago Mercantile Exchange and the Chicago Board Options Exchange.

In the next few weeks — the exact start date has not been set — Goldman will begin using its own money to trade Bitcoin futures contracts on behalf of clients. It will also create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients.

To read the full NYT story, click here.

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

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Tech Talk

Fintech Startup Alpha Trading Labs Brings HFT to Retail Traders

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Alpha Trading Labs, the Chicagoland fintech “crowd sourcing startup” has thrown the gauntlet down and threatens to democratize the sacred world of HFT wonks, those hoodie-wearing quant jocks who occupy $1mil per yr cubicles at high-frequency trading firms like Virtu, Citadel, Jones Trading, Hudson Trading, and Two Sigma (among others). You know who mean, those cool kid computer wizards who make their bosses billions (or at least tens of dozens of millions) using computer-generated trading schemes. That’s right, Matilda (and you Mark, Mary, Max, Moshe, Mel, and Melissa) and everyone else who aspires to be a Flashboy (or Flashgirl), can jump into the fray thanks to serial fintech entrepreneur Max Nussbaumer.

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Max Nussbaumer, Fintech Entrepreneur

While the criteria to be accepted into the new program sponsored by fintech startup Alpha Trading Labs is not nearly as simple “High Frequency Trading for Dummies“, if you’ve got a reasonable thesis as to trading strategy and are reasonably computer literate, each of you can become a quant jock now! No more merely dreaming about having command and control of the same HFT weapons deployed by those ‘secretive prop trading firms’ that make fractions of pennies tens of thousands of times per day while trading cross the electronified world of stock, options and futures trading.

Per excerpt from WSJ trading markets reporter Alexander Osipovich’s latest piece, “Alpha Trading Labs is throwing its system wide open, with a programming tool kit that anyone can use to access high-powered trading machines.The company, which launched its do-it-yourself platform in January, has invited anyone with a trading idea and coding skills to try it out. Those who craft successful algorithms can get a chance to run them and share profits with Alpha Trading Labs, whose owners have up to $100 million to allocate to crowdsourced trading strategies..”

Chicago-based Alpha Trading Labs says it will execute trades through computers housed in the data centers of Nasdaq Inc., the New York Stock Exchange and other markets, a practice known as “co-location.” For those not aware, HFT firms use co-location to execute trades without being slowed down by the need to transmit electronic signals over long distances.

Alpha Trading Labs’ main investor is CMT Group , a firm founded by two veteran traders in 1997, with businesses that now run the gamut from high-speed trading to venture capital to real estate. It was an early investor in Dollar Shave Club, the razors-by-mail service acquired by Unilever PLC for $1 billion in 2016.

Read the full story at the WSJ via this link

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

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People Profiles, Tech Talk

SEC Subpoena Smackdown: ICO Issuers & Enablers Get Pinned

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An SEC subpoena is not exactly what any Issuer (or stock promoter) puts on the top of their birthday wish list. And, for crypto cool kids who are either already a member of the ICO Issuers Club, or who have applied to become part of the dapper dapp crowd that is floating digital coin or digital token offerings, its time to make sure that you have set aside real cash (or crypto-currency) for defense counsel fluent in engaging with the SEC.

According to multiple news outlets, the top US securities regulator has launched a series of cluster bombs in the form of SEC subpoena aimed at ICO Issuers and respective enablers. Included in the SEC’s ‘outreach” are  ‘consultants, advisors, promoters, and other actors who have played a role in helping blocktech start-up companies raise what industry experts believe to be billions of dollars through initial coin offerings. Of that figure, forensic investigators believe at least $200 million raised by several dozen ICO companies during the past year  has “gone south.”

As noted by investor document preparation firm Prospectus.com, “According to multiple news outlets, in recent weeks the SEC has sent subpoenas to dozens of blocktech companies and individuals who are involved in cryptocurrency, including crypto crowd thought-leader Patrick Byrne, the founder of Overstock.com and his company’s cryptocurrency-focused subsidiary, tZero. When Overstock announced in early November they would be launching an ICO, the company’s shares skyrocketed from the the mid $20’s to nearly $90 per share in a manner of days. When it was revealed this week that Overstock (NASDAQ:OSTK) was one of multiple companies that have received SEC subpoenas, its share price plunged 20% in two days.

“ICO Issuers are compelled to understand the term “Caveat Venditor”, lest they be moved to the top of the SEC’s ICO Subpoenas list.”

The targets of the initial coin offering crackdown subpoenas include potential SEC enforcement actions against companies that have launched ICOs, the cryptocurrency equivalent of IPOs, as well as their lawyers and advisers. The subpoenas reportedly include requests for information on how ICO sales and pre-sales are structured, according to anonymous sources to WSJ. The SEC is also requesting the identities of the investors who bought digital tokens, The New York Times found. The SEC declined to comment.

caveat-venditor-ico-issuersPeter Berkman, a Florida-based securities attorney and US Federal Bar Association member who also advises investor document preparation firm Prospectus.com, stated “Nobody should be ‘shocked’ that regulators are stepping up their scrutiny of ICOs given that many have the characteristics straight out of “Boiler Room 4.0.” There’s a cadre of bad actors and so-called promoters who are preying on the naivete of start-up entrepreneurs as well as the greed profile of unsophisticated investors,” stated Berkman.

There are steps that ICO issuers can take to stay inside the regulatory goal posts, or at very least, under the radar given that SEC rules for ICOs remain in the ‘forming stage. Attorney Berkman advocates ICO Issuers should be compelled to understand the term “Caveat Venditor”, unless they want to be moved to the top of the SEC’s ICO Subpoenas list. Prospectus.com thought-leaders were arguably early to opine that among other ICO compliance guidelines to follow, accredited investor guidelines should be embraced by ICO issuers. The firm has provided multiple crypto cool kids and start-up entrepreneurs with a best practice approach to raising capital in the course of advancing  digital token and digital coin offerings.

To continue reading via blog post at Prospectus.com, click here

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Tech Talk

Memo to Asset Managers : Get on the Blockchain Bus or Get Run Over

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Asset Management Industry is Notorious for Waste: Its About Blockchain, You Blockheads. NOT Bitcoin,

Blockchain Dapps Can Mitigate Risk of “Death By Drop Copy”

Any asset manager in today’s world who has more than $500 of AUM does not need to be fluent in the language of fintech, blocktech or be able to explain ‘the internet of things’ to understand the benefits of embracing blockchain dapps and the power of distributed ledger technologies. Any asset management firm that claims to be operating in the world of institutional fund management does need to get on the blockchain bus–or risk getting run over by it.

(courtesy of Prospectus.com LLC) As part of ongoing series “Its About Blockchain, Blockhead, Not Bitcoin!”, FT reporter Attracta Mooney hit the yellow zone of the target in a recent column profiling the how, where and why investment industry asset managers in UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan and Australia could enjoy nearly $3billion in annual savings were they to embrace blockchain’s distributed ledger powered processes. After all, the new ‘internet of things’ blockchain value proposition for securities industry purposes is specifically designed to deliver at very least, greater efficiency in work flow, greater trust in the information being shared, enhanced transparency among trade processing constituents and more effective use of human capital resources.

Where? Let’s focus on the back office, the central place where administration of transaction reporting, accounting, trade processing and related legacy “drop copy” tasks take place. How? Distributed Ledger dapps leveraging the blockchain ecosystem are intended to mitigate duplicitous human interactions within the context of transaction affirmation, transaction processing, transaction reporting and transaction documentation.

If the above is confusing to you, or if you have not yet interrogated any of the thousands of simple-to-understand primers and tutorials on this topic (including the growing assortment of content pieces published in the news section of Prospectus.com) then you should

  • schedule a call with a fellow named George Chrisafis, who oversees fintech merchant bank SenaHill Partners’ Emerging Tech and Infrastructure Advisor Group. George is an IT industry grey beard with 30 years of domain expertise and his CV includes senior roles at the world’s biggest banks. When it comes to distributed ledger—as well as AI applications being developed for the securities industry, George is a reliable source of insight.
  • bring a high school or college-aged family member to your office and have them deliver a 5 minute dissertation on the topic of blockchain and distributed ledger, and to limit the cryptocurrency explanation to 1 minute. For some, the topic is confusing, but this is confusing, there is no shortage of simple primers and tutorials that frame the value proposition of distributed ledger.

Why Asset Managers Should Embrace Blockchain applications Barring above steps to independently confirm the thesis put forward in the FT article (excerpt and link below), let’s jump straight to the topic that best defines the purpose of asset managers: MONEY. Now let’s delve into the real cost and real expenses associated with their role(s) from both a human capital perspective and IT angle. [The information cost (research) and marketing expense components can be addressed in a different opinion piece}.

From a human capital expense perspective, transaction reporting tasks are notorious for their duplicative and redundant steps spread across various internal departments; many back-office professionals lament the high risk of Death by Drop Copy, simply because much of their time is spent drop-copying one file from one software application into an unconnected software application that performs a different task. From an IT perspective, let’s opine that most investment management firms are spending considerable sums each year on software licenses, software maintenance, and software administration. Succinctly, blockchain applications can save tens, if not hundreds of thousands of dollars to an established asset management firm—in turn enabling a firm to deploy those cost savings to revenue producing initiatives and recalibrating how internal human capital resources are better utilized.

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MiFID II ETFs
ETF News, Global Macro Strategy, People Profiles, Strike Price

MiFID II Fuels Massive EU Move Towards ETFs, ETF Options, Sec Lending

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MiFID II Implementation Triggers Flow of $50b into Europe ETF Market In First Weeks of 2018; ETF Sec Lending and  ETF Options Growth Expected to Drive EU Financial Markets.

“What we’ve seen for the first time in European ETF trading is really a concerted interest in trading ETF options in Europe. A load of clients use ETF options in the States, but in 2018 — and it’s a culmination of MiFID II (and other factors) — I think there is an acceptance that this is now a practical and attractive proposal for people who want to trade volatility, buy protection or raise income by selling options. That’s really unlocking a whole new dimension in the way end-investors can use ETFs,”

Twenty-five years ago, when SPDR, the original Exchange-Traded Fund (ETF) was christened on the American Stock Exchange with the nickname “Spiders”, this MarketsMuse senior curator was one of the first market-makers on the Amex to trade the ‘new-fangled’ product.  Along with a cadre of other professional traders and floor brokers from that time, we’re now viewed as the original cast of The ETF Story.  A quarter of a century later, ETFs represent $3trillion in assets; a number that some expect to double in size in just a few more years.  Across the US financial market ecosystem, the ETF evolution has transformed investment strategy schemes on the part of retail and institutional investors within the context of equity, fixed income, commodities and derivatives market investment styles. And with the January 2018 implementation of  The Markets in Financial Instruments Directive II (MiFID II), few will dispute that Europe is on the cusp of realizing a massive asset allocation transformation to ETF constructs, as the benefits to investors and industry participants cannot be understated.

Slawomir Rzeszotko, Jane Street
Slawomir Rzeszotko, Jane Street

“Best execution and post-trade transparency are two areas where MiFID II seems to have had an impact on ETF trading,” said Slawomir Rzeszotko, head of institutional sales and trading, Europe, at quantitative trading firm, global liquidity provider and market maker Jane Street Group LLC in London. “In both cases, the changes appear to have encouraged institutional investors to execute more trades via (request for quote platforms).”

For those who are still unclear as to the value proposition of utilizing exchange-traded funds, let us the count the ways, starting with the ability to deploy assets based on investment theme (e.g. industry or index of specific types of stocks or bonds) via an instrument that trades just like a stock in terms of transparency, liquidity and low cost commissions. There’s a host of reasons why retail investors are generally better served to use ETFs vs. Mutual Funds. Let’s not overlook Warren Buffett’s view that index investing is a smarter approach for individual investors. For institutional investors, the list of reasons to embrace ETFs has become equally compelling. We won’t provide a tutorial if you haven’t gotten the memo yet, we’ll simply point you to the text book explanation.  It’s taken a long time for institutional investors in the U.S. to ‘get the joke’, now its time for European ETF Issuers to ramp up the education and awareness process aimed at institutional investors. Here’s a few hints as to how MiFID II implementation is going to benefit those charged with overseeing institutional portfolios, pension assets and end retail clients:

  1. Greater Transparency (which delivers Greater Liquidity)
  2. Lower Cost to Execute (vs mutual funds)
  3. Ability to allocate to specific themes
  4. Portfolio Transition Ease
  5. Securities Lending (Sec Lending) Opportunities (more income to funds that hold ETFs)
  6. Introduction of Options on ETFs–to enable hedging and portfolio optimization schemes.

“When volumes and trading hit a certain critical point, the acceptability of any of those things that trade as collateral becomes more feasible.” The look-through liquidity afforded by the MiFID II rules means “we’re at a tipping point where ETFs themselves are being recognized increasingly as something that can be used in the world of lending. It means the borrow market in ETFs in Europe is moving toward where it is in the States.. A good “borrow” or securities lending market also lends itself to a “functional options market..”

We’ll leave the lengthier explanation to P&I’s Sophie Baker–who put forth a superb dissertation in the Feb 19 2018 edition of Pensions & Investments Magazine titled “Europe in line for ETF boom, thanks to MiFID II”.  MarketsMuse ETF curators also extends a big shout out to “Dame Deborah Fuhr”, who is viewed by most across ETF land as the “Queen of ETFs”.  Her Eminence Dame Deborah is an industry icon and founder of research platform and industry think tank ETFGI. When it comes to objectively framing the ETF value proposition within the European theater, nobody does it better–so we think you should follow her on Twitter.

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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People Profiles, Tech Talk

BlockTech Bid Repeats via Bloomberg: Its About Blockchain, NOT Bitcoin

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(MarketsMuse fintech and blocktech curators extend our thanks to Prospectus.com LLC for the following contribution)-Bloomberg Intelligence reporter Jonathan Tyce wins the Valentine’s Day Award for Very Good Framing courtesy of his latest piece “Blockchain is Coming Everywhere, Ready or Not” –one of a series of articles by Tyce that puts the blockchain value proposition into proper perspective. Without suggesting there is any IP underlying the thesis advanced by Tyce,  the opening sentence speaks volumes to those who are crypto challenged and have the misinformed view that blockchain = bitcoin=all kinds of bad things, including but not limited to ‘investment bubble”, Ponzi scheme, “pump and dump” ICOs where the Issuer is now hiding in the ‘dark web’ or sun-tanning in Belize, and lastly, ‘one of the things that lets people create crazy currency that isn’t even fungible’. Bid repeats: Its all about the blockchain, blockhead. Not bitcoin. Welcome to BlockTech.

Without intending to invite the BloombergLP copyright cops to castigate this blog for infringement violations, this blog has posted a series of original articles themed with the same title of this post. With that disclaimer, we’ve responsibly stayed within the goal posts and merely excerpted select portions of Tyce’s piece to advance smart thinking and give credit where due…

The applications of blockchain technology will spread in 2018 far beyond bitcoin and, perhaps more surprisingly, way beyond financial services. Significant disruption and new business opportunities are on the menu. Four of the most-critical benefits from distributed-ledger technology can be encapsulated within trust, transparency, cost and speed. Where will the disruption occur?

Blockchain is now a familiar term to many, though in most cases, its meaning will be inextricably linked to bitcoin after a 10-fold price surge in 2017 valued the cryptocurrency at more than $180 billion.

This is only one strand of the story for Europe and globally. The applications of blockchain technology will spread in 2018 far beyond bitcoin and, perhaps more surprisingly, way beyond financial services.

For starters, huge improvements in efficiency and transaction speeds, cost savings and enhanced security are on the menu, with significant disruption and new business opportunities likely to follow.

Distributed-ledger technology

Putting the semantics to bed early, blockchain is the name designated to a string or chain of transaction records (blocks), cryptographically signed with “hashes,” or digital signatures. Though undoubtedly the most high-profile application of blockchain, the bitcoin network is just one example of how cryptocurrencies and other transactions can use this technology.

Blockchain is effectively the means to create tamper-proof records of data and transactions — whether that is a money transfer, vote cast, medical record or change of property ownership. It is just one of a variety of decentralized database technologies that exist across multiple locations. These are known as distributed ledgers, and it is within these so-called DLT technologies that great opportunity exists.

To continue reading, please visit Prospectus.com LLC blog

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Global Macro Strategy, People Profiles

MiFID II : Sell-Side Research Analysts Unwanted Thanks to Unbundling

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(MarketsMuse blog post image courtesy of Institutional Investor)–Thanks to MiFID II, Sell-Side Research Analysts are not only unwanted, they will become increasingly underemployed in terms of compensation, or simply unemployed. This increasing view is bleak for investment bank research wonks, but provides for a career re-purposing on the part of experienced research analysts. At least that’s one thesis, as advanced by Institutional Investor’s Amy Whyte. (link to article below).

Wall Street’s investment bank research analysts, the folks who have long been notorious for peddling buy recommendations on companies in which their respective firms serve as the lead or co-lead underwriter to the company whose shares and/or bonds they tout are now facing a new professional career dilemma and its directly related to MiFID II, the EU’s revamped financial industry regulatory framework. Part of the new regs that rolled out at the beginning of 2018 require investment banks to charge their clients separately for research provided, as opposed to bundling the cost of research within trade execution fees/commissions charged to clients. This is actually a very big deal, as it now puts the onus on investment banks to not only justify the “value” of their manufacturing buy recommendations, but opens Pandora’s Box insofar as institutional investor clients of those banks can now measure the value of that research in a granular fashion.

MiFID II’s negative impact on investment bank research analysts is one that is perhaps bigger than the reputational crisis they suffered consequent to the bursting of the internet bubble during the turn of this century. Back then, research analysts were castigated for peddling grotesquely overvalued dot com stocks–many of which imploded within less than 2 years of their banks underwriting the IPOs of the same companies.  For those not familiar with history, a simple revisit to the wikipedia page of former Merrill Lynch Analyst Henry Blodget provides a case study in conflicted commentary peddled by analysts back in those days (keep reading below for the Blodget story). Point being-sell-side research analysts were (deservedly) thrown under the bus for being conflicted in their recommendations, leading to a short-lived surge in startup independent research firms. Now, investment bank research analysts are facing another career crisis thanks to unbundling research regulations introduced by MiFID II.

Unbundled pricing models will change research market forever (Bloomberg Intelligence Aug 2017)
Banks are adjusting their pricing models for investment research in preparation for EU reforms that will prevent research from being paid for directly using dealing commissions. In an unbundled world, based on execution-only commission rates where payments for research are separated, competition in equity research, as well as fixed-income, currency and commodities research, is likely to rise. Managers may look beyond traditional sources, triggering fragmentation. They may also move research in-house.

But all is not as bad as it sounds for the research analyst community at large. Sell-side research analysts who have strong pedigrees are presumably well-positioned to take on similar roles at buy side firms, or as the II article suggests, these folks are nicely qualified to serve as Investor Relations professionals for corporations. For US-based analysts, the urgency to repurpose is not as severe as it might be for their EU counterparts, as the US SEC has provided a reprieve for the time being according to one expert.

MiFID 2 regulations require investment research to be paid for in one of two ways: from a fund manager’s own account, which may be recoverable by raising fees, or via a ring-fenced client research-payment account. While regulators will permit research charges to be collected alongside transaction commissions, subject to strict conditions, there should be no link to transaction value or volume. The move to an unbundled research model will limit the long-held use of commissions and is being disruptive to the industry globally.

Henry Blodget
Henry Blodget

Flashback to Blodget….Putting into context, he was the 1990’s icon for being a dot com MarketsMuse. The likes of Henry Blodget made no bones promoting dot com stocks underwritten by his former employers Oppenheimer & Co and then Merrill Lynch. Blodget was ultimately barred for life from the securities industry for his egregious touting and to make sure the door didn’t slam his butt on the way out of Wall Street, he paid a $2mil fine and agreed to give back another $2mil that he earned while being the most prolific stock promoter of his generation.  Good news-Blodget repurposed himself and is co-founder/CEO, Editor-in-Chief and publisher of financial industry rag Business Insider.

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.

Here’s the article from Institutional Investor

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ETF News, Tech Talk

ETF Broker Rolls Out Quote Capture Tool for Block Trades

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JERSEY CITY, N.J., Jan. 17, 2018 /PRNewswire/ — ETF broker WallachBeth Capital, a leading institutional brokerage firm, has announced the Phase I roll out of its internal proprietary Quote Capture platform. The platform further enhances WallachBeth’s commitment to providing institutional clients the highest degree of transparency throughout the ETF execution process.

WallachBeth has always leveraged the advantages of a competitive quote model to source liquidity for outsized ETF block trades, providing price improvement and increased liquidity in often hard-to-trade and/or illiquid products. In light of clients’ interest in the transparency provided by RFQ (“Request for Quote”) platforms, WallachBeth’s Quote Capture tool allows clients to quantify and validate their price discovery process and satisfy compliance obligations.

The foundation of WallachBeth’s ETF execution business is providing institutional clients high touch access to a full suite of execution strategies, coupled with agnostic advice throughout the trade lifecycle. WallachBeth continues to be increasingly relevant to the broadening number of institutions using ETF products and strategies to achieve their investment mandates. Andrew Mcormond, Managing Director, ETF Trading Solutions, at WallachBeth Capital states, “We always emphasize that best price often goes beyond a block trade. True best execution requires a comprehensive plan that includes experienced consultation, pre- and post- trade analysis and the invaluable expertise of seasoned ETF traders.”

About WallachBeth Capital LLC

WallachBeth Capital is a leading provider of institutional execution services, offering clients a full spectrum of solutions to help them navigate increasingly complex markets. The firm’s expertise includes ETF and equity trading, derivatives, and capital markets. Operating on a fully disclosed, agency-only basis, the firm is committed to facilitating all client needs with transparency and integrity. The firm’s website is located at www.wallachbeth.com.

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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ETF News, Tech Talk

Blockchain ETFs Debut-It’s About The Blockchain, Blockhead, Not Bitcoin!

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What’s Next for exchange-traded-fund land? Blockchain ETFs! Duh?! Aside from the efforts by the Winklevoss Boys and a cadre of others to introduce a Bitcoin ETF, Blockchain companies (now known as ‘blocktech’ firms) fall into the sweet spot for fintech investors and public companies that are pivoting, re-purposing or adding to their value proposition with a blockchain-based approach to enhancing e-commerce, big data applications or other tools are top candidates for an exchange-traded fund dedicated to the world of crypto and distributed ledger.

As noted by ETF.com, “..Today sees the debut of two Blockchain ETFs focused on blockchain technology, the first blockchain exchange-traded funds of their kind. The actively managed Amplify Transformational Data Sharing ETF (BLOK) lists on the NYSE Arca and comes with an expense ratio of 0.70%, while the index-based Reality Shares Nasdaq NexGen Economy ETF (BLCN) lists on the Nasdaq and comes with an expense ratio of 0.68%…”

In case you’ve been hiding under a brick for the past many weeks, blockchain technology is in the spotlight due to the mania surrounding bitcoin and other cryptocurrencies. If you were not aware, blockchain technology is the engine that powers the sauce that goes into cryptocurrencies. To coin the phrase (pun intended, courtesy of MarketsMuse top pundit), “Its all about the blockchain, Blockhead! Not the bitcoin!” –meaning the blockchain is foundation to wider applications, not just supporting digital money. In other words, blockchain serves as a “distributed ledger” that provides a secure and unalterable record of transactions that have taken place and other key pieces of information, storing them in linked blocks of data. Think of blockchain as a multi-dimensional spread sheet that lives in real-time and is refreshed with every interaction by those who are enabled to access the application. The bitcoin or token element is therefore the key or passport to accessing the spread sheet. So, it seems to make sense that as more companies seek to leverage this new generation technology, there will be more prospective candidates for blockchain ETFs, which are likely to morph.

ETF.com commentary profiling the new listings continues with “..BLOK was actually the first blockchain ETF to go into registration. The fund can invest in domestic and non-U.S. securities, including depositary receipts, according to the prospectus. It will focus primarily on firms that are developing or using blockchain or similar technologies.

According to Christian Magoon, founder and CEO of Amplify ETFs, developments among the companies in his firm’s Amplify Online Retail ETF (IBUY) alerted him to the fact that cryptocurrency was an emerging trend.

“That started to get us interested in the blockchain equities side of things given the potential of blockchain technology to disrupt; it certainly seems to have potential that is almost similar to the internet’s,” Magoon said.

The range of companies allowed in the portfolio covers those engaged in research and development, and the implementation of blockchain and similar technologies; those profiting directly and indirectly from demand for such technologies; those partnering with companies engaged in blockchain research, development and implementation; and those that belong to consortiums or groups formed to explore the potential of such technologies. Companies must also meet minimum size, price and liquidity thresholds.

Further, the portfolio managers consider the depth of the involvement of companies when selecting them for inclusion in the portfolio, classifying those that are selected as either “core” or “secondary” companies based on their activities, the prospectus said.

Magoon describes the fund’s strategy as “skating where the puck will be.”

“We think companies that are leaders today in researching, investing in or receiving revenue from blockchain are going to be well-positioned for tomorrow—similar to companies that engaged in internet technology early on,” he said.

Magoon’s firm offers actively managed and index-based ETFs, but he believes active management is particularly important for a fund such as BLOK.

“Our key differentiator is that we believe you have to be active when you engage in this space. In order to capture the upside and manage downside risk, you have to be, on a daily basis, looking at this and adjusting your portfolio,” he said, noting that a manager can slowly build or unwind positions, whereas index funds tend to make very binary decisions regarding including or selling a company. Further, while an index fund must wait until its scheduled rebalancing to reflect changes in the market, an active fund’s manager can react immediately.

 

Keep reading the story directly from the source..

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People Profiles, Tech Talk

What’s Next? Blockchain Feasibility Study Services

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The following is courtesy of a blog post published at Prospectus.com, the global consulting firm specializing in investor offering document preparation, feasibility studies and consultative guidance to tech entrepreneurs and others seeking to raise capital. As discovered by MarketsMuse fintech curators, the firm has opened a blockchain feasibility study practice area for crypto cool kids..,

Blockchain Feasibility Study For Cool Kids and Grey-beards Like Me. I might be a ‘grey-beard’ straight from the cast of Mad Men, but I’ve been to plenty of tech rodeos in my time and I’ve come up with an idea that is so brilliant, it has already been nominated for the LinkedIn 2018 Global What’s Next? Award for Best Fintech, Martech, Medtech, Insuretech or BlockTech Idea, Ever!” Very smart folks within the bitcoin and blockchain ecosystem who have heard about it have said, “Wow! I wish I thought of that! You could make Billions from it!” And of course, my great technology idea not only solves a problem by making it easier to do a whole bunch of things, it has a blockchain back-drop that leverages distributed ledger technology and naturally, there is a utility token component that comports with the established crypto community’s definition of ‘store-of-value” and it can be expressed in the form of a new bitcoin, or an Ethereum energized alt currency and it can nest on Ripple. Do you know how many ICOs are raising tens of millions and in some cases, hundreds of millions of dollars?! This is a no brainer and we’ll be listed on all of the bitcoin exchanges in a few months.

My idea is going to change the way discrete networks connect, how groups of people and nodes interact within specific industry workplace settings, and it will change the way in which people live.

You’re either going to hear the above pitch or you’re thinking of making it. But without a blockchain feasibility study in hand, the conversation will be short.

If you didn’t get the memo titled “ICO Traded Ahead,” the nascent stage, yet multi-billion-dollar ICO marketplace is being viewed as fast track path for pre-revenue startups to raise capital without having the burden of adhering to accredited investor guidelines for private placement offerings and aims to accomplish the same outcome as a traditional Initial Public Offering.  It is has also become a virtual pump and dump arcade.

Oren-Raphael
Oren Raphael, Tech Entrepreneur

According to Oren Raphael, the 30-something former international banker turned-tech entrepreneur, “the ICO marketplace has already become a virtual #shithole of penny-stock populated, half-baked ideas riding the wave of euphoria courtesy of the birth of blockchain.” Raphael (click image to right for his linkedin profile) is the founder and chief technology architect of RAADAAR, an IP rich, location proximity software firm that has developed a “real world” mobile device app that provides the crucial last few feet of connectivity between consumers and a merchant’s cash register and is already being rolled out by independent gas station / convenience store operators in Southern California.

The Series A round for RAADAAR was completed one year ago, and after meeting the original deliverable milestones well ahead of schedule, Raphael set out to do a Series B round with proceeds earmarked towards product launch. When reaching out to the investor offering document firm Prospectus.com to prepare a Reg D Offering Prospectus, Evan Fisher, a senior member of Prospectus.com who has framed crypto token value propositions for several startups in the past few months had a ‘aha moment’ in the initial consultation. He recommended that Raphael should want to have a blockchain feasibility study for his existing product, not just a typical business plan that would be mapped as an exhibit to the Offering Prospectus. According to Raphael, “It was as if Fisher hit me with a lightening bolt when we were discussing the business plan I thought I wanted his people to write for me.” Two weeks later, Raphael, working with Prospectus.com team, produced a plan that has already fallen into the hands of a discrete universe of investment groups focused on blockchain opportunities, two of which have put a 10x multiple on his initial enterprise value. A classic example of what happens if you perform an objective blockchain feasibility study so as to fully curate out opportunities that lever distributed ledger technologies.

To continue reading, please visit Prospectus.com

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Fixed Income, People Profiles, Tech Talk

SEC Chair Jay Clayton Axe: Greater Corporate Bond Market Transparency

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Corporate Bond Market Transparency 4.0 MarketsMuse fixed income fintech curators, who have been on the beat for better than 8 years, were keen to cover this week’s inaugrual meeting of FIMSAC.  e-Bond trading system founders, fixed income fund managers and fintech aficionados who have long lamented the limited degree of US corporate bond market transparency and less-than-likeable liquidity when trading corporate bonds in the secondary market and who ‘get the joke’ insofar as the benefits of embracing electronic trading platforms for corporate bonds might have a new advocate: SEC Chair Jay Clayton. At least that’s the way it appears based on comments Clayton made on Thursday while speaking to members of the Fixed Income Market Structure Advisory Committee (FIMSAC) during the group’s first meeting in Washington DC.

Whether Clayton does a typical White House walk-back after financial industry lobbyists turn up the heat in effort to preserve their legacy role controlling order flow and pricing remains to be seen. Because Clayton’s axe is less focused on institutional participants versus retail investors when stating “Main Street investors want liquidity; it is a sign of stability and resiliency..” he may not understand how the corporate bond works or the process by which individual investors become holders of corporate debt within their portfolios. If that’s the case, he’s perhaps perfectly suited to be a member of the present White House administration.

The importance of fixed income markets is “difficult to overstate,” Clayton said, noting the value of outstanding corporate bonds rose 76 percent between 2006 and 2016, compared to equity market cap growth of 40 percent.

“Individual investors are key participants in these markets, both directly and indirectly through pension funds and other pooled vehicles,” Clayton said, adding that he intends for the commission to continue focusing on these investors.

Courtesy of Law360 coverage: “Concerns regarding liquidity, or the ease with which buyers and sellers can match up in a given market, have been raised by bond market investors in recent years as big banks that serve as bond dealers and market makers, acting on new regulations imposed in the wake of the 2009 financial crisis, have reduced their balance sheets to cut costs and rein in risk.

The banks have shrunk their balance sheets by scaling back on the large bond positions they once held and used for creating markets for bond investors.

Some bond market participants have said the smaller balance sheets have led to reduced liquidity because it’s now harder to match buyers and sellers. That’s raised concerns that investors could lose lots of money should they need to quickly sell a large block of bonds into a market with few buyers.

Companies seeking to raise capital via private placement of debt instruments and in need of offering prospectus document preparation services turn to investor document specialists at global consultancy Prospectus.com

The wider concern is that if liquidity is already fragile it could essentially freeze during a time of financial stress when lots of investors choose to sell their bonds. When that happens, as it did in 2007, a domino effect kicks in which, given the size and reach of global bond markets, poses a threat to the world’s economy.

Committee member Gilbert Garcia, managing partner of Houston-based bond manager Garcia Hamilton & Associates, said he trades daily and has firsthand knowledge of a lack of liquidity during normal trading conditions, especially for large blocks of bonds.

“What we need to do is be ready for the next crisis,” Garcia told other members of the committee.

Scott Krohn, Verizon Communications Inc.’s treasurer and also a committee member, raised a concern that yields on Verizon’s highly liquid bonds could be vulnerable to extreme volatility during periods of financial stress as investors flee riskier securities in favor of safer ones, such as Verizon’s corporate debt.

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