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ETF News

ETF Funds and Folks Nominated for 2016 Best Of by ETF.com

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The 2016 BEST ETF funds and People in the ETF industry...Each year, ETF.com and Inside ETFs orchestrate a list of Best Of-the top ETF funds and ETF industry players who have made the greatest positive impact on the industry and investors in exchange-traded funds. The nomination process and voting process is overseen by five of perhaps the most influential thought-leaders in the space. With that, MarketsMuse ETF curators are pleased to offer an advance look at this year’s categories and a selection of category nominees. Winners will be announced March 30 2017.

ETF.com and Inside ETFs are pleased to announce the finalists for the 2016 ETF.com awards. The awards are designed to recognize the people, companies and products that are driving the ETF industry forward and delivering new value to investors.

ETF.com Award winners are selected in a three-part process designed to leverage the insights and opinions of leaders throughout the ETF industry.

Step 1

The awards process began with an open nomination period running from Dec. 5, 2016, through Jan. 4, 2017. Hundreds of nominations from participants in all corners of the ETF space.

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World’s Largest ETF Conference
January 22-25
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Following the open nominations process, the ETF.com Awards Nominating Committee—made up of senior leaders at ETF.com, Inside ETFs and FactSet—voted to select up to five finalists in each category. Votes were tallied on a majority basis, and concluded this past weekend. The members of the nominating committee were:

  • Matt Hougan, CEO, Inside ETFs (Chair)
  • Paul Britt, Senior Analyst, FactSet
  • Elisabeth Kashner, Director of ETF Research, FactSet
  • Dave Nadig, CEO, ETF.com
  • Drew Voros, Editor-in-Chief, ETF.com

Winners from these finalists will be selected by a majority vote of the ETF.com Awards Selection Committee, a group of independent ETF experts. Committee members will recuse themselves from voting in any category in which they or their firms appear as finalists. Ties will be decided where possible with head-to-head runoff votes.

Members of the 2016 Awards Selection Committee Include:

  • Kim Arthur, Founding Partner, Main Management
  • Eric Balchunas, ETF Analyst, Bloomberg Intelligence
  • Ben Blaisdell, US Trust
  • Rob Glownia, RiverFront
  • Ben Johnson, Director of Global ETF Research, Morningstar
  • Tom Lydon, Editor, ETF Trends
  • Phil Mackintosh, Managing Director, KCG
  • Jason Nicastro, Senior Research Analyst, LPL Financial
  • Tyler Mordy, President & CIO, Forstrong Global Asset Management
  • Todd Rosenbluth, Director of ETF & Mutual Fund Research, CFRA
  • Jim Wiandt, Founder, ETF.com

Voting will be complete by Jan. 20, 2017, but results will be kept secret until they are announced at the ETF.com U.S. Awards Dinner on March 30, 2017.

If you’ve got fintech fever, or just a hot tip, a bright story idea profiling global macro, fintech, ETFs, options, or fixed income markets, or if you’d like to get visibility for your firm through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, etc., please reach out to MarketsMuse Corporate Communication Conciege via this link

AND THE NOMINEE CATEGORIES ARE …

Lifetime Achievement Award

Awarded annually to one living individual for outstanding long-term contributions to ETF investor outcomes, whether from a position of media, regulation, product provider, investor or other category. Previous winners are not eligible.

ETF of the Year – 2016

Awarded to the ETF that has done the most to improve investor opportunities and outcomes in 2016, by providing access to interesting areas of the market, lowering costs, delivering new exposures or otherwise creating better results for investors. There is no requirement for this award regarding when this fund was launched.

  • Fidelity Total Bond Fund (FBND): The nomination case for Fidelity’s actively managed total bond fund was simple: It crushed its benchmarks and its peers, outperforming 97% of its peer group in 2016.
  • Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC): The cheapest smart-beta ETF on the market, GSLC attracted nominator attention by offering quant-active exposure for just 0.09% in annual fees. Investors rewarded it with more than $1 billion in net flows.
  • iShares iBoxx $ High Yield Corporate Bond ETF (HYG): With more than $3 billion in net inflows, HYG is the poster child for the massive rise in interest in bond ETFs in 2016, particularly among institutional investors.
  • VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL): Nominees loved the simple investment rationale for ANGL … and the fact that it worked wonders. The fund, which buys debt that has recently been downgraded from investment grade to junk, performed beautifully in 2016.
  • Vanguard Total Market Index Fund (VTI): A perennial favorite of the nominating committee, VTI wins plaudits for being a near-perfect ETF, offering broad exposure, excellent tracking, extreme liquidity and a low price.

Best New ETF – 2016

Awarded to the most important ETF launched in 2016.

Note: Importance is measured by the overall contribution to positive investor outcomes. The award may recognize ETFs that open new areas of the market, lower costs, drive risk-adjusted performance or provide innovative exposures not previously available to most investors. Only ETFs with inception dates after Dec. 31, 2015, are eligible.

  • Deutsche X-trackers USD High Yield Corporate Bond ETF (HYLB): HYLB got the nod from nominators who applauded Deutsche Bank for adding fee competition into the ETF space: HYLB is priced at just 0.25% compared with 0.50% for its top peers.
  • Fidelity Dividend ETF for Rising Rates (FDRR): This intriguing new ETF, which selects firms that have strong dividend payments and returns that are correlated with rising rates, was described as “the perfect ETF for today’s market.”
  •  JPMorgan Diversified Alternatives ETF (JPHF): “Finally a big name and well-thought-out entrant to the liquid alts space,” wrote one nomination entry, echoing a popular sentiment about an ETF some have called “the hedge fund killer.”
  • NuShares Enhanced Yield U.S. Aggregate Bond ETF (NUAG): NUAG solves one of the biggest concerns facing investors: what to do with their bond portfolios. It offers a sensible, rules-based tweak to traditional bond exposure, increasing yield without going crazy.
  • SPDR SSGA Gender Diversity Index ETF (SHE): This well-received ETF was the second-fastest growing ETF launched in 2016. It offers, per one nomination, “a unique opportunity to seek a financial return on gender diversity and create change with capital by providing a transparent, relatively low-cost way to invest in companies that have achieved greater levels of gender diversity at the senior management level.”
  • Vanguard International High Dividend Yield ETF (VYMI): VYMI won plaudits for offering broad-based exposure to high-yielding companies at a very reasonable fee of just 0.30%. The fund looks not at historical dividend yield, but at expected future yield, to select components.

Most Innovative New ETF – 2016

Awarded to the most groundbreaking and disruptive ETF launched in 2016. This is an ETF that is pushing the envelope in terms of what kinds of exposures can be packaged into an ETF.

Best New U.S. Equity ETF – 2016

Best New International/Global Equity ETF – 2016

Best New U.S. Fixed-Income ETF – 2016

Best New International/Global Fixed-Income ETF – 2016

Best New Commodity ETF – 2016

Best New Currency ETF – 2016

There were no currency ETFs launched in 2016, so this category will not be awarded this year.

Best New Alternatives ETF – 2016

Best New Asset Allocation ETF – 2016

Best New Smart-Beta or Factor ETF – 2016

Best New Active ETF – 2016

Thematic ETF of the Year – 2016

Awarded to the most important “thematic” ETF of 2016, as measured by its ability to capture important macro plays that can lead to specific portfolio outcomes. There is no requirement for this award regarding when this fund was launched.

  • 3D Printing ETF (PRNT): 3D printing is super cool, and PRNT is the first ETF to focus on that market. It tracks a tiered, equal-weight index of companies involved in the 3D printing industry, including hardware, software, scanners, measurers and 3D printing centers.
  • Spirited Funds/ETFMG Whiskey & Spirits ETF (WSKY): More than just a great ticker, WSKY offers direct exposure to the hottest trend in spirits. With whiskey consumption growing faster than the price of a bottle of Pappy Van Winkle, maybe WSKY is a good bet.
  • PureFunds ISE Cyber Security ETF (HACK): Hacking stole the headlines in 2016, whether it was Yahoo, the DNC or Donald Trump. HACK offers pure-play exposure to the firms that fight the hackers, and you have to think that business is doing well.
  • PureFunds Video Game Tech ETF (GAMR): Video game contests are now attracting bigger audiences than many professional sports leagues. GAMR offers you a way to “play” that theme, holding companies operating in and around video games and virtual reality.
  • SPDR SSGA Gender Diversity Index ETF (SHE): This well-received ETF was the second-fastest-growing ETF launched in 2016. It offers, according to one nomination, “a unique opportunity to seek a financial return on gender diversity and create change with capital by providing a transparent, relatively low-cost way to invest in companies that have achieved greater levels of gender diversity at the senior management level.”
  • Summit Water Infrastructure Multifactor ETF (WTRX): Infrastructure spending is top of mind in the U.S., and climate change seems to be putting a premium on water. WTRX captures the trend by finding global firms with water-related equity exposure, choosing the best of the best based on a series of fundamental factors.

ETF Issuer of the Year – 2016

Most Innovative ETF Issuer of the Year – 2016

Awarded to the ETF provider that has launched the most innovative and groundbreaking group of ETFs in 2016.

New ETF Issuer of the Year – 2016

Awarded to the new ETF issuer that has done the most to improve investor outcomes through product introductions, product performance, fund management, investor support and innovation. Issuer must have launched its first ETF in 2016. ETF.com considers “issuer” to mean the “brand” of the ETF, as classified by FactSet.

Index of the Year – 2016
Awarded to the index that has done the most to provide new ways of considering investment strategies, opportunities or ideas, or which has simply delivered for investors in a meaningful way.

Index Provider of the Year – 2016

Awarded to the index provider that has done the most to improve investor outcomes through index introductions, research, advisor support and more.

ETF Liquidity Provider of the Year – 2016

Awarded to the ETF liquidity provider (including market maker, authorized participant, agency broker, etc.) that has done the most to improve investor outcomes through education, support, services, innovation and outreach.

Best Online Broker for ETF-Focused Investors – 2016

Awarded to the online brokerage offering the best package for ETF-focused investors. This award will consider commission-free trading options, education materials, supporting services and other factors.

Best ETF Offering: Wire House

Awarded to the wire house that offer its reps and advisors the best total offering in the ETF space, including research, data, tools, trading capabilities and education.

Best ETF Offering: Independent Regional Broker-Dealer

Awarded to the independent broker-dealer offering its reps and advisors the best total offering in the ETF space, including research, data, tools, trading capabilities and education.

Best ETF Research Paper – 2016

Awarded to the published paper from 2016 that most increased our understanding of how ETFs and/or index-based investments affect investor outcomes, whether in portfolios, markets or broader economic context.

Best ETF Issuer Website – 2016

Awarded to the most informative and user-friendly website by an ETF issuer.

Best Index Provider Website – 2016

Awarded to the most informative and user-friendly website by an index provider.

Best ETF Issuer Capital Markets Desk – 2016

Awarded to the ETF issuer providing the most useful support to advisors for ETF trading.

  • Deutsche Bank: Nominations noted that Deutsche Bank made great strides in its capital markets desk this year, to become a true leader in the space. One nominator wrote: “Great partner, incorporated feedback, improved processes, handled complex products smoothly, communicated well, innovative, etc.”
  • FlexShares: “Available anywhere, anytime, for analysis, competitive positioning, context or working with a trading desk of another firm,” wrote one nomination, adding that it always “tells it like it is.”
  • Goldman Sachs: “Goldman Sachs’ Capital Markets team, led by Steve Sachs, helps clients navigate the ETF marketplace through product education and by ensuring the highest-quality market for the firm’s ETFs,” wrote one entry. They’ve successfully placed a number of large block trades in the firm’s new ActiveBeta suite.
  • J.P. Morgan: Nominations called out J.P. Morgan’s desk for being ‘extremely helpful,” and also noted that it was “not afraid to tell market makers what to do.” That sounds like the kind of desk you want on your side.
  • SSGA: With a deeply knowledgeable team, nominators called out SSGA’s unique ability to respond to market crises, guide clients, and put things in perspective even in tumultuous times. “A world-class organization from bottom to top,” wrote one nominator.

 

ETF Strategist of the Year – 2016

Awarded to the ETF strategist or model portfolio provider that has done the most to improve investor outcomes in 2016. Automated investment services are eligible for this award, as they provide managed portfolios en masse to investors.

ETF Lawyer of the Year – 2016

Awarded annually to the law firm that has done the most to push the ETF industry forward, including driving new and innovative products through the Securities and Exchange Commission, advocating for the industry and the rights of investors, and improving outcomes for investors.

ETF Advisor of the Year – 2016

Awarded to an individual financial advisor or advisor team that is using ETFs to deliver high-quality portfolios to clients in an innovative way.

  • Chudom Hayes Wealth Management: “Consistently at the forefront of innovation in the industry, this group was one of the first ETF-based portfolio managers,” wrote one nomination paper. Others called out its overall leadership in ETFs within MSSB, where it is “one of the largest users of ETF portfolios.”
  • Edelman Financial Services: Regularly ranked the No. 1 independent advisor in the nation by Barron’s, Edelman is a giant, providing high-quality ETF-focused portfolios to the masses (including, admirably, clients with relatively low assets under management).
  • Stocker Woods Financial: A heartfelt nomination for Mike Woods called out his 20-year service to Carl Stocker, where he rose from a low-level advisor to become president and CEO this year. In the past year, Woods’ ETF book—managed through a relationship with CLS—has grown dramatically (up 198%).
  • Ritholtz Wealth Management: Led by the inimitable Barry Ritholtz and Josh Brown, Ritholtz Wealth offers steady ETF-focused portfolios to a growing client list. Nominations noted the “huge role” the firm plays in the media and its recent decision to reward clients who “don’t monkey around with their portfolios” by lowering fees for clients with good behavior.
  • The Veteran Financial Freedom Initiative: This unique partnership offers free or discounted financial planning and portfolio management to veterans, including ETF-only portfolios. The effort is a partnership between Agile Capital, a veteran-owned firm, and Capital Wealth Planning, which funds and covers the operational cost of the effort as a service to veterans.

Institutional ETF User of the Year – 2016

Awarded to an institutional investor that is using ETFs to deliver high-quality portfolios in an innovative way.

  • Houston Firefighters’ Relief And Retirement Fund: A nomination wrote: “In 2016, the Houston Firefighters’ Relief And Retirement Fund, led by Ajit Singh, became an early adopter and innovative user of numerous ETF-only investment solutions. As an example, Ajit and his team implemented a “Long and Lend” strategy using ETFs to take advantage of lucrative securities lending revenue. HFRRF is also an advocate for factor investing and thus implemented a solution to four diversified multifactor ETFs across various exposures.”
  • Lazard Asset Management: Lazard developed the “Lazard Capital Allocator Series” in 2004, and became an early and leading institutional user of ETFs to provide investors with attractive returns using an innovative investment approach. At a time of continued turmoil in the ETF strategist space, Lazard has been a rock of stability, delivering sensible and solid returns.
  • Rockefeller University: Rockefeller has quietly become a major user of ETFs, leveraging the products for transition management for its $2 billion endowment.
  • Tennessee Consolidated Retirement System: Tennessee was nominated for its sophisticated understanding of ETFs and its quant-driven approach to sector investing using ETFs.
  • USAA: “One of the biggest users of factor ETFs in the world,” wrote one nominator. “USAA has been on the forefront of leveraging ETFs to transform how institutional money managers deliver returns.”

New ETF Ticker of the Year – 2016
Awarded to the ETF with the best new ETF ticker. The ETF must have launched in 2016 to qualify.

  • BUZ: Sprott Buzz Social Media Insights
  • MENU: USCF Restaurant Leaders Fund
  • OLD: The Long-Term Care ETF
  • VNLA: Janus Short Duration Income ETF
  • WSKY: Spirited Funds/ETFMG Whiskey & Spirits ETF

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Fixed Income, Tech Talk

Fintech, Fixed Income Trading & Fragmentation-Now a Private Placement Bond Platform

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Fintech Fixed Income Trading & Fragmentation-What’s Next? A Venue for Private Placement Bonds & MTNs

Despite the seeming oversupply of electronic bond trading initiatives, the convergence of fintech and fixed income trading continues to spawn new electronic trading start-ups, bringing the total industry count to 128 venues.  The latest player, dubbed “Origin Markets”, aims at filling a void in the $1.5 trillion Medium-Term Note space aka private placement bond market. The “still-in-beta mode” initiative is based in the UK and backed by a consortium of global banks led by BNP Paribas, Bank of America Merrill Lynch, Societe Generale and Credit Suisse.

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Raja Palaniappan CEO Origin Markets

Origin’s founder and quarterback is Raja Palaniappan, a former Credit Suisse flow trader and MIT wonk who cut his teeth trading MTNs at various firms during the past 9 years and was most recently a VP responsible for making markets in investment grade and crossover corporate bonds and CDS at Credit Suisse.

A spokesperson for UK-based Origin said its platform “simplifies issuance in the medium-term note private placement market by acting as a central information source.” The business model allows dealers to receive targeted funding levels from issuers on a single platform and allows users to foster new relationships through cloud-based technology and bank-grade security.

“[Issuers] can optimise their funding using the built-in cross-currency pricer, comparing their funding levels to their own and their peers’ levels in the secondary markets,” Origin said.

Joakim Holmstrom, head of funding at Municipality Finance, explained the platform makes the medium term note process more efficient and provides access to a broader pool of dealers. Ben Powell, head of funding for IFC, added that Origin’s platform “simplifies what was once a manual process prone to inefficiency. It allows us to manage our dealer communication in one central place.”

The platform’s full launch is expected later this year and brings the total number of electronic fixed income platforms to 128, according to a recent compilation of platforms by front office trading consultant John Greenan.

Bob Mahdavi, the CTO for private placement bond documentation firm Prospectus.com stated “The MTN market is indisputably one of the largest sectors in terms of number of issues, yet it is populated by thousands of private issues that don’t typically lend themselves to being traded in an electronic venue.” Added Mahdavi, whose firm works with tens of dozens of Issuers, as well as attorneys and boutique investment banks throughout Europe and Asia in preparing debt offering documents, “You can build it, but will they come?”

According to fintech merchant bankers at SenaHill Partners “When considering the still nascent stage impact of electronic venues focused public company investment grade corporate bonds, including the likes of startup Electronifie among others, a platform that can prove truly effective and liquid for MTNs can prove to be a big challenge, albeit the backing of big banks does provide some wind in the sail.”

If you’ve got fintech fever, or just a hot tip, a bright story idea profiling global macro, fintech, ETFs, options, or fixed income markets, or if you’d like to get visibility for your firm through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, etc., please reach out to MarketsMuse Corporate Communication Conciege via this link

As noted in a 11 Jan story in TheTradeNews and citing the work of Greenan, between November 2016 and January this year alone, 14 new fixed income trading platforms joined the market.

“…The asset class is overcrowded with trading venues as regulation forces the structure of fixed income across instruments away from a centralised model – mostly due to bank balance sheet constraints – towards a decentralised model….Market participants have said the explosion of venues is causing fragmentation and a ‘liquidity drought’ in global bond markets.”

Large buy-side firms and asset managers have the opportunity to act as price makers rather than price takers, according to a quarterly report published by the International Capital Market Association (ICMA) this week.

The report said the bond market has seen a decrease in ratio turnover, despite an increase in market size and overall turnover against a backdrop of bond issuance, as issuers take advantage of low interest rates globally.

Joanna Cound, head of public policy EMEA at Blackrock and a member of the ICMA board, explained this has led to liquidity in fixed income markets suffering, something regulators have taken a greater interest in over the last year.

Fixed income participants are wary the bond market has not improved significantly since the financial crisis, as future stress events could have far-reaching consequences.

To continue reading TheTradeNews story click here

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People Profiles, Tech Talk

2016 Top Fintech Financiers According to Institutional Investor

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Identifying the top fintech financiers is no easy task these days. It seems like only yesterday when MarketsMuse curators were among the first to advance the phrase “fintech” in the course of profiling startups seeking to disrupt the financial services sect, many of which have been led by sell-side veterans who made their best trades building innovative financial technology applications for bulge bracket banks and institutional brokerage platforms. At the outset of this now mainstream trend towards disruption of legacy financial technology tools and applications, fintech was a label given to trading system firms; now it is a ubiquitous moniker used to categorize a full-blown industry that counts more than 3000 start-ups and fast growing enterprises across the globe.

(feature images courtesy of YANN LEGENDRE)

Fintech is still the term used to to describe fast-moving firms that deliver Web 3.0 trading system and institutional broker tools, but also now includes enterprises that have brought peer-to-peer lending, crypto currency, distributed ledger companies and other offerings that are rapidly changing the way financial industry firms operate, and more important, the behavior of end-users across the globe. Along the way, this evolution has also created a cottage industry of bankers, private equity firms and VCs who share the catchphrase “What’s Next?” and whose respective vision is focused on the “next great thing” within the context of the way we interact when conducting a financial-centric task.

“Many of the Fintech Finance 35 — those ranked by Institutional Investor as the leading financiers and facilitators of the ongoing entrepreneurial explosion in financial technology — have “partner” in their titles. Their firms are structured as partnerships, but all on the list are partners in a practical, day-to-day sense. They are as much strategic advisers and collaborators as they are funders; “partnerships” are what they offer to companies they invest in and usher toward growth and maturity.” Jeffrey Kutler, Institutional Investor Magazine

With that, its no surprise that Institutional Investor Magazine, which for years has been the harbinger of the financial industry’s best-in-class people (e.g. Institutional Investor All America Research Team is the bible used to benchmark equity and fixed income research analysts) has more recently started tracking the top funders and dealmakers from across the fintech ecosystem via II’s Annual Fintech Finance 35. And, hot off the press: II’s 2016 Top Influencers in Fintech Finance! With 35 top guns highlighted, MarketsMuse team arbitrarily picked out one of the profiles from the middle of list of 35 to share with our readers. The folks who have risen from last year’s #19 spot to this year’s #16 spot are the principals of SenaHill Partners, which is arguably one of the fintech industry’s leading pioneers. SenaHill positions itself as part investment bank, part PE investor, part adviser and part incubator.  Below is the excerpt courtesy of II’s Jeffrey Kutler.

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Justin Brownhill, SenaHill

Principal investor, strategic adviser, and business accelerator, SenaHill Partners gets a lot of mileage out of just 14 people. “We’re hiring,” managing partner Justin Brownhill says — an auspicious indicator for the New York firm and perhaps for fintech deal flow overall. Founded by Brownhill and co–managing partner Neil DeSena in 2013, SenaHill is staffed by people with extensive banking, brokerage, and operational experience, further leveraged by an adviser network of dozens of industry veterans, who contribute strategic insights and help identify and vet investment candidates. “Two to three generations of knowledge,” hands-on experience and a roll-up-the-sleeves attitude set SenaHill apart, says Brownhill, 45, who was an investor in and executive at Lava Trading, which Citigroup acquired in 2004, and CEO of the Receivables Exchange from 2007 to 2012. “Venture capital in financial technology is a journey, not a me-too business,” says DeSena, 52, who started the REDI institutional trading business in 1992 and ran it until 2006, the last six years as part of Goldman Sachs Group. “ ‘Five years and exit’ isn’t the way it works.” SenaHill’s 22-company portfolio includes investment research and analytics site Market Realist, where Brownhill is a board member; blockchain smart-contracts company Symbiont, where DeSena is a director and former Morgan Stanley capital markets executive Caitlin Long recently became chairman and president; and WealthForge, a private capital–

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Neil DeSena, SenaHill

raising platform that placed third in last year’s UBS Future of Finance Challenge (see Hyder Jaffrey, No. 30). Another holding, know-your-customer platform Trunomi, represents “reg tech,” the emerging regulatory-and-compliance category that Brownhill and DeSena are following alongside other fintech themes in capital markets, banking and payments, insurance, wealth management, and infrastructure. “The interest is now top-down,” Brownhill observes, referring to incumbent financial services companies’ openness to investing in or partnering with entrepreneurs. “They are hiring us to connect them with young, emerging technologies.” Says DeSena: “The incumbents need help. Their budgets are big but shrinking.”

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

The Fintech Finance 35 will be honored at the iiFintech Awards taking place on December 1. The awards program was designed to bring together the honorees of the Tech 50, Fintech Finance 35, and Trading Technology 40 to explore how financial technology will continue to transform the industry.

This ranking was compiled under the direction of Senior Contributing Editor Jeffrey Kutler. Individual profiles were written by Kutler, Asia Bureau Chief Allen T. Cheng, Senior Writers Frances Denmark and Julie Segal, and Staff Writer Jess Delaney, as well as by former Editor Michael Peltz, Content Editor Anne Szustek, Associate Editor Kaitlin Ugolik, and Assistant Editor Jen Werner.  To read the entire story from II, please click here

 

2016 Top Fintech Financiers According to Institutional Investor
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ETF News, Global Macro Strategy, People Profiles

Buy-Side Beefs Up Use of ETF Products; They Finally Get The Joke

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ETF product use among the Buy-Side is no longer viewed as “just a portfolio re-balance or transition management tool,”  according to a survey of the investment industry’s largest portfolio managers. More PMs than ever are finally ‘getting the joke’ with regard to the value proposition of Exchange-Traded Funds (ETFs), according to a recent report by State Street Global. The up-trending holdings of ETF products across the institutional manager community is attributed to a variety of reasons that include better product education, the ongoing search for alpha, the need to reduce single-stock exposure, and according to Europe-based fund managers, ETF products are ideal vehicles to express global macro investment views.

(MarketsMedia) By , Senior Editor · In its search for alpha and decrease exposure to single-stock risk, the buy side is increasingly turning to exchange-traded funds.

John D'Antona,-financial-journalist
John D’Antona, MarketsMedia

According to recent research from State Street Global, 85% of investment professionals are using exchange-traded funds (ETFs) to gain exposure to individual sectors or industries. More than one-quarter of survey respondents (26%) report that over 20% of their assets under management are allocated to sector/industry ETFs.

This research is based on State Street Global Advisors’ Survey of Investment Professionals’ Sector and Industry Investing Attitudes and Usage, completed in the first quarter of 2016. The study comprised web-based interviews with 419 financial advisors and wealth managers.

While it is hard to compare the two conventionally – the average daily amount of stock trading as measured by Bats Global runs around 7.30 billion shares compared to 1.3 billion for ETFs, the latter reported by SSGA. When compared on a notional dollar basis, ETFs hit $13.1 billion versus $48.5 billion for stocks.

If you’ve got a hot tip, a bright idea, or if you’d like to get visibility for your firm through MarketsMuse via subliminal content marketing, advertorial, blatant shout-out, spotlight article, etc., please reach out via this link

The estimated value of all ETF shares issued exceeded that of shares redeemed by $5.60 billion for the week ended October 26, 2016, the Investment Company Institute recently reported. For ETFs backed by equities, for the week ended November 1 net issuance hit $5.23 billion for the week, compared to estimated net issuance of $2.38 billion in the previous week. Domestic equity ETFs had estimated net issuance of $4.03 billion, and world equity ETFs had estimated net issuance of $1.19 billion.

Nick Good, co-head of the Global SPDR business at State Street Global Advisors, told Markets Media that the research pointed a rosy picture for ETFs going forward. He said the survey found that the use of sector and industry ETFs is highest among private wealth managers, with 92 percent reporting they had some exposure to the sector and/or industry funds; followed by independent/regional broker dealer advisors (87 percent), National Broker Dealer advisors (86 percent) and Registered Investment Advisors (80 percent).

“The most important variables these investment professionals consider when choosing a specific sector or industry ETF are liquidity, expense ratio and the fund’s holdings,” he said.

Looking ahead, 45 percent of financial advisors surveyed report they plan to increase usage of ETFs while another 50 percent said they plan to maintain their current allocation of sector and industry ETFs in the future.

Advisors’ top reasons for incorporating sector and industry ETFs into client portfolios include:

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People Profiles, Tech Talk

What’s Next? Buy-Side Traders Plot To Embrace Market-Making

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For exchange-based specialists, prop floor traders and upstairs sell-side market-makers, the notion of buy-side traders putting on the hat of risk-taking market-making is a head scratcher. Sure, there’s a cadre of hedge fund wonks who have interned on a sell-side trading desk, then moved up to Greenwich to grab a slot at one of the many firms run by former trading desk heads who now think they can displace the traditional liquidity providers and do a better job of making markets than their counterparts across the aisle. You know who they are; the ones who get a charge out of bashing their sell-side sales/trader with comments like “Listen, if you can’t fill me right now, I’LL make a two-sided market away from you and prove to you what an idiot you are!”

While sell-side folks scoff at that kind of blasphemy, given the more than two decade process in which electronification has upended equities market structure (and now doing the same to FX, Commodities and UST markets), it shouldn’t surprise anyone that there is growing movement in which buy-side equities traders are plotting to take the model of disintermediation one step further and conjuring up business plans that would have them providing liquidity to the market (via making two-sided markets), instead of their historic role of having a one-sided axe in a particular name.

With that entree, we segue into a fresh-off-the-press column from Shanny Basar at Markets Media “Buy-side Looks to Fill Market-Making Vacuum”….

Nearly half of hedge funds said they would evaluate being market makers in certain securities as banks pull back from some markets, according to a new survey from State Street.

In a report “Let’s Talk Liquidity: Opportunities in a New Market Environment”, State Street surveyed institutional investors on whether market liquidity has deteriorated. Banks have shrunk their balance sheets in response to the increase in capital requirement from regulations such as Basel III, Dodd-Frank and Solvency II and pulled back from some activities. The study had 300 global respondents which included 150 asset owners and 150 asset managers, including 50 hedge funds.

John Bolton, State Street

John Bolton, State Street

John Bolton, global head of thought leadership at State Street, said in a media briefing today that 30% of respondents said the liquidity of their institution’s portfolio had decreased over the past three years, while 28% said it was unchanged. Nearly half, 48%, believe decreased market liquidity is a structural issue and not likely to change.

As a result 49% of respondents believe the role of non-bank institutions as providers of market liquidity will increase, with large pension funds and buy-side firms making prices.

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“43% of hedge funds would evaluate being market makers in certain securities,” added Bolton.

Alex Lawson, head of securities finance, Europe, Middle East and Africa at State Street said at the briefing that in addition to new entrants in market making, the decrease in liquidity will lead to an increase in electronic trading and peer-to-peer connectivity so participants can directly meet their financing needs without the need for intermediaries.

Lawson added: “Regulations have changed the capacity in the market and there are new entrants who have capacity such as Canadian banks and non-banks.”

For example, State Street launched an enhanced custody offering in the US seven years ago and in EMEA three years ago as an alternative to traditional prime brokerage financing as the custodian generates large amounts of internal cash. Clients can borrow and finance securities directly with State Street within a segregated custody account.

Lawson continued that the International Securities Lending conference in June included a panel in which two asset owners, including a sovereign wealth fund, and two hedge funds discussed how they were changing their use of the securities lending market and becoming less reliant on banks.

In order to access more liquidity 48% of institutions said they will increase their use of electronic trading platforms and nearly six in 10 believe the electrification of over-the-counter markets will accelerate over the next three years.

“The industry needs to add capacity so we believe in allowing clients to connect in many ways as possible,” added Lawson. “That could include agency lending, across an electronic platform or through facilitating direct relationships.”

The International Securities Lending Association said in its latest half-yearly market report that there have been significant changes in how institutional investors have been using repo and securities lending markets in the past two years.

To continue reading, click here

What’s Next? Buy-Side Traders Plot To Embrace Market-Making

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Fixed Income, People Profiles, Tech Talk

Bond Boy Rutter Adds Tackling UST HFT to List of Axes

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Nobody can accuse veteran government bond market broker and fintech poster boy David Rutter of being single-minded. The former Prebon Yamane exec, who later migrated to inter-dealer broker ICAP where he became of head of electronic trading, then did a stint as CEO of fixed income and FX platform BrokerTec, and who more recently has positioned himself as a blockchain empressario via his role as co-founder and head of R3, the industry consortium dedicated to normalizing the use of distributed ledger technology across the financial ecosystem remains determined to set the standard for how UST’s and related futures contracts are electronically traded.  His latest axe is to cut down on the noise and disruption created by high-frequency trading (HFT) tools used by so-called predators that have ‘undermined’ how government bonds are traded in the OTC marketplace.

(Bloomberg) via reporting by Eliza Ronalds-Hannon : David Rutter, the former head of the biggest electronic venue for Treasuries, says his startup will launch a new trading platform called LiquidityEdge Select this week. According to Rutter, a big draw is that it will enable clients to shut off bids and offers from firms they suspect are using hair-trigger algorithms to trade against their orders. He’s enlisted Cantor Fitzgerald to backstop the transactions and signed up about 90 clients, including most of the Treasury market’s 23 primary dealers and several high-speed trading firms.

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David Rutter, Liquidity Edge LLC

“There’s a lot of pent-up demand to fix the inherent disadvantages” on some of the existing venues, Rutter said from his midtown Manhattan office. Going up against certain kinds of speed traders can be “a huge frustration.”

Success is far from guaranteed and there’s considerable debate over whether high-frequency traders, or HFTs, actually do more harm than good. But one thing is undeniable: technological advances and post-crisis bank regulations designed to limit risk-taking are transforming the inner workings of U.S. government debt trading. What’s resulted is a sense of disorder among the more traditional players in the world’s most important bond market.

“The game is changing every day,” said Tom di Galoma, the managing director of government trading and strategy at Seaport Global Holdings. On electronic platforms, the rise of HFTs “concerns anybody else who trades on them.”

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Liquidity Woes

Regardless of who or what is responsible, there are signs U.S. government bonds have gotten harder to trade, even as Treasury Department officials say the $13.7 trillion market is sound and the ability to transact remains robust.

An average of $491 billion of Treasuries have changed hands each day in the past year, down from $600 billion in 2011, according to JPMorgan Chase & Co. The ability to trade without moving prices has also deteriorated, with another measure indicating Treasuries are now 50 percent more sensitive to price fluctuations than they were five years ago.

At the same time, the market itself has become more prone to sudden shocks, with the Oct. 15, 2014, “flash crash” in Treasury yields the most prominent example. While regulators still haven’t figured out what triggered it, they concluded that automated trading firms made the wild ride that much worse.

All these changes have come as regulations imposed in the aftermath of the financial crisis prompted Wall Street banks to retreat from dealing. Computerized firms have swept in to fill the void.

Electronic platforms like ICAP Plc’s BrokerTec and Nasdaq Inc.’s eSpeed now account for almost half the volume in the Treasury market. Bloomberg LP, the parent of Bloomberg News, and its affiliates also provide trading in Treasuries.

‘Phantom Liquidity’

On the main venues that cater to dealers, eight of the 10 biggest firms by volume last year were non-bank proprietary trading firms, according to Greenwich Associates, a financial services consulting firm. Their influence has led HFT critics to blame computerized traders for providing “phantom liquidity.”

That occurs when those firms use their speed to suddenly change the amount they are willing to buy (or sell) once they detect incoming orders. And it can be costly for slower-footed investors who enter the market thinking there’s a certain amount they can trade, only to have it disappear. In some cases, predatory firms use sophisticated algorithms to decipher a counterparty’s intentions and race ahead of its orders.

The problem was underscored by the Bank for International Settlements, which concluded in a January paper that such strategies have the potential to depress bond-market liquidity. According to Greenwich, less than half the trading activity on inter-dealer platforms last year consisted of “true market making,” which the research firm defined as the willingness of firms to buy and sell a specific security on demand.

“A lot of the intermediaries that had balance sheets to absorb risk and trade, they’re gone,” said Ed Al-Hussainy, senior global interest-rate analyst at Columbia Threadneedle Investments, which oversees $460 billion.

Value Proposition

That’s where Rutter comes in. LiquidityEdge is the first of at least four companies that are planning to start trading platforms by year-end.

LiquidityEdge Select differs from traditional electronic platforms in a few distinct ways. First, clients can pre-select counterparties and trade with them using anonymous user IDs, rather than sending an order into a central market that everyone can see. That maintains confidentiality and enables clients to receive bids and offers only from parties they want. Second, the system allows customers to exclude any streams at any time.

Rutter says this kind of self-policing gives non-bank traders a greater incentive to provide firm orders, while weeding out predatory firms that try to game the system.

LiquidityEdge will also use Cantor Fitzgerald as a central clearing counterparty, settling trades via the Fixed Income Clearing Corp. That means trades are guaranteed even if one party fails to deliver on either payment or bonds. The lack of a such an arrangement precipitated the demise of Direct Match, a Treasuries trading startup that shut down in August.

Diminishing Returns

To be sure, a proliferation of trading platforms could potentially harm liquidity more than help it.

New venues may poach clients from the incumbents — BrokerTec, Rutter’s former employer, and eSpeed — but that may just lead to shallower liquidity across more venues and result in a Treasury market that’s more fractured than it is now. LiquidityEdge Select will be the firm’s second trading venue for Treasuries. It will sit alongside the firm’s one-year-old bilateral platform, LiquidityEdge Direct.

“Is it a case of, the more liquidity pools the merrier?” said Anthony Perrotta, global head of research and consulting at Tabb Group, which specializes in market-structure research. “Some would say yes. At the same time, people’s bandwidth is only so great.”

The Treasury market’s two incumbents, BrokerTec and eSpeed, already have plans to launch competing trading venues later this year.

To continue reading the Bloomberg story, click here

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ETF News

Insurance Co PMs Getting The Memo: ETF Products Make More Sense

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Insurance Co PMs are increasingly getting  “the memo” : Exchange-Traded Funds (ETFs) Make Sense..

(Pensions & Investments) Exchange-traded funds have permeated almost every corner of the financial markets, but insurance companies have primarily kept their distance. That may be changing.

Though several U.S. insurers have navigated the $2.4 trillion ETF marketplace through variable-annuity products, integration into general accounts has been more recent, many observers say.

According to S&P Dow Jones Indices, insurers have only scratched the surface in their use of ETFs. Analyzing National Association of Insurance Commissioners data through 2015, S&P found that property and casualty, life and health insurers only reported an aggregate $15 billion invested in ETFs for general accounts, but the growth of ETF assets has outpaced overall growth of general account assets, which approached $6 trillion at the end of 2015, according to SNL Financial.

Since 2006, the amount of ETFs held by Insurance Co PMs has increased 146% and grown 14.5% per year, whereas total assets in general accounts have increased 26% in the same period, according to S&P. And, as with many measures of institutional investment in ETFs, year-end holdings are not necessarily indicative of ongoing ETF usage in more temporary functions such as transitions and liquidity management.

S&P projects ETF asset values for insurers to double in five years, in line with Greenwich Associates’ annual institutional ETF survey which indicated 71% of insurers surveyed in 2015 expected to increase their allocation to ETFs.

“It’s clear that the largest ETF providers — BlackRock (BLK), State Street and Vanguard — have been working more closely with the insurance companies,” said Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence, New York. “But it’s also a size aspect. Smaller insurers with fewer resources have been more willing to use index ETFs compared to larger insurers paying for active management and investment due diligence.”

“Compared to financial advisers and pension managers, insurance general account managers have more assets and greater risk aversion,” added Mr. Rosenbluth. “The ETF education model is different.”

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More recently those “educational” conversations are including the growing asset base and efficacy of fixed-income ETFs, said Steve Mickle, a director of institutional sales and trading with WallachBeth Capital LLC in San Francisco. He said that insurers have become the agency brokerage firm’s fastest growing clientele. “They see the size and liquidity of some of the earliest and most foundational fixed-income ETFs as utility products, ones that work for parking cash or interim benchmarking,” said Mr. Mickle.

According to WallachBeth, 132 fixed-income ETFs have been assessed by the National Association of Insurance Commissioners for risk-based capital treatment that could potentially be more favorable than common stock (as ETFs are traditionally reported).

“The NAIC designation is an added feature,” said Bill Best, managing director at VanEck in New York, “but some of the largest insurers are still working through the products and mechanics of ETFs.”

Josh Penzner, managing director at BlackRock Inc. (BLK), has observed insurers testing the waters of fixed-income ETFs, particularly to manage cash liquidity and investment exposures as a placeholder before purchasing bonds that have been “and will continue to be” the core of insurance general account portfolios.

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MarketsMuse blog post title Insurance Co PMs are increasingly getting  “the memo” : Exchange-Traded Funds (ETFs) Make Sense..

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Global Macro Strategy, People Profiles

Circus Comes To Town-Global Macro Guru Heads to Hofstra

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MarketsMuse inhouse political pundits are headed to Hempstead, NY, home of Hofstra University where the Circus Comes to Town disguised as the first tranche of 2016 US Presidential debates. While our inhouse politicos battle the LIE rush hour traffic in effort to get a ring-side seat for the Ringling Bros Bake-Off circus, our curators pass the ball for pre-debate color courtesy of global macro guru Neil Azous, principal of macro think tank Rareview Macro and publisher of Sight Beyond Sight.  Below extract first appeared in yesterday’s weekend edition of FinAlternatives.com

 

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Neil Azous, Rareview Macro

Humble in Hofstra…One Debate an Election Can Make
by Neil Azous

Tonight’s U.S. Presidential debate, infamously coined the “Humbling in Hofstra” by Mark Cuban, has the potential to reshape the world. Unlike the adage “one stock a market does not make,” our view is that “one debate an election can make.”

At the top-down investment level, this event will dictate asset prices over the next 72 hours more than any other catalyst. For the reasons we will layout below, our bias is to be short risk assets or hedged going into the event.

Additionally, the event will kick-off a greater rebalancing exercise at the sector, industry, and single stock level which might take a few weeks to find an equilibrium.

The Debate Setup

Firstly, this is an advertiser’s dream as over 100 million people are expected to tune in, the largest ever for a US Presidential debate.

The debate will run from 9 to 10:30 p.m. ET at Hofstra University in Hempstead, New York.

Baby Boomers, Generation X, and Generation Y, can watch the debate on C-SPAN, Fox, ABC, NBC, CBS, Fox News, CNN, and MSNBC.

It will also be streamed live on various social networks. That way, the millennials who cut-the-cord from networks have an opportunity to follow along as well.

Secondly, it is important to recognize the extreme view that non-US citizens take on Donald. J. Trump. They view Trump in a similar vein as the Dear Leader in North Korea – that is, highly concerned over the prospects of his ascent on the world stage and having access to weapons of mass destruction.

The key point here is that if there is going to be a change in viewpoints on Trump, it will be for the better, as it cannot get much worse internationally.

Finally, the political strategists, already bruised from being wrong on Trump for 18 months, are struggling to pinpoint what a win or loss looks like for either candidate in advance of tomorrow night’s debate.

As evidenced by the widespread views expressed on the various Sunday morning talk shows this morning, they are all soul-searching at the moment.

The conclusion, especially after a surprise ‘Brexit’ outcome, is that paid forecasters, political strategists, media persona, and politicians are worthless in shaping sentiment and helping investors construct their portfolios.

Our View

Allow us to put one simple view forward.

Continue reading →

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Tech Talk

Land of Rising Sun Embraces FinTech Sector; Japan’s Biggest Banks Open Wallets

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The FinTech Sector is red hot now in Japan as Land of Rising Sun Banks now looking to pour hundreds of millions of dollars into fintech start-ups after the abolition of a law that prevented them from owning more than 5 per cent of a technology company.

(FT) 25 September The changes are part of a national effort to push into the fintech sector and pursue investments in financial technology startups, highlighting fears in Tokyo that Silicon Valley could decimate Japan’s banking sector as it did the country’s mobile phone industry.

“Japanese institutions are concerned that a Google Bank or Facebook Bank will conquer Japan,” said Naoyuki Iwashita, head of the FinTech Centre at the Bank of Japan.

It means that Japan could become a big new source of funding for start-ups, especially in Asia, that are experimenting with technologies such as blockchain or artificial intelligence.

Yasuhiro Sato, chief executive of Mizuho, told a conference in Tokyo last week that Japanese banks had been constrained by regulators wanting to preserve old, but tried-and-tested, IT systems.

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Yasuhiro Sato (photo courtesy of WSJ)

“I think [regulators], especially the Japanese Financial Services Agency, are now changing their thoughts on that,” he told the FinSum conference, organised by the FSA and Nikkei, owner of the Financial Times.

The change in the law means banks can ignore a 5 per cent limit on stakes in non-financial companies if their purpose is to apply information technology to finance.

The FSA is considering a further legal change that would make it easier for fintech companies to engage in regulated financial activities. “In order to obtain more technological advances from outside participants,” said Mr Sato. “That’s the reason why the banking law will now quite likely be changing.”

Mizuho established a presence in Silicon Valley three years ago and this year added an innovation-focused office in New York. Mr Sato said the rule changes would accelerate that. “We have created a specific team, which is the innovation product team, to make significant investment in venture companies. We are sending many many persons to the US.”

Rakuten, the Japanese ecommerce group, has launched a $100m fund to invest in fintech companies and SBI Holdings, a financial group, raised a ¥30bn ($299m) fintech venture fund earlier this year.

Other global banks have opened outposts in California. BBVA, the Spanish bank, is one of the most aggressive, acquiring Simple, an Oregon-based digital lender in 2014, and investing in Prosper, the San Francisco-based peer-to-peer platform. It also set up a venture capital company, Propel Ventures, to pursue investments in other start-ups. SenaHill is a leading merchant bank boutique specializing in fintech initiatives and focused on fast growth companies that are producing revenue and/or startups that have at least one year of business operating metrics.

To continue reading the story Land of Rising Sun Embraces FinTech Sector from FT.com, please click here

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ETF News, Strike Price

Options Mart CBOE Rumored to Merge with BATS Exchange

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Following a decade of new exchange launches, which led to a series of aggressive fee competition to attract order flow and elevated the ‘pay-for-order-flow’ game, the more current trend towards consolidation, fueled by an industry-wide race to zero fees and commissions is sparking rumors that the CBOE and BATS are planning to marry..This on the heels of the still uncompleted deal between Deutsche Boerse and London Stock Exchange (LSE), a transaction that according to one MarketsMuse “has been put on hold pending further impact analysis” of this late summer’s BREXIT vote.”

(Traders Magazine)-CBOE Holdings’ reported talks to acquire Bats Global Markets would be the latest in a long line of exchange tie-ups, with one common denominator: the drive to have more trades execute under the same roof.

“Exchanges are a scale game,” said Brad Bailey, research director at Celent’s securities and investments practice. “Running exchanges in a regulatory, market-structure-complex world is tough. There is tremendous operational leverage available to bigger, more complex exchanges.”

Yesterday, Bloomberg News reported merger talks between CBOE and Bats, citing people familiar with the situation. A deal could be announced within weeks, thought it still may not happen, according to the report.

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CBOE’s eponymous options exchange is the largest of 14 in the U.S., with market share of 26.5% this month, according to OCC data. Chicago-based CBOE has a virtual stranglehold in the index-options business via its dominant CBOE Volatility Index (VIX) product.

Bats, which purchased rival exchange operator Direct Edge in 2014 and itself went public earlier this year, runs the BZX and EDGX options exchanges, which have a combined market share of about 12%. Bats also operates four of the 13 U.S. equity exchanges, with a combined market share of about 20%.

Equity and options exchange operator Nasdaq bought options bourse International Securities Exchange earlier this year. In the equities space, IntercontinentalExchange bought New York Stock Exchange in 2013. In Europe, Deutsche Boerse and London Stock Exchange are planning to merge. And there have been a host of exchange mergers over the past half-decade that have been discussed or proposed but ultimately didn’t happen.

“Think about the size and scale across asset classes of most exchanges,” Bailey told Markets Media. “ICE gobbled up NYSE, DB/LSE are attempting a marriage despite the complexities that Brexit has added to that equation.”

MarketsMuse editors are gearing up to profile ‘What’s Next?’ Anti-Trust Fever Sweeps Regulators as Exchanges Consolidate to Revert To Predatory Pricing Model..” To read the entire story CBOE Rumored to Merge with BATS Exchange from Traders Mag, click here

global-macro-sell-now
Global Macro Strategy, People Profiles

If History Is Any Guide-Sell Every Rally, Now! Says Global Macro Muse..

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If History is Any Guide….more than one “markets muse” should be running for cover, faster than if they found themselves strolling the streets of NYC’s Chelsea neighborhood this past Saturday evening. And, one global macro muse is extending that warning..

Stock market technicians, i.e. those who hang their hats on technical analysis and the notion that history tends to repeats during select times of the year should take note of the following statistics; if history is any guide, professional traders should sell every rally, now!

neil azous-global-macro
Neil Azous, Rareview Macro

Why? Aside from the fact that the month of September is notorious for market tops and arguably, the most damaging sell-offs in US equity markets followed soon thereafter, the month of October in years ’29, ’87, ’91, , ’01* ‘ and 08 to cite just a few), professional chartists are reminded by a illuminating observation courtesy of global macro guru Neil Azous in the a.m. notes published by Rareview Macro’s “Sight Beyond Sight”:

Gann Day: Per legendary Wall Street trader W.D. Gann, September 22nd is the date markets top more frequently than any day of year. This year that date coincides with the Fed and BoJ meetings on Sep 21st. Stock Trader’s Almanac : S&P 500 down 22 of 26 during week after September options expiration, average loss 1.08% (Full Stats HERE, @AlmanacTrader)

S&P 500 Seasonality: This week is the 38th week of the year. This is the worst week of the year since 1950 and the S&P 500 has been down 7 of past 8 years. Last week was Sept Options Expiration. Since 1990, the week after this has higher only 4 times past 26 years. Higher only 15.4%, lowest for any week of year.

Those having glasses half full, or those whose glasses use bifocal lenses might argue “even a broken clock is right twice a day, that doesn’t mean lightening strikes at the same place at the same time..” will discount the above. On the other hand, “Many People Are Saying” that those who are familiar with fall stock market falls will want to follow Azous on Twitter, or better and smarter still, those who are global macro aficionados should grab themselves a subscription to Sight Beyond Sight by clicking this link.

 

 

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People Profiles, Tech Talk

What’s Next? A Blockchain-Powered ATS for Equities

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“What’s Next? Well, for those familiar with Patrick Byrne, the controversial and innovative founder of Overstock.com, one of the first online retailers to embrace the use of bitcoins, it should not be a surprise that Overstock’s chief honcho would ‘get the joke’ and realize its all about the underlying technology that powers cryptocurrency applications, known as distributed ledger. While bitcoin currency continues to encounter challenges in terms of mass embracement, the real grease that makes the makes the wheels turn is under the hood. With that, Overstock subsidiary “T0” (T-zero) is taking a page from both the industry consortium formed by R3 and the Senahill-backed Symbiont –both of which target institutional capital markets usage–and aiming it’s own sights on retail investors by setting to launch an equities-centric Alternative Trading System aka ATS powered by their own blockchain formula.

A distributed ledger is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, and/or institutions.
A blockchain is a type of distributed ledger, comprised of unchangable, digitally recorded data in packages called blocks.
Rob Daly of MarketsMedia (not related to MarketsMuse) provides the scoop..

Online retailer Overstock.com expects trading to begin on its blockchain-based alternative trading system before the end of the year, according to company officials.

The ATS will be operated by Overstock.com subsidiary TO as part of the company’s Medici Project, and it will only handle trades in the company stock, at least at first. So while it’s not an immediate competitive threat to the existing field of 13 U.S. stock exchanges plus several dozen ATSs, the initiative will be closely watched as a gauge of the potential of distributed-ledger technology in capital markets.

The ATS will write completed trades to its blockchain instead of routing them to the National Securities Clearing Corp., a subsidiary of Depository Trust & Clearing Corp., for clearing.

Overstock.com plans to prime the liquidity on the ATS through a new issue of corporate shares to existing shareholders the day before trading commences on the new trading venue.

judd bagley blockchain ATS
Judd Bagley

T0 officials plan to formally announce its partnership with a broker-dealer on Sept. 12. “For those who want to trade on the ATS, they will have to create an account with the broker-dealer,” said Overstock’s man-in-charge Judd Bagley, who declined to name the brokerage firm.

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Investors will be able to select from multiple “very vanilla” order types, which are still in development, he added. T0 may use a so-called maker-taker rebate model to encourage liquidity, but officials have not made a final decision.

The new trading venue is a mix of internally developed technology and the technology T0 acquired with its purchase of order-routing firm SpeedRoute in October 2015. T0 built its matching engine internally as well as the necessary interfaces to the rest of the U.S. equity marketplace.

The company, in conjunction with Bay-area consultancy PeerNova, also developed a proprietary blockchain architecture for the ATS instead of using Bitcoin, Ethereum, or Ripple.

To continue reading the story from MarketsMedia, please click here

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Fixed Income, Global Macro Strategy, People Profiles

Strong Demand For Yield-Outsize Demand For IG Corporate Bonds

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MarketsMuse Fixed Income Curators have been keeping tabs on the seemingly insatiable and outsize demand for yield and in particular, the demand for IG Corporate Bonds aka  investment grade corporate debt. With that, we roll to opening excerpt of Aug 9 notes from “Quigley’s Corner”, the financial industry award-winning commentary produced by Ron Quigley, Head of Fixed Income Syndicate for boutique investment bank/institutional brokerage Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans..

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Ron Quigley, Mischler Financial Group

Today things slowed down a bit for the IG dollar DCM but it was still a formidable line-up. We featured 5 IG Corporate Debt issuers that priced 9 tranches between them totaling $7.66b.  The Asian Development Bank priced its expected two-part 3s/10s new issue in the SSA space that totaled $1.3b bringing today’s all-in IG tally to 6 issuers, 11 tranches for $8.96b.

WTD we have now priced 85% of the syndicate midpoint average forecast for the week or $19.46b vs. $22.80b.
MTD we eclipsed the syndicate estimate for the month after only 7 sessions or $68.41b vs. $61.13b.

The big deal of the day in the IG Corporate Debt space was Duke Energy Corp. $3.75b 3-part 5s/10s/30s issued to finance a portion of costs in connection with Duke’s acquisition of Piedmont Natural Gas Company Inc.   Last week Duke Energy (NYSE:DUK) announced it mandated Barclays, Credit Suisse, Mizuho, MUFG Securities and UBS as joint leads to arrange investor calls after which a transaction could soon follow.  As has been written in the “QC” pipeline for a while, on Friday, January 22nd, shareholders of Piedmont Natural Gas (A2/A) voted to approve the Company’s acquisition by Duke Energy (A3/BBB+).  66.8% of voting shares supported the acquisition.  In late October 2015, Duke Energy, (A3/BBB+) the nation’s largest utility, announced that it will buy Piedmont Natural Gas (A2/A) for $4.9b in cash.  Both companies are partners in the $5b Atlantic Coast Pipeline.  The purchase adds one million new rate payers to Duke Energy’s customer base.  Congrats to Duke!

Rates on the Rise?…Think Again.

Today the U.S. Treasury held a 3-year notes auction.  It was one of the strongest in years.  Investors or buyers, for that matter, fly into the safety of USTs motivated by fear and desire for safety.  No one flies into 3yr Notes for the 0.85% yield.  You want my money?  Let’s talk about 5-8% and we can discuss it.  So, when I heard the 3yr auction was so wildly successful I pulled up a chair next to my rates guru Mr. Tony Farren to discuss the matter.  Here are the prescient takeaways:

  • The auction stopped thru 1.2 bps which is a big stop for a 3yr auction.
  • Dealers bought 33.7% of it versus the 6-month average of 38.2%.
  • The bid-to-cover or oversubscription rate was 2.98x versus the 6-month average of 2.76x.
  • Bidders at the auction yield (stopped 1.2 bps thru) only received 54.18% of their size bid for (so, if you bid for $100mm you only wound up buying $54.18mm).

What does it all mean?  Lower-for-longer.  The Fed is not raising rates anytime soon folks.  Taking rate volatility off the table means dive int the stock market readers.  Get back in now.

To read the full (excerpted edition) of Aug 9 edition of “Quigley’s Corner”, please click here

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Global Macro Strategy, People Profiles

Trump to Shut Dept of State and Open Dept of Sex; Melania To Head

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TRUMP CAMPAIGN SPECIAL REPORT: GOP NOMINEE VOWS TO SHUT US DEPT OF STATE AND REPLACE WITH US DEPT OF SEX;  FIRST LADY MELANIA TO GIVE HEAD AND “LEND A HAND”

DONALD TRUMP TWEETS “MY NEW US DEPARTMENT  WILL BE PROFITABLE STARTING DAY ONE!”

(MarketsMuse Exclusive)- Donald Trump, the GOP Presidential Nominee announced today “Because our foreign policy is such a disaster, during my first 100 days as President, I will not only build a really big wall along the Mexico border, I hereby vow to shut the U.S. Department of State until someone can figure out what the heck is going on with our foreign policy and at the same time, I will appoint my wife and First Lady Melania Trump to sit on my staff as Secretary and lead a newly-created US Department of Sex.” Mr. Trump vowed this would be a Cabinet-level role and “unlike every money-losing US Government agency, my new department will be “profitable starting day one!”

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Selen Katz, “Creative Director” for Seaquake.io

IF YOU LIKE THIS COVERAGE, CLICK ON TO READ ABOUT SEAQUAKE CRYPTO SCAM UNCOVERED BY MARKETSMUSE: 

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photo by Ale de Basseville

In a series of 140-character tweets pushed out late Saturday night by Donald Trump after the NY Post revealed uncovered the plan, the Republican candidate eviscerated the foreign policy strategy initiatives of the Obama administration and declared, “Let’s face it folks, #SEX is the ultimate influencer when it comes to global diplomacy. All of the world’s great leaders have been swayed by legions of  Eastern European models and consorts, and Melania is well-trained to lend a hand to my administration; trust me!.” Added Trump, ” We will immediately reward the vast number of under-educated white males in our country who have been so cheated by the rigged system and whose votes are so important to our country!” Trump went further to state ” I hereby pledge that my wife Melania will administer hand jobs to every single uneducated white male who votes for me in the national election.” In a follow-up tweet, Trump stated, “These will be the GREATEST hand jobs ever administered, and you can trust me when I make this promise!”

Trump also suggested that Estonia Government Bonds issued in 1927, long considered to have little value after Russia annexed the country in 1940, would “soon be worth much more than original face value, much more!”

Despite the fact that Mr. Trump has been a direct party to more than 3700 civil law suits during his business career, he insists that the promise to have his wife perform manual sex on under-educated white male voters is “a legal contract that I swear on my son Baron’s head, is a binding agreement that I will co-sign and one that I will not breach and she will not breach!”

In a late-breaking tweet made Sunday morning, Donald Trump said “This promise does not have to be limited to only under-educated white males, Melania will also provide manual sex to any woman who votes for me! This proves that I truly love and respect all women!”

Trump advisor Paul Manafort confirmed that “Donald Trump’s plan to create a revenue-producing US Federal Department of Sex could easily wipe out trillions in US national debt within the first two years of a Trump administration.”

Steve Mnuchin, a former Goldman Sachs partner who was recently appointed National Finance Chairman to the Trump Campaign

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Trump Finance Head Steve Mnuchin (c)

stated, “Winning and making money and making America great again is our focus. Many people on Wall Street know that Melania is a perfect role model who can lend her own hands to lead a profitable US Government initiative that can wipe out the national debt in a few easy strokes! Mnunchin added, I personally hope that other Trump family members will want to join in this program!”

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Donald Trump offering Hitler-style salute

How this latest pledge on the part of Donald Trump’s effort to be elected will impact financial markets remains unclear. According to one CNBC commentator, “From a global macro perspective, I don’t know how the markets will react to Trump’s promise, but I can tell you that most of our Squawk Box talking heads are going to putting out buy recommendations on this new plan and most viewers of CNBC will likely be impressed!”

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ETF News, People Profiles

O’Leary of Shark Tank Brands Bigger Pool of ETF Products

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The summer interns at MarketsMuse had already voted “Shark Tank” as their favorite TV show,  so it was no surprise that our senior curators took their cue to advance the latest news from Kevin O’Leary, the celeb entrepreneur and more recently, an ETF aficionado who has extended his brand to the world of exchange-traded fund (ETF) products under the O’Shares Investment umbrella.

(Bloomberg) — Kevin O’Leary is out to carve a niche for himself in the world of exchange-traded funds.

The chairman of O’Shares Investments and Shark Tank personality has filed a prospectus with the Securities and Exchange Commission to launch 17 ETFs. All the proposed offerings have “quality” in the name and would employ a passive investing approach. The investable universe of these funds includes emerging-market equities, small-cap U.S. stocks, preferred shares, and even corporate credit.

“It’s rare for an indie shop like this to put this many funds on one filing,” said Eric Balchunas, ETF analyst at Bloomberg Intelligence.

O’Leary’s celebrity status and the application of smart-beta strategies to fixed income could help the Canadian businessman differentiate himself and attract assets in what’s becoming a crowded ETF space, with roughly 60 issuers in the U.S. The “quality” designation suggests O’Leary’s ETFs will put a priority on conservative factors, which are in vogue as the bull market enters its eighth year.

O’Shares’ most popular current offering, the FTSE U.S. Quality Dividend ETF (NYSE ARCA: OUSA), has $240.5-million in assets and has outperformed the S&P 500 so far this year:

Details on expense ratios or fees for O’Shares‘ proposed ETFs weren’t included in the preliminary prospectus. The FTSE U.S. Quality Dividend ETF has an expense ratio of 0.48 percent, which is roughly in line with that of other smart beta offerings.

Earlier this year, O’Leary indicated that he was considering a run for the leadership of the Conservative Party of Canada after former Prime Minister Stephen Harper’s Tories lost the 2015 federal election to the Liberals, led by Justin Trudeau.

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Tech Talk

BlackRock Wants You To Chat Up Symphony..Away From Bloomberg

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BlackRock is the latest firm to embrace Symphony Chat Platform; Another Shot Across Bloomberg Bow

In early 2014,  when David Gurle, a former Reuters exec started to chat up a scheme with prospective banking industry investors that would offer a low cost alternative  to Bloomberg LP’s ubiquitous instant message / chat application, prospective strategic investors were more than intrigued. After all, Bloomberg had long held a virtual monopoly on the most critical application used across financial markets, one that enables traders and managers to rapidly communicate indications of interest for large-scale transactions And, because Bloomberg only provides bundled applications within its subscription model, many terminal subscribers who only use that platform for instant messaging have long been handcuffed to annual terminal fees that approach $25,000 per user for the simple privilege of instant messaging. Guthrie’s idea was not only intriguing, it was seen as an epiphany moment by a start-up investing group within Goldman Sachs led by a fellow named David Cohen, who long expressed concerns about Bloomberg’s toe-hold on trading desk communications.

Soon thereafter, a consortium of banks and buyside firms pumped nearly $70 million into the startup named Symphony, each sharing the same goal of hoping to save millions of dollars on Bloomberg subscription fees and via a more secure way to communicate with trading desk counterparts away from watching eyes of Bloomberg’s black box.  Nearly 2 years since that first funding round, the company has received approximately $100mil to fund its David v. Goliath battle. Now that Blackrock has joined the Symphony party, the fintech company’s still slow path to prominence is hoped to hasten. Below excerpt from WSJ frames the latest chapter..

David Gurle, Symphony CEO
David Gurle, Symphony CEO

By JUSTIN BAER and SARAH KROUSE
June 23, 2016 7:00 p.m. ET

The world’s largest money manager is trying to change the way Wall Street chats.

BlackRock Inc. will urge banks, brokers and others who interact with it to communicate via a messaging platform backed by banks and investment firms called Symphony Communication Services LLC, according to people familiar with the matter.

The asset manager, also an investor in Symphony, started testing the system with thousands of employees internally last year and now has moved all internal chat messaging to the service, the people said.

The hope from those backing Symphony is that BlackRock’s push will help jump-start the service’s use across the financial-services industry.

Symphony was created as an alternative to Bloomberg LP terminals, long a hallmark of trading floors and an expense banks have struggled to trim. The firms also like Symphony’s secure-messaging technology.
Despite the fanfare that followed Symphony’s late-2014 launch and last year’s $100 million funding round that included an investment from Alphabet Inc.’s Google, Symphony has yet to gain widespread use, according to traders across Wall Street.

At Goldman Sachs Group Inc., a Symphony investor that contributed its own messaging developments to the platform, the service is now used by most of the firm’s employees across all of its businesses, according to a person familiar with the situation. Goldman traders, for instance, use Symphony to communicate with back-office employees charged with settling trades.

Elsewhere, though, Symphony remains little used or, in some cases, virtually unknown.

To continue reading, click here

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Global Macro Strategy

Global Macro Trade-Eye On China-How to Hedge RMB

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(SubstantiveResearch.com)- The global macro trade idea of the week with eye on China. With all of the debate around the Fed’s signalling for rate hikes this summer, the question of how to hedge, or for that matter, to bet on China is prominent in the mind of investors. Neil Azous of Rareview Macro has some good ideas on how to effectively hedge for the potential/probable devaluation of the RMB, and its wider impact on Asia, whilst also benefiting from some significant positive carry in long China equities. So rather than roll out the same ”will they-won’t they” or ”What today’s fix and what does it mean” there’s some good practical value-add here. Non-subscribers won’t be able to access the full piece, but click below to access Rareview’s archive or book a time to discuss the Rareview product with Azous.

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Fixed Income

Avalanche of Investment Grade Corporate Debt Deals

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Below extract is courtesy of May 09 edition of daily debt capital market commentary and focus on investment grade corporate debt deals courtesy of boutique investment bank Mischler Financial Group, the financial industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans. MarketsMuse editorial team adds: “Make no mistake, the phrase ‘service-disabled’ applies to members of the military injured in the line of duty and no longer certified for combat situations. The heroes who have earned “SDV certification” are highly-trained, uniquely capable and often, thanks to the skills learned while serving in the U.S. military, are more qualified than most to meet and exceed job requirements across every facet of any business setting.

Today makes it clear why I featured “The Most Interesting Man in the World” in last Friday’s “QC” saying, “EMBRACE NEXT WEEK’S IG ISSUANCE

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Ron Quigley, Mgn.Dir. Mischler Financial Group

AVALANCHE!” Just look at today’s numbers: 10 IG Corporate issuers priced 25 tranches between them totaling $25.10bn.  SSA featured 1 issuer and 1 tranche for $500mm bringing today’s all-in IG day total to a monolithic 11 issuers, 26 tranches and $25.6bn.

Here’s where today stands:

 

The 7th highest IG dollar new issue volume day of all-time.

The 2nd busiest day of 2016 for the same.

The 3rd highest number of tranches priced in history.

New Issues Priced Today’s recap of visitors to our IG dollar Corporate and SSA DCM:For ratings I use the better two of Moody’s, S&P or Fitch.IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
AbbVie Inc. Baa2/A- 2.30% 5/14/2021 1,800 +135a +120a (+/-5) +115 +115 BAML/BARC/DB/JPM
AbbVie Inc. Baa2/A- 2.85% 5/14/2023 1,000 +150a +140a (+/-5) +135 +135 BAML/BARC/DB/JPM
AbbVie Inc. Baa2/A- 3.20% 5/14/2026 2,000 +165a +155a (+/-5) +150 +150 BAML/BARC/DB/JPM
AbbVie Inc. Baa2/A- 4.30% 5/14/2036 1,000 +195a +180a (+/-5) +175 +175 BAML/BARC/DB/JPM
AbbVie Inc. Baa2/A- 4.45% 5/14/2046 2,000 +210a +195a (+/-5) +190 +190 BAML/BARC/DB/JPM
Banco de Bogota Ba2/BBB 6.25% 5/12/2026 600 mid 6.00%a 6.50%a (+/-12.5) 6.50% +474.8 CS/JPM/HSBC
Burlington Northern Santa Fe, LLC A3/A 3.90% 8/01/2046 750 +155a +135a (+/-2) +133 +133 CITI/GS/JPM
Chevron Corp. Aa2/AA- FRN 5/16/2018 850 3mL+50a 3mL+50 the # 3mL+50 3mL+50 BAML/JPM/WFS
Chevron Corp. Aa2/AA- 1.561% 5/16/2019 1,350 +70a +70 the # +70 +70 BAML/JPM/WFS
Chevron Corp. Aa2/AA- FRN 5/16/2021 250 3mL+equiv 3mL+equiv 3mL+95 3mL+95 BAML/JPM/WFS
Chevron Corp. Aa2/AA- 2.10% 5/16/2021 1,350 +90a +90 the # +90 +90 BAML/JPM/WFS
Chevron Corp. Aa2/AA- 2.566% 5/16/2023 750 +105a +105 the # +105 +105 BAML/JPM/WFS
Chevron Corp. Aa2/AA- 2.954% 5/16/2026 2,250 +120a +120 the # +120 +120 BAML/JPM/WFS
Deutsche Bank Baa1/BBB+ FRN 5/10/2019 500 3mL+equiv 3mL+equiv 3mL+191 3mL+191 DB-sole
Deutsche Bank Baa1/BBB+ 2.85% 5/10/2019 1,600 +212.5a +200 the # +200 +200 DB-sole
Deutsche Bank Baa1/BBB+ 3.375% 5/12/2021 1,500 +237.5a +225 the # +225 +225 DB-sole
Duke Energy Indiana LLC Aa3/A 3.75% 5/12/2046 500 +130a +115a (+/-3) +115 +115 CS/GS/MIZ/USB
GATX Corp. Baa2/BBB 5.625% 50NC5 150 5.75%a RG: 5.625%a
+5.75%a		 5.625% $25 par BAML/MS
Waste Management Baa2/A- 2.40% 5/15/2023 500 +110a N/A +90 +90 BAML/CITI/MIZ
Westpac Banking Corp. Aa2/AA- FRN 5/13/2019 250 3mL+equiv 3mL+equiv 3mL+71 3mL+71 BAML/CITI/GS/JPM
Westpac Banking Corp. Aa2/AA- 1.65% 5/13/2019 750 +95a +85a (+/-5) +80 +80 BAML/CITI/GS/JPM
Westpac Banking Corp. Aa2/AA- FRN 5/13/2021 250 3mL+equiv 3mL+equiv 3mL+100 3mL+100 BAML/CITI/GS/JPM
Westpac Banking Corp. Aa2/AA- 2.10% 5/13/2021 1,250 +110a +100a (+/-5) +95 +95 BAML/CITI/GS/JPM
Westpac Banking Corp. Aa2/AA- 2.85% 5/13/2026 1,500 +137.5 +120a (+/-5) +115 +115 BAML/CITI/GS/JPM
WW Grainger Inc. A2/AA- 3.75% 5/16/2046 400 +140a +120a (+/-3) +117 +117 HSBC/MS/WFS

         

For the entire edition of Quigley’s Corner, including a full analysis of the day’s debt capital market activity, please click here  

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Mubadala Dev. Co. PJSC Aa2/AA 2.75% 5/11/2023 500 MS+170 MS+150 MS+150 +133.8 BAML/BNPP/FGB/JPM/MUFG/SG