Tag Archives: Thomas Peterffy


Crypto Hedge Funds: Greenwich Crowd Buying Into Bitcoin Trading

Crypto Hedge Funds Get Their Greenwich On. If the MarketsMuse curators have avoided bidding on and publishing tick-by-tick coverage of “crypto mania” and bitcoin bubblelicious bytes akin to our media industry brethren, its only because we were arguably a pioneer when, starting in 2014, we first started framing the bitcoin and distributed ledger evolution under the label fintech. OK, one of our editors was conflicted–having purchased a few bitcoins back when paying $100 for the cryptocurrency caused laughter from peers with CT license plates on their Teslas. What a difference a day makes (ok, lets call it a few hundred days).

Every famous hedge fund wonk, from Steven Schonfeld to “Stevie” Cohen, and tens of dozens of others have either carved out a crypto trading strategy or are planning to do so. After all, volatility is every trader’s elixir and now that CME, CBOE, NASDAQ and as of Dec 20 announcement, NYSE ARCA have all blessed bitcoin, the opportunity to trade crypto derivatives on a regulated exchange is impossible to resist for the ‘hedgies.” Even Thomas Peterffy, the hard-charging Republican and multi-billionaire founder of Interactive Brokers, has walked back on his earlier position in which he said he would not allow IB customers to trade bitcoin products; now they can when they post the required margin. Hey, Thomas’s membership fees at Mar-a-Lago are going up and if bitcoin trading can create a new commission silo for the “Professional’s Gateway to the World’s Markets”, it makes sense to get in on the action. (Breaking News: NYSE ARCA TO LIST 2 BITCOIN ETFS).

As reported by WSJ’s Dec 20 column, “Big Hedge Funds Want In On Bitcoin”-— Already, there are around 20 funds, managing a total of roughly $2 billion in assets, that solely or predominantly trade cryptocurrencies, as tracked by an index compiled by Chicago-based data group HFR. The asset total highlights how it has largely been smaller funds that have traded bitcoin, though HFR President Kenneth Heinz says the number of funds could double in size in the first quarter of 2018.

OK $2b is “Peanutsville” when it comes to the trillion dollar  hedge fund industry which deploys capital across multiple asset classes and strategies.  But, according to the WSJ story, as well as off-line conversations with HF titans,  lots of folks who might have been allergic to peanuts are now looking to put on spreads with LEAP style maturity dates.

Lest one  forget, a whole bunch of smarty pants types in VC land dismissed two twins by the name of Winklevoss for claiming to have been the brains behind Facebook. Even their lawyers laughed at them when they insisted on taking then private shares in FB instead of $50m in cash when Mark Zuckerberg offered to settle the ‘misunderstanding.’ The shares soon became worth $300m and the twins then parlayed some of that into buying up 1% of the bitcoin market. The Winklevoss boys were laughed at again when they were the first to file for a bitcoin-based exchange-traded fund (ETF).  As their initial $10m stake in bitcoin blossomed into $1 Billion (on paper), those twins also created what is viewed as the most robust electronic exchange in the bitcoin ecosystem and is arguably worth as much as $1b also–just because someone would likely pay that much to take over the system.

Evan Fisher of Prospectus LLC, a global consulting firm that provides hedge fund set up guidance, business plan writing services, preparation of investor offering documents and more recently, whitepaper writing and ICO offering documents, sums it up by saying, “The calculus for hedge fund players allocating risk to this new asset class is pretty simple, if their peers are diving in, they need to.”

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Interactive Brokers to Retreat From Options Market-Making

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

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

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

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

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

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

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


What’s Next? Reuters Gets Redi; EMS Icon Acquired by Market Data Legend

Reuters execs say “Why build an expensive EMS platform to integrate with your buy-side focused analytics platform when you can buy one that already has captive customers?” If it’s the right price, then the answer  would seem to favor Buy v Build! That is apparently the calculus of market data provider  Thomson Reuters, which just announced they will acquire 100% of Redi Global Technologies.

Below coverage courtesy of our friends at MarketsMedia.com.

The market data provider plans to integrate Redi’s at-trade capabilities with into its Eikon pre-trade financial-analysis desktop

Market data provider Thomson Reuters has just moved into the trade-execution space with its agreement to purchase buy-side execution management system provider Redi Global Technologies.

Although both parties declined to disclose the terms of the deal, which is expected to close by the end of the year, Redi CEO Rishi Nangalia stated, “This is a 100% acquisition by Thomson Reuters and Redi’s existing owners will no longer have an equity stake in the company.”

“This deal was as much about technology, clients, reputation as it was domain expertise that sits with the Redi employees,” added Michael Chin, managing director, global head of equities at Thomson Reuters.

Most Industry watchers see the acquisition playing an important part in Thomson Reuters’ technology and trading strategy. One EMS sector market muse commented “InteractiveBrokers CEO Thomas Peterffy is probably peeing his pants from laughing too hard. Thomson Reuters has a history of bungling acquisitions.”

“Redi has a strong buy-side/hedge fund footprint, which will help Thomson Reuters increase its presence with that increasingly important demographic allowing Thomson Reuters to expand its data, distribution, and analytics business,” said Larry Tabb, founder and CEO of industry analyst firm Tabb Group. “Also given that Redi is not a broker and helping investors connect to their brokers, the acquisition will help reinforce the relationship that Thomson Reuters has on the sell side.”

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The two vendors already share many buy-side clients, according to Nangalia.

“However there is less overlap in the user base,” he added. “Eikon users typically are portfolio managers and analysts while RediPlus users are more often traders.”

Thomson Reuters plans on integrating the Redi EMS with its Eikon platform in a phased approach by moving each platform onto a common architecture through their respective upgrade cycles.

“We are not planning to re-write Redi into Eikon in the near term,” said Chin.

“There is no forced timeline to deliver an integrated product, said Nangalia. “It will be client feedback and prudent discussions along the way that will drive those technology decisions.”

Neither companies expect that the deal will result in any redundancies for Redi’s approximately 120 employees.

“The idea is to invest and grow the business,” said Nangalia. “The synergies are not planned from a people perspective. They are from other cost areas. This is an investment thesis and not a cost-cutting thesis.”

From a real-estate perspective, Redi will move from its corporate headquarters in Manhattan’s Wall Street neighborhood and other global offices into existing Thomson Reuters facilities.

“To achieve and integrated team, we want the teams in each city to be next to each other,” Nangalia added. “Obviously, Thomson Reuters’ offices are much large than ours, so we will be moving into their offices and integrating with their financial equities teams as quickly as is practical.”

Equities market-maker Spear, Leeds & Kellogg developed the RediPlus EMS in 1992, which Goldman Sachs later acquired in 2001. The investment bank then spun off the EMS vendor in 2013 with the collaboration of Bank of America Merrill Lynch, Barclays, BNP Paribas, Citadel and investment funds associated with Lightyear Capital.

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