Whats old is new again in the equities trading markets – talk of what the Federal Reserve will do at its upcoming policy meeting.
After months of the Trump rally, talk of tweets and executive orders, the Fed and potential interest rate hikes had faded into relative obscurity as share prices and valuations moved higher on economic optimism. But now the focus has turned back to the Fed and what might come at the upcoming March 14-15 meeting.
Interest rate talk was around and about the market as traders discourse moved distinctly from if the Fed was going to raise rates to how much and soon. Improvements in the economy and the possibility of fiscal stimulus have increased the chances that the Federal Reserve will raise interest rates this month, said Fed Governor Jerome Powell in a speech last week. Futures markets are putting as much as a 90% likelihood that rates will be raised by at least 25 bps at the next meeting which begins on March 14. Some traders told Markets Media that the Fed could surprise the market could bump rates even higher – 50 bps – given recent comments on fiscal policy and wage push inflation pressures.
Jessica Rabe, research associate at Convergex, a global brokerage company based in New York said that when looking at the Feds dual mandate, labor markets remained tight amid reports of widening labor shortages, while shortages of skilled workers helped put upward pressure on wage growth. Prices on the other hand were little changed. Looking at this plus the regional reports from the district branches and banks, it looks like the markets are still signaling a greater than 60% chance for a March hike.
William Mingione, Managing Director – Head of Equities at Drexel Hamilton told Markets Media that the old adage, the trend is your friend, still holds true even in the shadow of Fed action.
The market has continued to show signs of strength.The market continues to trade in overbought conditions but shows no signs of weakness in the RSI indicators, Mingione said.
Looking back at last week, he recounted lots of hype with the highly anticipated IPO of Snapchat (SNAP) which went off well during a down tape.
Snap, maker of the Snapchat messaging service saw its issues sell for $17 in the IPO and rise as high as$26.05. They were last quoted on the New York Stock Exchange at $28.82 or up 159 percent from its offering price. CBOE Holdings announced it plans to list options on Snap. The exchange anticipates trading in options on Snap will begin on Friday, March 10, once the underlying stock has been certified as meeting all of CBOE Holdings’ applicable exchanges’ listing criteria.
CBOE plans to list Snap options on its four options exchanges — Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2), Bats’ BZX Options and Bats’ EDGX Options.
Also, Mingiones firm hosted a Washington DC bus tour this week visiting several Washington, DC-area defense and internet technology firms. Based on his personal conversations and analysis, he believes most of the likely paths forward that he heard are generally very positive (stock prices moving higher) ffor defense and the IT stocks.
Trading on U.S. equity exchanges was reported at an average 7.46 billion shares per day for the week ended March 3, according to Bats Global Markets data.
In other market news, Greenwich Associates reported the cost to trade U.S. equities via people has held steady during the last year at 12 basis points while exchange traded funds (ETFs), which are gaining in popularity and provide more stability, are getting more expensive to trade.
Also, CBOE Holdings reported that it completed its acquisition of Bats Global Markets, Inc. last week in a cash and stock transaction valued at approximately $3.4 billion (based on the closing price of CBOE Holdings shares on February 28). CBOEs leadership team is headed by Edward Tilly, Chairman and CEO of CBOE Holdings. Chris Concannon, formerly CEO of Bats Global Markets, is now President and COO of CBOE Holdings.
Also, Tabb Group reported that total volume in the U.S. options market reached 4.06 billion contracts in 2016, a 1.9% decline from 2015. The reason for the drop – lack of volatility. As Tabb wrote, as a lack of sustained volatility has resulted in little perceived volume growth, U.S. listed options volume for 2017 is expected to also remain fairly stagnant.
Lastly, the Senate Banking Committee is expected to consider the nomination of Jay Clayton as SEC Chair this week. While some Democrats have raised objections to Clayton given his background representing financial services firms, market observers do not expect any serious obstacles to his confirmation. Once confirmed, some items which may be high on Clayton’s agenda include measures to encourage more initial public offerings and to ease the accounting and compliance rule burdens for mid-sized companies.
Mid- and small-tier US-based asset managers should not think that they’ve dodged the MiFID II bullet, according to the discussion on a Security Traders Association open call.
“If you are a US manager that doesn’t have any physical presence in Europe, you are not in the regulation’s bullseye,” said Tom Conigliaro, managing director at IHS Markit Brokerage and Research Services. “But from a practical and competitive pressure situation, you could be.”
Under MiFID II, which goes into effect in January 2018, asset managers that fall under the directive’s mandate no longer will be able to pay for research from commissions. Instead, they will need to pay for research directly using their own balance sheet or via a research payment account funded by commission sharing agreements or a research fee charged to clients.
Implementing an RPA will require asset managers to track their interaction with their counterparties, assess the quality of the delivered research regularly, establish and allocate a research budget, and manage payments directly or through an RPA administrator.
According to Conigliaro, the global asset managers are gravitating to MiFID II’s stricter research funding requirements rather than operate under multiple regulatory regimes.
Tom Conigliaro, IHS Markit
“That’s how it will first leak into the US,” he noted. “These global managers that find it much easiest to adhere to what they see as the most stringent regulatory standard and operate synergistically across the globe.”
Once US-based global asset managers adopt the regime, it will becomede factobest practices for the industry and a bullet item on existing and prospective clients’ checklists.
“US managers may be perceived at a disadvantage if they are not following MiFID,” said Conigliaro. “Most underlying clients will view MiFID as a positive thing with better transparency, more reporting, and the other things that go along with it.”
However, domestic US asset managers do not necessarily have to follow the MiFID II regime to the letter but should set up budgets, have an organization-wide evaluation process in place, rate the research and then rank it.
These procedures will prevent asset managers from being caught flat-footed when clients call inquiring about the firm’s transparency when it comes to the funding of research, according to Conigliaro.
“It will give you a head start when that bell rings, and you have no choice but to move into a MiFID-oriented regime,” he added.
New research tools make it even easier for retail investors to research securities using fundamental data screens on the thinkorswim trading platform from TD Ameritrade, Inc. –
Fundamental Watchlists: All of the fundamental data available in thinkorswim’s Stocks Fundamentals tab have migrated into all of the watchlists. The watchlist interface now has more than 40 additional new data points, including growth rates, valuations and profitability metrics, all backed with full historical data.
Many of these are customizable by timeframe and display aggregation, for example, yearly, quarterly or five-year trend data.
Fundamental Scanning: thinkorswim users can also search the universe of equity symbols for all of the companies that fit a unique profile of fundamental metrics through the Stock Hacker and Options Hacker tabs. Users apply filters to scan for specific metrics and refine their searches by applying timeframe and aggregation parameters.
“Our clients now have access to one of the most powerful screeners in the world, and can search the universe of equity symbols based on an extensive set of fundamental and technical parameters,” said Nicole Sherrod, managing director of trading, TD Ameritrade. “Our new, highly sophisticated interface can help them make more informed decisions and the ability to share their screeners means our clients can collaborate to have a more engaging trading experience.”
Separately, thinkorswims paperMoney function has been upgraded based on client feedback to give the user an even more realistic experience. Expiring securities such as options, futures and futures options now end automatically in these demo accounts to better simulate a real-time trading experience.
VectorVest, a market analysis system, announced a partnership that links VectorVests portfolio management software with a users Interactive Brokers account via itsTrade Nowbutton.
The client-centered offering provides best price executions, low commissions and margin rates via Interactive Brokers, as well as dedicated client support by Gar Wood Securities, LLC., an Introducing Broker to Interactive Brokers. For VectorVest clients, this combination enhances the customer experience by incorporating an immediate point of contact at Gar Wood with the financial strength of Interactive Brokers, the largest electronic broker in the U.S.*
The collaboration greatly streamlines the process for executing trades in U.S. stocks through VectorVest, simplifying and enhancing the trading experience for VectorVest clients while providing access to a highly-capitalized firm providing best price execution.
Speed and quality of execution are paramount to successful trading. IBstransparent, low-commission and best-price executions minimize traders costs to help maximize their returns, said Thomas Peterffy, Chairman and CEO of Interactive Brokers. IB clients subscribing to VectorVest can now enjoy a seamless trading experience directly from VectorVests stock analysis and portfolio creation platform. This is an added value to Interactive Brokers clients using VectorVest, and further demonstrates our commitment to providing the best investing service for both active and mainstream investors, he said.
While analyzing stocks in VectorVests software, clients can create an order ticket by simply right-clicking on stocks and choosingTrade Now.Behind a secure login, an order ticket awaits customization and confirmation by the user. The order screen conveniently pulls in the account balance, the positions, and buying power from Interactive Brokers. One user click enablesPreview Orders, and a second click,Place Orders, securely transfers the order ticket to Interactive Brokers for execution.
In addition to the newTrade Nowfeature, VectorVest is making RoboTrader available to clients executing with Interactive Brokers. RoboTrader is a powerful trading tool that solves many traders biggest problem: executing a trading plan without letting emotions cloud judgment. RoboTrader implements a trading plan only requiring confirmation for fast, accurate execution, and monitors results in real time.
Traders can use any trading system in VectorVest, modify it, or build their own, and can even trade several plans at once. RoboTrader monitors the portfolio (and trading system) to identify new trading opportunities the moment they arise and trades need to be made. Confirming trades only requires a few clicks, and the trades are sent directly to the broker.
For VectorVest subscribers to learn more about opening a new account with Interactive Brokers or to link an existing, Interactive Brokers account with the VectorVest platform, please visitwww.garwoodsecurities.net/vectorvest.
The cost to trade U.S. equities via people has held steady during the last year at 12 basis points while exchange traded funds (ETFs) , which are gaining in popularity and provide more stability, are getting more expensive to trade.
In its latest report, Have Emerging Markets Emerged? An In-Depth Look at the Changing Landscape of Global Equity Commission Rates, market consultancy Greenwich Associates has noted that headline commission rates have remained largely unchanged in the developed world. In the U.S. market-by far the largest by capitalization-Greenwich said the buy side reports an average high-touch bundled rate of slightly more than 14 basis points (3.7 cps).
Although curbed by the higher rates paid in smaller countries such as Israel and much of Southeast Asia, rates in developed markets as a whole average 15.6 bps-a bit higher than the 14.9 bps average in developed Europe, Greenwich noted. Even in the all-in blended average commission rates, which take into account high-touch, algorithmic and portfolio trades, we saw little change in the 10.9 bps developed-market average.
For the US – 2016 provided plenty of excitement and volatility, equity markets included. The commission rate backdrop included such notable geopolictical events such as the Brexit vote, which caused heightened uncertainty. Also, the U.S. presidential election results ignited the current market rally, resulting in all-time market highs. Lastly, regulatory pressures from both the U.S. and abroad (think MiFID II) have contributed to increased attention to best execution and research payment practices.
In the U.S., Greenwich looked at deviations from the traditional single-stock and portfolio-trading commission rates by reporting rates for exchange-traded funds, commission-sharing agreements, larger-cap versus smaller-cap trades, and trades involving capital commitment.
In its calculations, Greenwich noted that the high-touch execution rate accounted for 46% of the high-touch bundled rate, with the remainder was tacked on to pay for research. On algorithmic trades, the execution-only rate represents 36% of the combined execution and research tack-on, as an increasing proportion of institutions tack on the same amount for research, be it a high-touch or low-touch trade.
As MiFID II gains steam toward the end of 2017, we may see further alignment of tack-on rates across execution channels, the consultancy noted.
U.S. Commission Management Trade Rates
The high-touch execution rate for commission management trades averages 1.7 cents per share (cps), while the algorithmic execution rate averages 1 cps. The research tack-on portion averaged 2.1 cps for high-touch trades and 1.7 cps for algorithmic trades. By comparison, these rate structures nearly match their single-stock counterparts. It appears that even when a commission-management program is used to compensate brokers for execution and research services, the rate at which institutions pay those brokers remains unchanged.
ETF vs. Single-Stock Rates
Although similar in composition, Greenwich noted that ETFs are traded at a higher rate than their single-stock counterparts. Reported U.S. high-touch and algorithmic execution rates were 2.2 cps and 1.2 cps respectively, for ETFs. These are 30% and 9% higher than their single-stock counterparts.
It appears traders are willing to pay a higher rate to reduce market movement, ensure timely execution and to access capital, report author William Llamas, Associate Director at Greenwich Associates noted.
Also, Nicholas Colas, chief market strategist at Convergex said the ETF popularity has also been a beneficiary of the move to passive investing over the last 20 years. He noted that as of the end of last week, US ETFs had $2.8 trillion in assets under management and that there are now 1,993 ETFs listed in US markets.
Furthermore, year-to-date money flows into US listed ETFs total $80.8 billion, of which $42.2 billion was invested in January and $38.6 billion month-to-date in February. These flow rates are well ahead of the 12 month average of $30.5 billion.
There is, of course, no guarantee these flows will continue, Colas said.
Investors Pay Up for Capital
Last year, when Greenwich asked respondents if they paid a different rate for a trade executed via a natural cross, as a working order, or using a commitment of capital, the consultancy had insufficient data to see any trend. However, more U.S. institutions reported and revealed that high-touch trades requiring capital averaged 2.7 cps for execution and 2.2 cps for a research tack-on. The execution rate is almost 60% higher than the reported U.S. single-stock high-touch execution rate of 1.7 cps. It seems that investors are willing to pay up for trades that provide access to capital.
The reports data was collected between September and November of 2016. Greenwich Associates interviewed heads of equity trading at North American, European, and Asian institutions regarding typical commission rates paid across 77 different markets. Desks were asked for their overall bundled rate, execution-only rates for both high-touch and electronic trades, tack-on rates for both high-touch and electronic trades, and portfolio trading and all-in blended rates across developed, emerging and frontier markets.
Thomson Reuters has made key enhancements to its data analytics platform, Thomson Reuters Velocity Analytics, to provide ultra-high-speed processing of real-time, streaming and historical data that will help EU and non-EU financial markets participants meet their MiFID II obligations.
The enhanced platform, now powered by Kxs market-leading technology, enables a broad range of use cases such as best execution compliance, transaction cost analysis, quantitative and systematic trading. It will also support new multi-asset best execution and SI (Systematic Internaliser) determination capabilities from Thomson Reuters in 2018.
By harnessing the power of Kx technology, Thomson Reuters Velocity Analytics can now process much larger volumes of data from multiple sources in real-time. Thomson Reuters has also expanded both the breadth and depth of the historical and reference data available for processing through full integration with its Datascope Select service as well as with Thomson Reuters Pricing Services for independent evaluated prices. In addition, Velocity Analytics is integrated into Thomson Reuters Enterprise Platform ensuring that financial institutions can take advantage of their existing infrastructure investments to access streaming analytics.
MiFID II compliance is fundamentally a data challenge and the work we have been doing to completely reengineer Velocity Analytics will support financial markets participants looking for best execution, transaction costs analysis, and other high performance trading analytics, said Brennan Carley, head of enterprise propositions at Thomson Reuters. We want to make it as easy and cost-effective as possible for our clients to comply with the MiFID II requirements and take advantage of their existing infrastructure investments, while helping them to prepare for new opportunities for their businesses post-January 2018.
“We are delighted to extend our partnership with Thomson Reuters by providing technology and solutions to power their MiFID II services offering, said Brian Conlon, CEO of Kx. We jointly believe that Kx technology combined with Thomson Reuters data is uniquely suited to address the data-centric challenges presented to firms by MiFID II. Therefore we are working together to continuously enhance Thomson Reuters Velocity Analytics to include data and analytics modules for pre and post-trade transparency reporting solutions for both new and existing Thomson Reuters customers.”
Thomson Reuters Velocity Analytics allows financial institutions to develop market-making trading strategies, perform real-time market monitoring and regulatory compliance checks, and build real-time transaction cost models to reduce execution costs. The solution is widely used by global hedge funds, proprietary arbitrage trading desks, brokerage firms, exchanges, regulatory agencies, third party transaction cost analysis firms, algo execution desks, and many other types of businesses in the trading community. The direct integration of Thomson Reuters data into Velocity Analytics provides an optimal platform for streaming and big data analytics, as well as low-latency, in-memory and event-driven analysis as data passes through the platform.
More on Thomson Reuters MiFID II solutions for the financial community can be found here. More on Kx systems can be found here.
Wall Street Horizon announced that IHS Markits new Hub Horizon corporate event data service, which is powered by Wall Street Horizons industry-leading event data, has officially launched.
Markit Hub Horizon provides extremely accurate and reliable forward-looking corporate event dates and information on over 5,000 North American and 7,000 international companies. More than 20 event types are covered, including earnings dates, dividend dates, splits and investor related conferences. The data helps investment managers avoid surprises, save time and make more informed investment decisions.
The Hub Horizon data is available alongside several other datasets within Markit Hub, which provides a centralized interface for managing sell-side and independent research, industry content, economic research, company fundamentals and filings. More than 20,000 financial market professionals, representing over 14,000 investment firms, use Markit Hub to access research, news and data from global banks, news and third-party research providers.
Commenting on the partnership, Bruce Fador, president and CCO of Wall Street Horizon, said: Investors today are increasingly looking to non-traditional sources of data to help fuel alpha. Whether its through satellite imagery of parking lots, social media sentiment or esoteric event types like the ones tracked by Wall Street Horizon, this alternative data is providing significant value to managers of all types. Were excited to formally go live as the data provider behind Markit Hub Horizon, and expect the Markit Hub clients will find great value in our data.
Tom Conigliaro, managing director of Trading Services at IHS Markit, added: Corporate events often add risk in the form of increased volatility in a stocks price. Investors and traders therefore need accurate corporate event data to most effectively execute their investment and trading decisions. The early response weve gotten to Hub Horizon and the manner in which it solves for these issues has been very encouraging, and we look forward to working with Wall Street Horizon to expand the datasets being provided.
In early February, the CME Group broadened its spoofing rule to include attempted spoofing, and increased the amount of potential fines for disruptive trading activity and attempted market manipulation. Not only did this news catch my eye, but it confirmed what I have been expecting to see for a while: the CFTC is starting to put increased pressure on the exchanges to detect and punish illegal trading activity. The CME is not the only derivatives exchange that has been feeling the pressure from the CFTC, as ICE has been mandated to speed up their investigations of market manipulation as well.
Craig Pirrong, a finance professor at the University of Houston, told Reuters, that under the new rules, theCME will have more latitude to pursue spoofers and other rogue traders. It is more clear than ever before, that compliance officers at trading organizations of all kinds must be thinking about the most effective ways to ensure that their traders are playing by the rules.
As a former CCO with about 10 years of experience on both the regulatory and business sides of the industry, I believe it is more critical than ever that compliance professionals take a proactive approach to protecting their company from costly regulatory fines and the reputational damage that comes along with them. Here are a few of my recommendations for todays compliance professionals: I call them the Three Es.
Education – Increase the frequency of training:It is critical that traders are up to speed on new regulations and the disciplinary actions by exchanges on which they trade. Educating your traders annually just will not fit the bill, however, you also dont want your traders too distracted from their daily work. It is up to CCOs to be creative and develop efficient yet effective methods for ensuring that their traders understand the mechanics of the rules that address disruptive and manipulative trading practices, as well as the severe consequences that accompany violations of those rules.
Evaluate – Your firms pre-trade risk controls:Pre-trade risk controls come in many forms, including messaging throttles, quantity limits, and kill switches. However, another way to enhance your firms pre-trade risk controls is by simply interviewing your traders on a regular basis about their trading strategies to ensure that they are fully aware of the rules and regulations important to the markets they trade in. If the traders are taking the rules into consideration when developing or modifying their strategies, then you have pro-actively reduced the amount of regulatory risk that your firm will ultimately be exposed to.
Execute – The usage of modern trade surveillance tools:With the broadening of the rules by the CME and the increase in potential fines, it puts the onus on CCOs to quickly make the change to modern trade surveillance technology. Now is the time for compliance teams to ensure that their trade surveillance solutions can be relied on to flag potential market manipulation and disruptive trading practices. Arecent Bloomberg articleconfirms that even the CFTC is pursuing private companies that use artificial intelligence to recognize fraud that isnt necessarily easy to spot. Utilizing state-of-the-art surveillance solutions that leverage machine learning technology in near real-time is what I believe is the way of the future in regulatory compliance technology. Legacy solutions that maintain a rule-based approach have proved to elicit too many false positives and allow fraudulent trading behavior to slip through the cracks.
Jay Biondois Director of Surveillance Products Design at Neurensic
Dash Financial announced Wednesday that that it has completed its merger with LiquidPoint (Convergex’s Options Trading and Technology business) to create Dash Financial Technologies. Private equity firm GTCR, which facilitated the transaction, is the majority owner of the new firm.Peter Maragos, CEO of Dash Financial Technologies, discussed the acquisition and other market topics with Traders Magazine editor John DAntona Jr.
Traders Magazine: Dash recently finalized its merger with the LiquidPoint options business from Convergex. What was the impetus for that deal and what is the vision for the new Dash?
Maragos: There were several factors that drove the deal, but probably the three biggest were the fact that we were able to pick up a hugely impressive team, some very sophisticated technology, and some product assets that augmented our existing offering incredibly well. With the deal now finalized and our firm rebranded as Dash Financial Technologies, were able to go to market with a suite of high performance solutions that is unmatched in its breadth. We now have products targeted to the Buy Side, Sell Side and Exchange communities that fall into four distinct categories: Trading Technologies, Execution Services, Analytics and Regulatory Technologies. We genuinely believe we are ushering in the technology-enabled brokerage model of the future that is based on transparency, performance and customization – were extremely excited about the opportunity we have.
Traders Magazine: At the time of the deal announcement you talked about unlocking the potential of both businesses – what exactly did you mean by that?
Maragos: Most broker dealers today are really technology companies first and foremost, at least thats the case with us. We operate as a broker in order to be compensated transactionally but for all intents and purposes were a tech company. And for technology firms the name of the game is scale, as that allows us to better service our clients and better reward our employees and shareholders. Dash and Liquidpoint on their own were fine businesses, but by combining we now execute 13% of the US options market and route an additional 20% of the overall market volume through the BrokerPoint and BLAZE floor broker workstation products. The scale of the combined business opens so many new avenues to us, several of which were already actively pursuing.
Traders Magazine: You mention your options market share and growing equities share. Where does the equities business stand today? Has moving from options into equities been easier or harder than expected?
Maragos: We basically launched our equities business two years ago and have seen that business grow considerably since. We signed a handful of very large institutions in the second half of last year as both options and equities clients, and expect those to have a meaningful impact on our volumes as they begin ramping up with us.
As to your question about the transition, I dont want to say it was easy because nothing in this business is. But I will say that going from the options market — where there are close to a million different contracts, 15 exchanges each with extremely complex market structures and massive amount of market data to process – to the equities market, which, while extremely complex, is probably less so than options, is likely an easier transition than going the other way. That was a big part of our thinking when we initially built our platform for options in 2010, as it allows us to move into other asset classes relatively quickly and efficiently.
Traders Magazine: You bill yourself as providing radical transparency – how is what you do different than any other firms that provides post-trade analytics?
Maragos: We provide clients visibility into every aspect of every order, which means the full breakdown of where, how and why each order and its child slices were routed, how long it took each venue to acknowledge each message, how long it rested on each venue, etc. We also provide a full breakdown of all the individual exchange fees and charge these on a “cost plus” basis, so if an order that is executed on a venue that pays a rebate, the client realizes that net savings. We do all of this through our Dash360 web-based transparency portal, which allows clients to analyze and visualize their trades. In today’s environment, I dont see why the buy side would accept anything less than this level of transparency.
Traders Magazine: Clearly the SEC will look much different in the near future. What, if any, market structure issues would you like to see them address?
Maragos: RegNMS has been with us for a little over 10 years now and I think its time for a holistic review. In our view the protected quote has clearly created more complexity than its worth, in addition to unintended consequences like some exchanges existing solely for market data fee capture reasons. I would be happy to see that particular rule go.
Traders Magazine: The role of the buy side trader has changed tremendously over the last 10-15 years. What do you think it will look like a decade from now?
Maragos: Whereas 10 years ago you had maybe 1-2 people on each buy side desk that would be considered a technologist, that number is much higher now and will only increase. I think youll see, in 10 years, the paradigm completely shift, where the buy side desk will be staffed almost exclusively by technologists and perhaps a small group of experts who know where to go for specific, hard-to-find liquidity. I also think youll keep seeing the move from specialists to generalists on the buy side as asset managers continue to contract their desks, all of which will make multi-asset tools that much more important.
Traders Magazine: You and your partner, David Karat, launched Dash just over six years ago. What do you know now that you wish you knew then?
Maragos: As anyone who’s started a business knows, it’s not for the faint hearted. But by and large we’ve been very fortunate. I think much of that good fortune is due to the people that weve surrounded ourselves with, both as advisors and employees. Youre only as good as your team, and to that end weve done very well.
Bloomberg announced new Canadian foreign exchange benchmark rates.
Today, the Bank of Canada will adjust the timing, frequency and calculation of the daily average rate for currencies against the Canadian dollar. The Bank said these changes are intended to reinforce the distinction between FX rate fixings used as benchmarks for transactional purposes and Bank of Canada exchange rates that are provided as a public good-for statistical, analytical and informational purposes only.
Bloombergs Canada BFIX is a family of benchmarks used for portfolio benchmarking, derivatives valuation, index construction, and trade execution. The rates can be used by corporate treasury professionals to get an accurate price in currency transactions, and by asset and pension fund managers to demonstrate best execution for investments. BFIX covers spot, forward and non-deliverable forward (NDF) rates. They are based on a Time Weighted Average Price (TWAP) methodology that captures streaming bid/ask data — indicative executable and executed — from multiple FX pricing providers.
Canadian corporates and investors will see the latest market changes next week, said Ben Macdonald, Bloombergs Global Head of Product. Bloomberg is ready, willing and able to provide them with a new, flexible and reliable set of data to help them get currency pricing with even more accuracy and transparency.
The Bloomberg Canada BFIX follows on the heels of its European BFIX counterpart that was introduced before the European Central Bank withdrew from providing FX reference rates as a transactional benchmark in July 2016. The BFIX family of benchmarks was confirmed to be aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, according to an assessment by an internationally recognized accounting firm, announced in May 2016.
We are gratified that so many European financial firms have adopted BFIX, Macdonald added. Data is available for the Canadian dollar with the following currency pairs: Australian dollar, Brazilian real, Chinese renminbi, European euro, Hong Kong dollar, Indian rupee, Indonesian rupiah, Japanese yen, Malaysian ringgit, Mexican peso, New Zealand dollar, Norwegian krone, Peruvian new sol, Russian ruble, Saudi riyal, Singapore dollar, South African rand, South Korean won, Swedish krona, Swiss franc, Taiwanese dollar, Thai baht, Turkish lira, UK pound sterling and US dollar.
Bloomberg customers can see the Canadian BFIX live-streaming, real-time on the Bloomberg Professional service (Terminal) at {BFIX}. These rates and others can be seen at www.bloomberg.com/markets/currencies/fx-fixings. Please note that all this information is provided for reference purposes only. To license the data to conduct valuation or in back-office systems and processes, please contact us at bfixinquiry@bloomberg.net
TRADING THE WEEK: What, the Fed Again?
Whats old is new again in the equities trading markets – talk of what the Federal Reserve will do at its upcoming policy meeting.
After months of the Trump rally, talk of tweets and executive orders, the Fed and potential interest rate hikes had faded into relative obscurity as share prices and valuations moved higher on economic optimism. But now the focus has turned back to the Fed and what might come at the upcoming March 14-15 meeting.
Jessica Rabe, research associate at Convergex, a global brokerage company based in New York said that when looking at the Feds dual mandate, labor markets remained tight amid reports of widening labor shortages, while shortages of skilled workers helped put upward pressure on wage growth. Prices on the other hand were little changed. Looking at this plus the regional reports from the district branches and banks, it looks like the markets are still signaling a greater than 60% chance for a March hike.
William Mingione, Managing Director – Head of Equities at Drexel Hamilton told Markets Media that the old adage, the trend is your friend, still holds true even in the shadow of Fed action.
The market has continued to show signs of strength.The market continues to trade in overbought conditions but shows no signs of weakness in the RSI indicators, Mingione said.
Looking back at last week, he recounted lots of hype with the highly anticipated IPO of Snapchat (SNAP) which went off well during a down tape.
Snap, maker of the Snapchat messaging service saw its issues sell for $17 in the IPO and rise as high as$26.05. They were last quoted on the New York Stock Exchange at $28.82 or up 159 percent from its offering price. CBOE Holdings announced it plans to list options on Snap. The exchange anticipates trading in options on Snap will begin on Friday, March 10, once the underlying stock has been certified as meeting all of CBOE Holdings’ applicable exchanges’ listing criteria.
CBOE plans to list Snap options on its four options exchanges — Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2), Bats’ BZX Options and Bats’ EDGX Options.
Also, Mingiones firm hosted a Washington DC bus tour this week visiting several Washington, DC-area defense and internet technology firms. Based on his personal conversations and analysis, he believes most of the likely paths forward that he heard are generally very positive (stock prices moving higher) ffor defense and the IT stocks.
Trading on U.S. equity exchanges was reported at an average 7.46 billion shares per day for the week ended March 3, according to Bats Global Markets data.
In other market news, Greenwich Associates reported the cost to trade U.S. equities via people has held steady during the last year at 12 basis points while exchange traded funds (ETFs), which are gaining in popularity and provide more stability, are getting more expensive to trade.
Also, CBOE Holdings reported that it completed its acquisition of Bats Global Markets, Inc. last week in a cash and stock transaction valued at approximately $3.4 billion (based on the closing price of CBOE Holdings shares on February 28). CBOEs leadership team is headed by Edward Tilly, Chairman and CEO of CBOE Holdings. Chris Concannon, formerly CEO of Bats Global Markets, is now President and COO of CBOE Holdings.
Also, Tabb Group reported that total volume in the U.S. options market reached 4.06 billion contracts in 2016, a 1.9% decline from 2015. The reason for the drop – lack of volatility. As Tabb wrote, as a lack of sustained volatility has resulted in little perceived volume growth, U.S. listed options volume for 2017 is expected to also remain fairly stagnant.
Lastly, the Senate Banking Committee is expected to consider the nomination of Jay Clayton as SEC Chair this week. While some Democrats have raised objections to Clayton given his background representing financial services firms, market observers do not expect any serious obstacles to his confirmation. Once confirmed, some items which may be high on Clayton’s agenda include measures to encourage more initial public offerings and to ease the accounting and compliance rule burdens for mid-sized companies.
This Weeks U.S. Economic Indicators of Interest:
Factory Orders
Neel Kashkari Speaks
Redbook Retail Sales
International Trade
Consumer Credit
Productivity and Costs
Wholesale Trade
Jobless Claims
Import/Export Prices