Tuesday, May 13, 2025

With The Introduction of QDD, Will Tax Compliance Get Even More Taxing?

Just when banks may think they have met all of their fiscal and regulatory obligations for the New Year (including the hotly- debated IRS 871(m) requirements), yet a new one arises.

Cue QDD – a new set of requirements for broker dealers and banks that want to become Qualified Derivatives Dealers (QDD). The idea is great, as QDD status prevents the cascading of withholding taxes on implied and actual equity-linked income events. Becoming a QDD breaks the chain, as when a QDD is paying income to a fellow QDD, it can do so gross, whereas if it is paying a non-QDD it must do so net.

But QDD status means that the company must perform a self-assessment of what tax it must pay to the IRS. This may result in assessing hundreds or even thousands of U.S.-related derivative contracts, as well as the implied dividend on the underlying shares embedded in the contract where they will get taxed on the underlying income events. All of which could create substantial potential tax withholding processing issues.

Luckily, the IRS has recognized the potential complexity involved in QDD and granted a concession which states that firms can use risk system reporting to understand if their implied dividends on derivatives were fully offset by the tax due on a standard cash income event in a QDD self-assessment calculation. As a QDD, the company in question will need to report and pay tax on these events. This all sounds reasonably straightforward, right?

This is where things start to get even more complicated. The QDD regime acts so that, in return for complying with the requirements of the regime, the bank or broker dealer receives 100% of the dividend and can pass it on to other QDDs at that rate. Although when it is paying to a non-QDD, that party is taxed based upon their associated tax documentation. This scenario seems like it could be easily supported – but, multiply the transactions, positions and dividend events into hundreds of thousands of flows, and it is clear that attempting to comply with this regime manually without leveraging automation will lead to a plethora of problems.

Similarly, QDD requires the comparison of the tax embedded on the underlying event, typically based on linking derivative share equivalents to dividend events, to the tax calculated on the cash income earned on the same dividend event so that only a net amount should be paid. With a myriad of complexities that will spill out, the implementation of QDD being delayed is not stopping firms from looking for solutions to these inevitable problems now. After all, every bank will need to work out the different entities they want to register as QDD status for and, as a result, will have to go through the painful process of registration. They will also need to work out a mechanism for centrally tracking situations that are QDD eligible and decide what feeds need to be interfaced into the central system, what tax needs to be calculated, when, by whom and submitted into what returns.

QDD regulations will of course require a much more sophisticated monitoring of a range of data elements – including who is receiving changes, updates and cancellations. While QDD is currently front of mind, it is not the first and certainly will not be the last tax initiative. Those firms who ignore the problem instead of looking for a long-term solution run the risk of accruing fines and ultimately, reputational damage. On the flip side, those that take advantage of the latest compliance technology like data automation and smart processing will not only keep the relevant U.S regulators happy, but also drive efficiency savings across the business.

Daniel Carpenter is Head of Regulation at Meritsoft.

Hudson River Trading to Buy Sun Trading

Hudson River Trading LLC (HRT) and Sun Holdings LLC (Sun Trading) announced that HRT has entered into a definitive agreement to acquire Chicago, IL-based market making firm Sun Trading.

Sun Trading is a highly regarded market marking firm with an approach to trading that is complementary to HRTs, said Jason Carroll, Co-Founder and Managing Director of HRT. This acquisition combines HRTs expertise in on-exchange trading with Suns expertise in off-exchange trading creating a stronger, more diverse firm. We are excited to join forces with Suns talented team and for HRT to become part of the Chicago trading community.

Hudson River Trading is a global leader in automated trading, said Kevin Cuttica, CEO of Sun Holdings LLC, We are excited to have found a strategic partner with a shared culture of collaboration. The combined firm will continue Suns focus providing meaningful liquidity to our trading partners through our US equity Single Dealer Platform, our European equity Systematic Internaliser, and an enhanced global distribution network across other market places.Subject to final due diligence and regulatory approval, the transaction is expected to close in the first quarter of 2018.

About Hudson River Trading

Hudson River Trading (HRT) is a multi-asset class quantitative trading firm based in New York City. Founded in 2002, HRT develops automated trading algorithms that provide liquidity and facilitate price discovery on exchanges and alternative trading systems. With offices in New York, Austin, TX, London and Singapore, HRT trades equities, futures, options, currencies and fixed income on over 100 markets worldwide.

About Sun Trading

Sun Trading is a global market maker providing liquidity to over 115 exchanges, trading venues,and counterparties in over 15 countries. Founded by Jeff Wigley in 2003, Sun Trading has been a leading market maker in multiple asset classes, focused on liquidity provision and price improvement for investors. The firm is headquartered in Chicago with offices in London and New York.

Cboe Conducts First Settlement of Cboe Bitcoin Futures

Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, announced the settlement of January expiry Cboe bitcoin (XBT) future.

The settlement price was $10,900.00, as determined by the 4:00 p.m. ET Gemini1 Exchange bitcoin auction.

Cboe XBT futures, the first regulated futures of their kind, launched on December 10, 2017, and a total of over 124,000 contracts have traded across expiries since, representing a notional value of over $1.5 billion. The contracts, which are cash-settled, were specifically designed to allow participants to implement straightforward trading strategies through settlement to a single, tradable auction price as calculated by Gemini.

Ed Tilly, Chairman and Chief Executive Officer of Cboe Global Markets, said: “Our regulated market experienced a smooth operational close and the settlement process worked as designed. This is an encouraging initial milestone, and we look forward to working with customers to power the growth of this nascent market.”

For more information about XBT futures, please visit here.

Weekly Corporate Event Highlights

Mon 1/22/2018


Biogen Inc (BIIB): Presenting at 14th Annual Phacilitate Cell & Gene Therapy World

BioMarin Pharmaceutical (BMRN): Presenting at 14th Annual Phacilitate Cell & Gene Therapy World

Celgene Corporation (CELG): Presenting at Immuno-Oncology Frontiers World Conference-Miami

Merck & Co. Inc. (MRK): Presenting at Immuno-Oncology Frontiers World Conference-Miami

Netflix Inc. (NFLX): Projected Earnings Release for Q4 20171/22/2018: confirmed on 12/15/2017

CVS Health Corp (CVS): Presenting at The Precision Medicine World Conference -PMWC 2018 Silicon Valley

International Business Machines Corp. (IBM): Presenting at The Precision Medicine World Conference -PMWC 2018 Silicon Valley

Tue 1/23/2018


Check Point Software Technologies (CHKP): Presenting at Check Point CPX360, Technology Partner and Customer Event-Barcelona

CVS Health Corp (CVS): Ex Date for Quarterly dividend of $0.500

Verizon Communications Inc. (VZ): Projected Earnings Release for Q4 20171/23/2018: confirmed on 10/20/2017

Johnson & Johnson (JNJ): Projected Earnings Release for Q4 20171/23/2018: confirmed on 11/29/2017

The Travelers Companies Inc (TRV): Projected Earnings Release for Q4 20171/23/2018: confirmed on 12/11/2017

Time Warner Inc. (TWX): Video Release date for Batman: Gotham By Gaslight

Twenty-First Century Fox (FOX): Video Release date for Goodbye Christopher Robin

Cisco Systems, Inc. (CSCO): Xerox Security Summit

Wed 1/24/2018


Citigroup Inc (C): Citigroup Fourth Quarter 2017 Fixed Income Investor Review

Ford Motor Company (F): Projected Earnings Release for Q4 20171/24/2018: confirmed on 1/12/2018

Comcast Corporation (CMCSA): Projected Earnings Release for Q4 20171/24/2018: confirmed on 12/15/2017

General Electric Co. (GE): Projected Earnings Release for Q4 20171/24/2018: confirmed on 12/19/2017

Illumina, Inc. (ILMN): Presenting at The Precision Medicine World Conference -PMWC 2018 Silicon Valley

Thu 1/25/2018


3M Corp. (MMM): Projected Earnings Release for Q4 20171/25/2018: confirmed on 11/29/2017

Intuitive Surgical Inc (ISRG): Projected Earnings Release for Q4 20171/25/2018: confirmed on 12/15/2017

Biogen Inc (BIIB): Projected Earnings Release for Q4 20171/25/2018: confirmed on 12/20/2017

Starbucks Corporation (SBUX): Same store sales report date for Q1 2018 CONFIRMED

Fri 1/26/2018


Twenty-First Century Fox (FOX): Movie Release date for Maze Runner: The Death Cure (WIDE)

Republic Protocol Announces Crypto Dark Pool

As the cryptocurrency trading frenzy continues, one firm is now committed to creating one of the first dark pools where traders can buy and sell their currency anonymously.

Republic Protocol, a new blockchain project with ties to Kyber Network and other well-known projects in the space, has announced they will be building a decentralized dark pool for the trading of crypto assets. Initially, the company will allow large-scale trading between bitcoin, Ethereum and Ethereum based tokens on a hidden order book, while on a public blockchain, to not affect the pricing of those assets.

In equities, dark pools are estimated to represent approximately 10-15% of the trading volume of all US stock trades.

Cryptocurrency trading has exploded recently, as daily trading volume has reached approximately $50 billion with a total market cap over $750 billion in upwards of 100 cryptocurrencies. With institutional investors arriving into the cryptocurrency market, the development of alternative trading systems is critical for trading large blocks of cryptographic assets while maintaining minimal price slippage and market impact.

Republic Protocol is proposing a decentralized open-source dark pool protocol facilitating atomic swaps between cryptocurrency pairs across the Bitcoin and Ethereum blockchains. Trades are placed on a hidden order book and are matched through an engine built on a multi-party computation protocol. This provides order execution without exposing market sensitive information such as price and volume at a certain position, which would provide an advantage to other traders.

Republic removes the need for a trusted intermediary to operate a dark pool and provides crypto-economic incentives through a protocol token for governance; enabling the development of a secure, decentralized, scalable dark pool protocol capable of handling billions in trading volume daily.

Dark pools represent a large percentage of daily trading in traditional financial markets for a reason, said Taiyang Zhang, CEO of Republic Protocol. A dark pool enables institutional traders to protect their hand from public view while not adversely affect market prices when they are buying and selling large orders. We feel like there is an incredible opportunity to apply this proven concept to the world of cryptocurrency trading while also utilizing the inherent security of the blockchain.

The report continued to note that Republic Protocol proposes using the Shamir Secret Sharing Scheme to break down orders into a large number of order fragments, and distributes them throughout the network. Orders cannot be reconstructed unless a majority of the order fragments are recombined. To prevent this from happening, the Republic Protocol de?nes an Ethereum smart contract called the Registrar, that organizes nodes into a network topology that makes it unreasonably di?cult for an adversary to acquire the enough of the order fragments to reconstruct an order. As long as traders respect the network topology de?ned by the Registrar, their orders will be safe. If they fail to do so, only their own orders are at risk of exposure.

Using order fragments from two di?erent orders, a node can cooperate with other nodes that hold other order fragments for the same two orders to perform a decentralized computation that will determine if the two orders match. The decentralized computation does not expose the order fragments, and performs a random scaling of the ?nal output. This prevents nodes from reconstructing the original orders, and prevents them from using the output to infer anything about the orders. A Zero knowledge proof is used to verify the integrity of the computation, without revealing any information. These proofs are simple and e?cient, allowing them to be performed by an Ethereum smart contract called the Judge.

After two orders have been matched, an atomic swap is initiated between the two traders over the Republic Swarm Network, a decentralized peer-to-peer network. Using standard asymmetric encryption primitives, the details of the atomic swap are kept secure.

The company plans to first build the Republic Terminal, a DApp (Decentralized Application) for interacting and trading BTC, ETH and ERC20 with the underlying Republic Protocol. Republic Terminal, along with all the other components of Republic are open-source.

Mining will also be implemented to discover orders on the distributed hidden order book. Miners are paid in the tokens of the platform called REN, which is a fee traders must stake and transfer for their usage of the protocol. The order matching process is decentralized.

FLASHBACK FRIDAY: Bitcoin Never Sleeps: How Pantera Capital’s Dan Morehead Trades The Digital Currency

Bitcoin. Ether. Ripple.

The list of tradable cybercurrencies goes on and on and everyone seems to be talking about these new securities as much as President Donald Trump and his Tweets these days. As the search for yield and alpha remains a central focus among institutional investors and the dreams of striking it rich are the focus for Joe Q Public, bitcoin remains the crypto everyone is talking about.

However, just recently there has been a pullback in these nascent markets. Bitcoin has lost about half its value since December – toppling from its high of $19000 to about $10000. Other cryptos are also in play, as Ripple, Ethereum and others are making news as alternative currencies with upside potential.

And the crypto trading universe continues to expand. Republic Protocol, a new blockchain project with ties to Kyber Network and other well-known projects in the space, has announced they will be building a decentralized dark pool for the trading of crypto assets. Initially, the company will allow large-scale trading between bitcoin, Ethereum and Ethereum-based tokens on a hidden order book, while on a public blockchain, to not affect the pricing of those assets.

In equities, dark pools are estimated to represent approximately 10-15% of the trading volume of all US stock trades.

Cryptocurrency trading has exploded recently, as daily trading volume has reached approximately $50 billion with a total market cap over $750 billion in upwards of 100 cryptocurrencies. With institutional investors arriving into the cryptocurrency market, the development of alternative trading systems is critical for trading large blocks of cryptographic assets while maintaining minimal price slippage and market impact.

Republic Protocol is proposing a decentralized open-source dark pool protocol facilitating atomic swaps between cryptocurrency pairs across the Bitcoin and Ethereum blockchains. Trades are placed on a hidden order book and are matched through an engine built on a multi-party computation protocol. This provides order execution without exposing market sensitive information such as price and volume at a certain position, which would provide an advantage to other traders.

Republic removes the need for a trusted intermediary to operate a dark pool and provides crypto-economic incentives through a protocol token for governance; enabling the development of a secure, decentralized, scalable dark pool protocol capable of handling billions in trading volume daily.

Dark pools represent a large percentage of daily trading in traditional financial markets for a reason, said Taiyang Zhang, CEO of Republic Protocol. A dark pool enables institutional traders to protect their hand from public view while not adversely affect market prices when they are buying and selling large orders. We feel like there is an incredible opportunity to apply this proven concept to the world of cryptocurrency trading while also utilizing the inherent security of the blockchain.

But, there are concerns in this new and completely unregulated market. Just this week, BitConnect, a cryptocurrency exchange closed it trading and lending platforms. On its website, BitConnect blamed media reports and a pair of Cease and Desist Letters it had received from Texas and North Carolina as the chief reasons for the closure.

However, the crypto world is also contending with mounting scrutiny from US regulators such as the Commodities Futures Trading Commission and Securities and Exchange Commission. Both bodies issued public statements about the danger of crypto trading and investing and are holding public hearings to discuss these matters. Also, there will be Congressional hearings on the crypto universe and its potential problems in the coming weeks.

And while it is just in the last few months people have been jumping on the bitcoin wagon and the currency has joined the vernacular, that is not to say that bitcoin and crypto trading are new. Back in 2015, Pantera Capital’s Dan Morehead discussed with Traders Magazine how he traded the then unheard-of security.

This article originally appeared in the January 2015 edition of Traders Magazine

Bitcoin Never Sleeps: How Pantera Capital’s Dan Morehead Trades The Digital Currency

Bitcoin-focused hedge funds must deal with the challenges of long-term investments. And the trading is relentless.

By Rob Daly

Regular headlines of high-profile bitcoin (BTC) thefts and legally questionable activities might have dulled the appetite of some institutional investors for digital currencies, but Dan Morehead has bet the future of his hedge fund on them.

“The value of bitcoin, if successful, is much greater than the downside risk,” said the founder and CEO of Pantera Capital. “It seems to be an asymmetric opportunity.”

Morehead decided to close the 10-year-old firm’s existing global macro funds and open a pure bitcoin-only investment fund in 2013, two years after being introduced to the most famous and infamous virtual currency. Since then, the fund’s assets under management (AUM) has grown to $150 million, which includes outside investments from venture capital firms Benchmark Capital, Fortress Investment Group and Ribbit Capital.

Unlike speculators who helped drive the initial bitcoin spot trading from a start of $0.07 per bitcoin to a peak of approximately $1,166 per coin in late 2013 and then down to around $230 per coin at press time, Morehead views bitcoins as a “buy and hold” investment.

According to Morehead, digital currencies are the capstone of the Internet’s evolution. “Until the introduction of digital currencies, the Internet had protocols to move all types of data around except for value,” he explained. “Digital currencies are that protocol.”

He likened the growth in digital currencies to the growth of the TCP/IP networking protocol in the mid-1990s, but with a price feed.

“The Internet at that time had all of the protocols it needed to be really cool, but you couldn’t do anything because you had a modem screaming at 2,400 bits per second,” Morehead said. “The Internet really sucked. Bitcoin is kind of like that right now. It has all the need attributes but just not all of the applications to make it useful.”

Potential killer apps will include mobile payments, micropayments and cross-border remittance.

This is not science fiction,” he argued. “More than 45 percent of Kenya’s gross domestic product is processed over cellphones. That proves that mobile money works.”

Morehead acknowledged that bitcoin could fizzle, but the need for digital currencies still remains.

Of the top 100 tradable digital currencies, bitcoin is in the strongest position amongst its peers. The digital currency began trading in early 2010, boasts a current market capitalization of $3.1 billion, and only 14.2 million of the eventual 21 million bitcoins are already in circulation.

Ripple (XRP) is the digital currency with the next largest market cap ($256 million) and has 31 billion of approximately 100 billion coins in circulation.

After Ripple, the market capitalization for the remaining 98 currencies drops offs precipitously from $70 million to $158,000, according to the Crypto-Currency Market Capitalizations website.

Bitcoins and More

As an early entrant into the bitcoin market, Pantera had few investment options but to invest in the digital currency itself.

“Most of the bitcoins we purchased, we purchased directly via telephone conversations,” Morehead explained. “We also do a lot of exchange-based trading, and we prefer to trade on Bitstamp.”

Typical bitcoin block trades might be quoted “Bitstamp less 1%,” he explained.

Over the past few years, however, Pantera has diversified its investments and has made early stage investments into the companies that help the bitcoin ecosystem grow.

Earlier this year, the total market capitalization of these companies surpassed bitcoin’s current $3.1 billion market cap. “U.S. equities are worth about four and a half times the value of money supplied,” he said. “U.S. equities are much more mature than bitcoin startups, so bitcoin startups could be worth much, much more than U.S. equities relative to money supply.”

Although Pantera does not invest in bitcoin derivatives, they remain an option for institutional investors that want exposure to bitcoin without holding the underlying digital currency. And there are exchanges and firms to help these types of investments.

Swap-execution facility (SEF) operator TeraExchange launched trading in a number of cash-settled non-deliverable USD/BTC forward contracts in September 2014.

ore recently, the Bitcoin Investment Trust (GBTC) exchange-traded fund (ETF) began trading on the OTC Markets stock market on May 11, while the market waits for brothers Cameron and Tyler Winklevoss, of The Social Network fame, to launch their Winklevoss Bitcoin ETF (COIN), which will be listed on Nasdaq.

Trading: Easier Said Than Done

There are more than 70 electronic-trading venues where bitcoin investors can trade against more than 28 global currencies. The digital currency market may refer to these platforms as exchanges, but they should not be confused with regulated futures or equities exchanges.

The U.S.-based venues that want to operate above board are regulated as money-transfer businesses, which are regulated at the state level. There is no direct regulation by the U.S. Securities and Exchange Commission or the Commodity Futures Trading Commission, but they do need to register with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

Bitcoin’s decentralized market structure makes it difficult to get a macro view of the market since each trading venue represents a tiny percentage of overall trading volumes. Yet several trading venues – Bitfinex, Bitstamp, BTC-e, itBit, Coinbase Exchange, Kraken, LakeBTC and OKCoin – have captured the mindshare of bitcoin traders.

Market data aggregators publish a subset of these venues’ price feeds. Bloomberg publishes price quotes from Bitstamp, Coinbase, itBit and Kraken on its Bloomberg Professional platform, while Thomson Reuters Eikon users will find quotes from Bitstamp and itBit.

“Given Bitstamp’s size, its quote is relatively indicative of the market,” said Ron Leven, head of Eikon foreign-exchange and economic content at Thomson Reuters.

“Those were the ones that were able to satisfy our demands as contributors,” added Tod Van Name, global head of foreign-exchange and commodities electronic trading at Bloomberg.

All of these quotes are for USD/BTC trades. According to data collected by the Bitcoin Charts website, U.S. dollar-denominated trades represent 48 percent of bitcoin volume, while China’s internal yuan (CNY) and the European Union’s euro (EUR) represent 33 percent and 6 percent, respectively.

However, the market-data vendors are not beating the bushes to find markets to include in their offering. There is no dearth of bitcoin-trading venues that want their feeds distributed by market-data vendors.

Since there are low barriers to entry to become a trading venue, the list of new exchanges that have popped up goes on and on, according to Van Name: “There have been a number of pseudo-exchanges that have been nothing more than a server running in someone’s basement.”

Thomson Reuters also publishes the NYSE Bitcoin Index (NYXBT), which the exchange operator launched in May. The New York Stock Exchange (NYSE) uses algorithms on data provided by Coinbase, in which it has a minority interest, to determine the price of one bitcoin in U.S. dollars at 4 p.m. London time and then distributes it via the exchange operator’s Global Index Feed.

NYSE’s Index Committee, which oversees the rules and methodology behind NYXBT, also plans to identify and review additional data sources for the index, according to exchange officials.

Meanwhile, TeraExchange launched its Tera Bitcoin Price Index at the same time it started to support trading in bitcoin NDF contracts in September 2014. The SEF’s index sources its data from 14 different bitcoin trading venues that have signed information-sharing agreements with Tera.

Tera signed all of these agreements to meet the Commodity Futures Trading Commission’s requirement that the index would “not be readily susceptible to manipulation,” said Christian Martin, president and CEO of TeraExchange.

Chicago-based North American Derivatives Exchange (Nadex) signed a licensing agreement with TeraExchange at the end of 2014 to use the index in its binary-options market.

The Bitcoin Price Index (BPI) published by online bitcoin-news site CoinDesk dates back even further. The publication launched the real-time index in 2012, but contains historical data back to 2010, according to Jon Matonis, an editorial board member of CoinDesk.

“The BPI is not a black box; we publish all of its criteria on our website,” he said. “We actively manage and curate the BPI to reflect the best possible prices from the available exchanges.”

CoinDesk sources data from Bitstamp, Bitfinex, BTC-e, LakeBTC and OKCoin for its USD/BTC index, and from BTCChina, Huobi and OKCoin for its CNY/BTC index.

Over the past three years, the index administrators have rebalanced the index eight or nine times. “Some of the changes are minor tweaks,” Matonis said. “We publish those in a change log that is available on BPI’s homepage.”

FX-ish

Trading bitcoins and other digital currencies is similar to trading other fiat currencies, but it has its own quirks, according to Pantera’s Morehead.

Most of the fund’s traders are experienced FX traders, he added: “Our main trader, who started 10 years ago, started trading currencies and then equities and commodities for us.”

Bitcoin traders can rely on some of the standard FX-analysis tools, such as beta estimation and correlation analysis, according to Thomson Reuters’ Leven. “There’s enough data so that you can get reasonable indications of these types of statistics,” he said.

“Using technical analysis with bitcoin has always been popular,” agreed Bloomberg’s Van Name.

Where digital currencies differ from their fiat counterparts is in other fundamental analysis, Van Name added. “There is no economics associated with bitcoin because it’s not tied to one country, while other currencies are based on GDP growth, interest rates or the credit or equities markets of the currency’s issuer,” he explained. “There is none of that here.”

Bitcoin may be nationless and not backed by any central banks, but CoinDesk might have a solution in the works.

According to CoinDesk’s Matonis, the publication is examining if an interest-rate benchmark like the London Interbank Offered Rate (LIBOR) is feasible; he has dubbed the new benchmark the Bank Interbroker Offered Rate, or BIBOR.

“If people will need a referenceable exchange rate, they will need a referenceable interest rate,” he said. “It’s currently about 32 percent annually. You would earn more money than you would on Greek bonds.”

The second characteristic that separates digital currencies from fiat currencies is their trading hours: Bitcoins never sleep. Unlike the regular FX market, which begins trading at 8 a.m. Monday morning in Tokyo and ends at 4 p.m. Friday afternoon in New York, digital currencies trade at all hours every day of the year. “When we are trading, it’s 24 hours a day,” Matonis said. “It trades on Christmas Eve and on New Year’s Eve.”

Such is the price bitcoin traders pay to capture the transactional pushes that affect the illiquid digital currency more than fiat currencies, Morehead added.

Bitcoin already cost Morehead one New Year’s Eve when the new fund needed to be audited at the end of 2013.

“I spent until midnight in the office with Ernst & Young auditors transacting bitcoins,” he recounted. “It’s definitely a hard-working currency.”

Deutsche Asset Management Lists More ETFs on Mexican Stock Exchange

Deutsche Asset Management (Deutsche AM) expanded the list of its exchange-traded funds (ETFs) offered on the Mexican Stock Exchange.

As a global asset manager with 10 years in the ETFs space, Deutsche AM is always looking for ways to provide investors efficient access to worldwide markets through strategies that best fit their investment needs, said Salvador Gomez, Head of Passive Asset Management for Latin America.

The global Passive Asset Management business forms a key pillar of Deutsche AMs overall client offering. With a global footprint, expansive product offering, and with the group-wide expertise and financial strength of one of the worlds leading investment firms behind it, Deutsche AMs global Passive Asset Management division is a leading provider of beta, beta plus and strategic beta investment products, strategies and solutions.

DTCC Appoints Tim Lind as Head of Data Services

The Depository Trust & Clearing Corporation (DTCC), the post-trade market infrastructure for the global financial services industry, announced that Timothy Lind, former Global Head of Financial Regulatory Solutions at Thomson Reuters, has joined the firm as Managing Director of DTCC Data Services. Mr. Lind will be responsible for guiding the firms data businesses, including services that leverage the vast amounts of data derived from DTCCs global processing platforms while ensuring on-going alignment with all risk management and regulatory requirements.

Mr. Lind is an industry veteran with deep expertise in global capital markets infrastructure, including the deployment of technology for operational efficiency, data governance, transaction automation, regulatory compliance and risk management. Prior to DTCC, he held roles at Thomson Reuters, where he was responsible for developing and overseeing the growth of solutions to meet regulatory compliance data challenges faced by market participants, and served as a consultant at RTech Advisors. Before that, Mr. Lind worked at Omgeo (now a part of DTCC) as its Chief Strategy Officer. His previous experience includes positions at GoldenSource Corporation, CEB TowerGroup, SWIFT and Brown Brothers Harriman.He has also worked extensively with industry associations promoting data standards in the financial services industry.

Commenting on the appointment, Tim Keady, Managing Director and Head of DTCC Solutions, said, Tim brings to DTCC more than 25 years of domestic and international experience in the capital markets, including a rich background in data offerings. We look forward to Tims contributions, working with our community to continue advancing our data strategy with an emphasis on reducing risk, enhancing data transparency and maximizing value for our clients.

Tim Lind said, Im excited to partner with my colleagues and the industry to identify innovative ways to increase the value of DTCCs data offerings to enable compliance with regulatory requirements, optimize capital use and more effectively manage risk.

Chinese Xiaomi IPO Could be Biggest Tech Offering in 2018

The biggest or most popular IPO of the year could be coming from the Far East and not the Middle East.

According to reports, Chinese technology company Xiaomi, has enlisted underwriters CLSA, Goldman Sachs and Morgan Stanley for a proposed IPO, people with direct knowledge of the matter said, in what could potentially value the Chinese smartphone maker at up to $100 billion.

The offering could be the worlds biggest tech float in 2018 and is expected to come in the second half of the year, IFR reported on Monday.

Xiaomi has separately tapped Credit Suisse and Deutshe Bank to work on its IPO, another source told Reuters. The source, however, added that the roles for global banks havent been decided and that no formal mandate has been given to any Chinese bank.

A spokesman for Xiaomi [IPO-XMGP.HK] declined to comment. IFR, a Thomson Reuters publication, first reported on the IPO sponsors.

The smartphone maker last month told bankers that it would beat its 2017 sales targets by up to 18 percent as it continues to benefit from a business overhaul that followed its over-expansion and fierce competition from domestic rivals including Oppo and Vivo.

Bankers expect Xiaomis profits to rise sharply in 2018 as its rebound continues, and have told the company – valued at $46 billion in a 2014 funding round before its slump – that a $100 billion valuation at the IPO is possible.

The smartphone maker will add more banks to its IPO later in the process, according to IFR, which reported that Credit Suisse, Deutsche Bank, JP Morgan and two Chinese banks were expected to get the nod for roles as joint global coordinators.

Xiaomis potential IPO – most likely in Hong Kong, according to sources – would headline a series of hotly-anticipated Chinese tech floats in the city this year. Other expected listings include Lufax, the wealth management platform backed by insurance group Ping An.

Lufax, Chinas largest online wealth management platform, is expected to sell $6 billion to $9 billion of shares in its IPO, and is seeking a valuation of $60 billion, the South China Morning Post reported on Monday.

In all, bankers anticipate tech companies worth up to $500 billion could seek IPOs in Hong Kong or New York over the next two years, encouraged by investor enthusiasm for recent tech floats and buoyant stock markets.

MIFID II Has Already Shrunk Euro Research Business by $300 Million

After only two weeks, it appears the enactment of the MiFID II regime has hurt the European equity research business.

According to market consultancy Greenwich Associates, the new MiFID II rules on payments for investment research that went into effect January 3 have already shrunk the market for European equity research by an annual $300 million, and the ultimate impact of the regulations likely wont be evident before the end 2018.

Well, that was a quick $300 million.

With a growing number of institutional investors announcing that they would cease charging clients for research and instead absorb research costs into their own P&Ls under the new rules, Greenwich Associates in 2017 conducted a special study of 88 institutional equity investors in Europe and the United States to determine how these changes have affected the industry and what the market can expect now that MiFID II has taken effect.

In sharing the results with Traders Magazine, the study shows in the run-up to MiFID II implementation, the 39 Europe-based study participants reduced their 2018 research/advisory budgets by 20% year-over-year. Greenwich Associates estimated the 2017 European research/advisory pool at $1.35 billion, meaning the 2018 market has shrunk by nearly $300 million.

Despite these industry-wide reductions, a third of study respondents will pay research providers the same amount as last year.

Managers express concern about the message it would send to their investors if they made sudden and substantial cuts, said William Llamas, Associate Director of Relationship Management at Greenwich Associates, and author of a new report, MiFID II is Here: How Investment Managers Have Prepared. Any sign that managers have been wasteful in their spending in the past would resonate poorly.

MiFID II has also prompted investors to shorten their list of research providers. European respondents have reported more than a 20% decrease in research counterparties. Despite these cuts, there is good news for research providers, though. Since both budgets and provider lists have been reduced to a similar degree, the amount budgeted for each provider/broker will remain relatively flat year-over-year.

In other words, if you make the cut, you wont get axed, Llamas said.

The report also examines the behavior of U.S. institutional investors, many of which must comply with MiFID II rules in order to continue managing their European clients money. A growing number of U.S. asset managers are following the example of their European peers by opting to pay for research themselves under MiFID II.

The Problem of Pricing Research

With MiFID II now in effect, investors and providers are engaged in tough negotiations about how to price research. About half of institutional investor relationships with bulge-bracket research providers are full service, meaning that the investor receives all written and electronic content, access to analysts, corporate access, and other products and services for one set price. The new Greenwich Report provides typical pricing levels for these relationships, as well as for mid-level access and written only research relationships-some of which have been priced as low as $15,000 per year.

Pricing research at such a low level puts enormous pressure on small providers whose core business is producing equity research, Llamas added..

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