BrokerDealers Beware: Big Brother Is Watching..and Predicting Your Next Move

Posted on April 9, 2015April 9, 2015 by admin

BrokerDealer.com blog update is courtesy of financial industry-focused site “MarketsMuse.com“…

While the title could be “Big Data Bags BrokerDealers”, MarketsMuse.com Tech Talk update is courtesy of extract from the 07 April Bloomberg LP story by Hugh Son profiling the recent initiative by JPMorgan (and presumably their bulge bracket brethren, and likely, a select band of black box-centric buysiders from the Hedge Fund world) to keep closer tabs on their respective ‘human assets’ via stealth “algorithmic” software designed to predict what’s going on inside the heads of traders, sales folks and well, everyone else that logs into a device monitored by JP’s surveillance sleuths.

We preface Son’s story with “Unless you’ve been asleep at your trading screen for the past 10 years, you already know that Algorithms aka Algorithmic Trading aka HFT are all the rage and that “algo-based trading” accounts for approximately 70% of daily US equity market trading, as well as increasing percentages across fixed income, FX and currency markets. Simply put, Wall Street quants were arguably the first to turn “big data” into big bucks via algorithmic models, which are now ubiquitous across an assortment of industries that are relying evermore on digital data to drive decisions that are neuroscience-based.

Well, Wall Street’s brokerdealers are once again ahead of the curve, as we’re now in the Big Brother phase of this algo evolution..

With this new chapter, its safe to presume that whatever you type into a keyboard is not only going to be stored by compliance wonks, its going to be analyzed by predictive Surveillance Dept. software to determine if you are prone to crashing planes into the side of mountain or likely to pose an assortment of other risks to the enterprise.

Here’s the opening extract of Son’s report:

Hugh Son, Bloomberg LP

Wall Street traders are already threatened by computers that can do their jobs faster and cheaper. Now the humans of finance have something else to worry about: Algorithms that make sure they behave.

JPMorgan Chase & Co., which has racked up more than $36 billion in legal bills since the financial crisis, is rolling out a program to identify rogue employees before they go astray, according to Sally Dewar, head of regulatory affairs for Europe, who’s overseeing the effort. Dozens of inputs, including whether workers skip compliance classes, violate personal trading rules or breach market-risk limits, will be fed into the software.

“It’s very difficult for a business head to take what could be hundreds of data points and start to draw any themes about a particular desk or trader,” Dewar, 46, said last month in an interview. “The idea is to refine those data points to help predict patterns of behavior.”

JPMorgan’s surveillance program, which is being tested in the trading business and will spread throughout the global investment-banking and asset-management divisions by 2016, offers a glimpse into Wall Street’s future. An industry reeling from billions of dollars in fines for the actions of employees who rigged markets, cheated clients and aided criminals is turning to technology to police itself better. Failure to do so will provide ammunition for those pushing to separate trading operations from retail banks. Continue reading →

Bojangles’ Filing Takes IPO Down South

Posted on April 8, 2015 by admin

Bojangles is a chain fast food restaurant that is based out of North Carolina. They are most well known for their spicy, “Cajun” fried chicken and buttermilk biscuits. After being around for 38 years, the company has decide to go public and filed for an IPO earlier this week. Bojangles is expected to raise $372 million from the initial public offering. Brokerdealer.com blog update profiling Bojangles’ IPO and key things to know about Bojangles before investing in their IPO is courtesy of MarketWatch. An excerpt from Ciarra Linnane of MarketWatch’s article “6 things to know about Bojangles’ ahead of its IPO“.

Chicken-and-biscuit restaurant chain Bojangles’ Inc. has filed for an initial public offering. The North Carolina-based company has tapped Bank of America Merrill Lynch, Wells Fargo Securities, and Jefferies as lead book runners on the deal. The company is planning to list on the Nasdaq exchange under the ticker symbol “BOJA.”

Here are six things to know about Bojangles’:

It doesn’t meddle with its menu

Bojangles’ menu hasn’t changed much since it opened its first outlet in Charlotte, N.C., in 1977, according to its IPO prospectus. The company now boasts 622 stores across 10 states and Washington, D.C., but is still famous for its bone-in fried chicken, its buttery biscuits and its home-brewed — sorry, that’s home-steeped — ice tea.

It is very U.S. focused

Bojangles’ is very much a domestic U.S. operation. It currently operates in Alabama, Washington, D.C., Florida, Georgia, Kentucky, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee and Virginia. Internationally, it has three restaurants, all of them located in Honduras.

To read the other four things to know about Bojangles and its IPO, click here.

Bond Trading: Smaller BrokerDealers Displace Bulge Bracket Market-Makers

Posted on April 7, 2015 by admin

BrokerDealer.com blog update profiles the emergence of specialist brokerdealers who are poised to displace the once dominant ‘bulge bracket’ aka “6-pack” firms in the world of making markets and providing liquidity across the bond marketplace. As regulations and capital requirements upend the legacy role played by Wall Street’s biggest investment banks, technology advances coupled with modern day perspectives as to how to source actionable liquidity and secure best execution when trading bonds is providing an opportunity for smaller and savvy broker-dealers to play an important role. Coverage is courtesy of excerpt from feature story published by MarketsMedia.com.

Since 2008, there has been an increase in electronic trading of fixed income securities, along with a decrease in inventory held by larger dealers and banks.

“If we look at some of the subtle changes in market structure that have come about, we see non-traditional liquidity providers, or price makers, coming up within the marketplace,” Bill Vulpis, managing director at KCG BondPoint, told Markets Media. “By non-traditional, I mean companies other than banks and large sell-side firms, including smaller broker dealers who are reliant upon electronic platforms to make markets.”

According to a January 2015 study by Greenwich Associates, 80% of institutional investors report difficulties executing corporate bond trades of more than $15 million, reflecting decline in market liquidity caused by the pullback of fixed-income dealers in the wake of new and more stringent capital reserve requirements.

With dealer inventories shrinking, investors’ search for new liquidity providers is proving a boon to the fast-developing ranks of electronic trading platforms, according to Greenwich. All-to-all trading accounted for an estimated 6% of electronically executed U.S. trades in 2014.

To read the full article from Markets Media, click here.

Broker-Dealer IPO Time: Electronic Trading Firm Virtu Financial Tries Again

Posted on April 6, 2015 by admin

BrokerDealer.com blog update profiles the second swing at the IPO bat by high-frequency-trading firm Virtu Financial Inc. The coverage is courtesy of TradersMag republishing of story from Bloomberg LP —

(Bloomberg) -Virtu Financial Inc., which delayed its initial public offering amid a furor over high-frequency traders, said it plans to raise as much as $314 million in a share sale.

The company will offer about 16.5 million shares at $17 to $19 apiece, according to a regulatory filing Monday. At the high end of the offering range, Virtu would be valued at about $2.6 billion, based on 136.5 million shares outstanding, the amount if all classes convert to Class A, the document shows. All of the shares are being sold by the company, rather that existing investors.

The filing precedes formal marketing of the deal, a process that was delayed after “Flash Boys,” the Michael Lewis book released in March 2014, alleged that high-speed traders, Wall Street brokerages and exchanges have rigged the $24 trillion U.S. stock market. Amid the heightened scrutiny caused by the book and various regulatory investigations, officials involved in the offering decided to shelve the deal.

Virtu’s revenue last year was $723 million according to the filing, an 8.8 percent increase from 2013. Net income rose to $190 million from $182 million the previous year. The 148- employee company, which uses computerized strategies to buy and sell everything from stocks to currencies, has had only one losing days in its six years of operation.

“Over a million times day, we’re not making money,” Chief Executive Officer Doug Cifu said at an industry conference last June. “But when you add up the volume of instruments that we trade, the tens of thousands of strategies that we trade in all the different marketplaces, it’s simply the law of large numbers, and, as a result, yes, we are profitable every day.”

Virtu has thrived as two decades of market reform and computer advances helped automated traders largely supplant humans on the floors of exchanges around the world. The company’s main business is market making, using software to provide standing offers to buy and sell stocks and other securities.

The past year has seen the departure of Virtu’s President, Chris Concannon. He left for Bats Global Markets Inc. in November and became CEO of the exchange operator on March 31.

Worldwide Expansion

Virtu started in 2008 by trading U.S. stocks and has since expanded worldwide and into assets including government bonds, currencies and futures. The firm makes markets in more than 11,000 securities and other financial products, trading on more than 225 exchanges in 34 countries, according to its filing.

Electronic market-making firms such as Virtu use automated systems to earn money off the prices that buyers are willing to pay and sellers are willing to offer. They depend on scale to make money given the compression between bids and offers during the past decade.

Indian Startups Gather Interest and Venture Funding From BrokerDealers Everywhere

Posted on April 3, 2015April 3, 2015 by admin

Brokerdealer.com blog update profiles Indian start up companies collecting interest from brokerdealers around the world for comapny funding. This brokerdealer.com blog update is courtesy of Wall Street Journal’s article, “Venture Money Floods Into Indian Startups “.

Vikram Chopra spent the past three years building an online furniture-shopping site for Indian consumers that was funded mainly by annual capital injections from a German technology incubator.

But during the past few months, investor interest in the site, FabFurnish.com, has soared, said the 32-year-old entrepreneur, who is based in the New Delhi suburb of Gurgaon. Several global venture-capital firms and hedge funds have said they are interested in investing, and Mr. Chopra is now considering another round of funding that would exceed the $20 million raised so far—even though he doesn’t expect FabFurnish to be profitable for another two years and doesn’t yet need the cash.

“A few years ago, everybody wanted to see profitability upfront,” said Mr. Chopra. “Today, it is more like how much money you need to curb the competition [and] kill everyone else.”

Global money is flooding into Indian startups as investors search for a successor to Alibaba Group Holding Ltd., the Chinese e-commerce company that raised a record $25 billion in its initial public offering last year.

To read the entire article from the Wall Street Journal, click here.