Five years ago, Sean Martin, a registered representative at Deutsche Bank Securities in New York, saw something troubling on his trading desk.

A few of his colleagues, he said, were letting preferred hedge fund clients listen in on confidential market commentary by the firm’s analysts before their views were made public. He alerted his superiors and was almost immediately given a negative review, a first in more than 10 years at the firm, he said. His bosses also removed him from the group he’d been working with and cut his compensation.

Mr. Martin, who continues to work at Deutsche Bank, said he believed that he was being punished for reporting misconduct and took the one avenue of redress that was open to him. In August 2012, he brought an arbitration case against the firm, contending retaliation and asking to recover his lost earnings. As is typical in the financial industry, his employment contract required that any dispute between him and his employer go through private arbitration, not the courts. Mr. Martin’s matter is being heard by three arbitrators associated with the Financial Industry Regulatory Authority, a self-regulatory organization that operates the largest dispute resolution forum in the securities industry.

But Mr. Martin’s experience with arbitration, both he and his lawyer say, has raised questions of fairness in the process. The three-member panel hearing his case has barred him from testifying about certain crucial aspects of what he saw at Deutsche Bank and disallowed the introduction of documents that bolster his claims. This led his lawyer to conclude that the panel was not interested in specifics of the behavior at the heart of his accusations — and to ask a state court to step in.

“When I filed this arbitration, I expected that Finra would resolve the dispute between Deutsche Bank and me in a fair way,” Mr. Martin, 41, said in a statement provided by his lawyer. “I was surprised and disappointed when the arbitrators refused to listen to important parts of what I wanted to say and rejected or redacted my exhibits. I can’t see how a dispute can be fairly resolved if one party is not even allowed to tell their side.”

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BlackRock, the world’s largest institutional investor, has sounded the alarm over the quality of European IPOs as hedge funds increase their bets against private equity-backed flotations, after the market for companies going public was soured by a string of high-profile failures. BlackRock said the flotation process needed to be improved, after the best six months for European IPOs since the financial crisis was ruined by poor market debuts from companies including Saga, the UK retirement group, Applus, the Spanish industrial testing business and eDreams Odigeo, the online travel agent.

Mr Leach told the Financial Times that the sheer volume of IPOs coming to market this year had affected communication between issuers and investors: “There has not been the same level of thoughtfulness and dialogue on valuation and structure.”

BlackRock tracked 104 IPOs in Europe in the first six months of this year, of which 38 deals – just over a third – are trading below their issue price. The Eurostoxx index is down around 0.5 per cent so far this year. Twenty companies which had been planning to go public – including names such as retail chain Fat Face – pulled their flotations. This year €33.7bn has already been raised in the European IPO market, more than in any full year since 2007, according to PwC.

Some of the worst performing IPOs in Europe have been those brought to market by private equity investors, with eDreams Odigeo, backed by Permira and Ardian, and Applus, the Carlyle-backed inspection group, both issuing profit warnings soon after listing. Many private equity groups use independent advisory firms such as STJ Advisors, which investment bankers say are too aggressive on pricing.

Investment bankers hit back at BlackRock’s criticisms of recent IPOs. A senior banker at one large bank said: “BlackRock wasn’t complaining after the first quarter when all the IPOs were up. Every potential investment should be looked at on its individual merits. The last time I checked, fund managers weren’t forced to invest.”

For the entire story from FT.com, please click on this link.

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Bitcoin, the crypto-currency that initially became infamous as the tender of choice for drug traffickers and mercenaries, may be coming to a trading desk or institutional portfolio near you – and sooner than you think.

“2014 is going to be the year Bitcoin hits Wall Street,” said Barry Silbert, founder and CEO of SecondMarket, a capital-raising platform for private companies and investment funds. Indeed, there is a growing consensus in some corners of Wall Street and the buyside community that the $7.8 billion  Bitcoin industry is going to become the new, flashy darling of investors, with dedicated digital currency funds, venture capitalists and asset managers all chasing after those 12 million bitcoins currently in circulation.

“Digital currencies like Bitcoin are not going away,” Silbert explained. “And Wall Street and the regulators know this, they’ve studied how to deal with it, and now they are starting to understand its potential.” SecondMarket has gone heavy into the Bitcoin phenomenon, launching the Bitcoin Investment Trust, a $70 million open-ended trust that invests exclusively in bitcoins, as well as a dedicated desk of 10 traders who buy and sell bitcoins for the trust and other institutional clients. SecondMarket is also creating what it hopes to be the largest, best-capitalized and well-run Bitcoin exchange in the U.S., and is enlisting banks and Bitcoin-related firms to be exchange members.

“The number of inquiries and requests from finance industry professionals for us to prepare compliant investor offering documents for crypto-centric funds is certainly keeping us busy”, said Paul Azous, CEO of Prospectus.com. “We don’t see this as some type of anomaly that is connected to a short-term fad, many of the funds we are working with are forward-thinking folks who realize that blockchain applications will be expressed in nearly every business process.”

In addition to preparing investment fund offering documents, Prospectus.com helps blockchain-based startups craft white papers, presentation decks that resonate with accredited investors and through a captive network of crypto industry consultants, the firm guides those advancing Initial Coin Offerings (ICOs).

Alec Petro, managing partner at Bay Hill Capital Management LLC in Duxbury, Mass., shares Silbert’s passion for Bitcoin. “We’re betting that the market is going to be there, maybe not next month, but soon,” Petro told Traders. “Institutional players are going to want to be in this space.” Petro almost single-handedly plays the role of market-maker in Bitcoin options on the Atlas ATS exchange, the only Bitcoin exchange currently offering options on the digital currency. He also runs a small fund, consisting entirely of Bay Hill Capital partners’ money, that invests in Bitcoin.

Everything Bitcoin needs to break into the mainstream of trading and investing is achievable and starting to happen, according to Petro. “More merchants are taking it and that means more liquidity, more stability in price and, ultimately, more confidence,” he said, checking off the events that will ultimately lead to the Great Bitcoin Revolution that he, Silbert and others are working toward.
The Revolution on Hold
Before the revolution can really begin, of course, Bitcoin has myriad issues to address.

Still, not everyone is convinced. Fitch Ratings threw some cold water on the Bitcoin buzz in an April report, noting that although total Bitcoin consumer transactions averaged $68 million per day in February, a more than tenfold increase compared with the year before, it was still minimal compared with other payment processors and credit card companies. In trading, Bitcoin ranked better, according to Fitch, citing an average daily transaction volume in Bitcoin in February equaling approximately 1 percent of Bitcoin’s total market capitalization. Over the same period, a sample of the largest U.S. equities showed that daily trading volumes were approximately 0.6 percent of total market capitalization, according to Fitch.

Supporters of Bitcoin are unshakable in their faith, however, saying the crypto-currency will play a big part in the future of payment processing, and that future will see an increasing number of trading platforms and investment funds dedicated to Bitcoin.

The Early Adopters
Brett Stapper, co-founder of Falcon Global Capital, a Bitcoin investment fund, is one of those faithful. But he got an early lesson in how hard Bitcoin’s bad past may be to shake. Speaking at a conference in Washington, D.C., about Bitcoin, Stapper thought he’d also reach out to some legislators about issues surrounding Bitcoin. He was stunned at how negative the reaction was to it.

“They had a very bad view of Bitcoin,” Stapper said. “And that worried me because these were the people that were basically in control of the future of Bitcoin in the U.S.” Resolving to rehabilitate the image of Bitcoin in the minds of these doubters, Stapper registered himself as a lobbyist and began to educate people about Bitcoin.

Now, he said, he spends his days on the phone as a Bitcoin evangelist, talking to lawmakers and potential investors. Of course, he’s got skin in the game – Falcon Global Capital runs a $7 million SEC Regulation D Private Investment Fund and is launching a second fund, for offshore investors, later this summer. The funds operate similarly to a gold-holding hedge fund, offering investors exposure by purchasing bitcoins on their behalf, with investments ranging from $25,000 to $10 million, according to the firm’s Website. The bitcoins are then stored in Falcon Global Capital’s digital vault, providing investors easy access and protection from theft.

Fund firms like Falcon Global, SecondMarket and Bay Hill aren’t the only ones to have fallen under Bitcoin’s spell. The Winklevoss brothers, best known for their legal face-off with Mark Zuckerberg, the founder of Facebook, are awaiting final approval from the SEC for the first-ever ETF that tracks the price of bitcoins. Hedge funds and trading firms such as Fortress Investment Group, Sun Trading, Tradebot Systems, Coin Capital, Pantera Capital Management, Cedar Hill Capital and Havelock Investments have launched Bitcoin funds, or have gotten involved in trading or acquiring bitcoins. Venture capital firms such as Liberty City Ventures and Core Innovation Capital are investing heavily in Bitcoin start-up support companies, like wallet companies (which allow users to hold and store bitcoins) and Bitcoin-focused tech companies that are helping set up exchanges. Tech exec heavyweight Marc Andreessen also is a Bitcoin fan, supporters like to point out.

Still, the number of Bitcoin fan club members who are actually willing to put up their dollars in terms of investment or trading infrastructure development is small, albeit growing. “We are on the front lines of Bitcoin, paving the way for others to get involved,” Stapper said, adding that Falcon Global Capital is anticipating its funds will grow to a combined $100 million in assets by the end of the year.

SecondMarket’s Silbert is also expecting to have a very busy summer. SecondMarket is planning to launch its large U.S. Bitcoin exchange in a few months, and is spinning all of its Bitcoin operations – including the exchange and the Bitcoin Investment Trust – into a yet unnamed separate company.

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