Larry Peruzzi, Mischler Financial Group

According to Larry Peruzzi, Managing Director and Head of International Equities for agency-only firm Mischler Financial Group, “The feedback we continue to hear from buy-side traders is consistent with the latest Greenwich Associates survey; investment managers want premium high-touch coverage from boutique BDs that can also provide best-in-class order routing and trade execution technologies.” Added Peruzzi, “Large investment managers are still looking to a broker’s research capabilities in the course of adding to a broker-rotation schedule, but the unbundling movement has made independent equities research, including those that have ‘buy-sell-hold’ recommendations, a commodity item that can be obtained away from those captive investment manager-executing broker relationships.”

(Traders Magazine Aug 2 2016)– As ‘bulge bracket’ brokers are faced with ever tightening budgets and focusing more on their larger institution accounts, the mid- and small-size brokers are poised to snatch up those clients left without an executing broker.

The bulge firms, after years of shrinking commissions amid a unique confluence decreased trading volumes, increased technology spend and a heavier regulatory compliance burden have shed staff and cut costs to the bare bone. Thus, having to make due with smaller trading desks and providing a modicum of service expected from the top tier banks, other brokers have been able to step in and grab underserved customers. And more importantly, the commissions that come along with providing both execution and research services.

“We’re definitely seeing this trend right before our eyes here,” said Doug Rivelli, co-head of US equity sales and trading at Auerbach Grayson. “As the trend of unbundling commissions has taken hold on a global scale, the traditional trading desk has had to become more focused on execution quality and broker trading services and firms like us have been able to capture market share.”

This phenomenon was reported also by market consultancy Greenwich Associates, who reported this week that mid-sized/regional brokers’ share of commission payments from institutional U.S. equity trades is increasing.

According to Greenwich, a s recently as 2007, the nine leading bulge-bracket brokers captured 78% of commissions paid by institutional investors on trades of U.S. equities. This year, they are claiming only 60%–down a full two percentage points from 2015. Much of the lost share has flowed to mid-sized/regional dealers, which as a group now take home 28% of U.S. equity commissions, up from just 11% in 2007.

To continue reading the coverage from Traders Magazine senior editor John D’Antona, please click here

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As reported by Traders Magazine John D’Antona Jr.,  In a move designed to bring more money into the Royal Kingdom and diversify the country away from its traditional oil industry and expose it to the international finance system, Saudi Arabia is opening its stock market to outsiders.

Currently, the country’s stock market, with a market cap of $580 billion – the biggest in the Middle East- is open only to large domestic institutional investors, according to a report in the Wall Street Journal. Up until now, Saudi and select Gulf countries could buy and sell shares. Also, a limited amount of foreign investors who wanted exposure to the country’s companies could execute in the country but had to had to go through a Saudi regional broker dealer. Now, investors can go directly into the market and execute their orders.

The opening of the country’s market comes at a time where the Kingdom is looking to move away from an oil-centric economy – which lately has been battered by the low price of oil and weak global demand. Also, with a softening of the country’s Muslim conservative bent officials felt opening their country to foreign money would be more permissible.

As of today’s Saudi stock market opening, the Journal said that only large global institutional investors, with at least $5 billion in assets under management, can execute buy orders. This limited opening of the market is viewed as bringing only the very savvy and stable investors the market needs at this stage of its development.

And foreign participants are going to have limits – as they cannot invest in Saudi companies that are closely linked to the country’s national security interests or companies located in holy locales, such as Mecca.

“There are many reasons to open the market and to do it gradually, but liquidity is not one of them,” said Mohammed Aljadaan, president of the Capital Market Authority, to the Journal. The CMA regulates the stock market.

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Two former top executives with institutional brokerage Direct Access Partners, a firm that shut down in December of 2013 after its clearing firm, Goldman Sachs, stopped clearing its trades, have opted to plead guilty for indiscretions regarding its bond trading business.

DAP’s former chief executive, Benito Chinea, and former managing director, Joseph Demeneses, each pleaded guilty one count of conspiracy to violate the FCPA and the Travel Act in connection with a scheme to bribe an official at a Venezuelan development bank, Banco de Desarollo Economico y Social de Venezuela (BANDES), in exchange for the official’s directing BANDES’ trading business to DAP.

Chinea, of Manalapan, New Jersey, and Joseph DeMeneses, of Fairfield, Connecticut, were each sentenced to four years in prison. They were also ordered to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.

“These Wall Street executives orchestrated a massive bribery scheme with a corrupt official in Venezuela to illegally secure tens of millions of dollars in business for their firm,” Assistant Attorney General Caldwell said in a media statement. “The convictions and prison sentences of the CEO and Managing Director of a sophisticated Wall Street broker-dealer demonstrate that the Department of Justice will hold individuals accountable for violations of the FCPA and will pursue executives no matter where they are on the corporate ladder.”

Three other DAP employees and the BANDES official pleaded guilty last year for their participation in the bond trading matter.

DAP itself filed for bankruptcy.

New York-based Direct Access Partners started out in 2002 as a New York Stock Exchange floor brokerage and grew rapidly over the years in both equities and fixed income. Sources tell Traders the firm has 130 employees.

To read the entire article from Traders Magazine, click here.

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Quantitative Brokers and RiskVal have formed a partnership to create and deliver a fixed income trading platform, called RVQB.

The new sellside bond trading platform “combines powerful real-time analytics with seamless access to QB algorithms for best execution,” according to a press statement. Quantitative Brokers is a provider of agency algorithms for fixed income and futures markets. RiskVal Financial Solutions is a trading analytics and real-time risk management provider.

The RVQB platform integrates QB algorithms and RiskVal trading analytics and aims “to provide traders with real-time control and transparency into their outright and relative value executions.” The solution provides the bond trader with screens that can route orders to Legger, QB’s multi-leg execution strategy, for basis and relative value trading. During a demonstration of the trading platform in Manhattan yesterday, a bond trader can fill in a single trade with reduced keystrokes and data entry.

QB’s Legger algorithm executes user-defined structures with any ratio and number of legs across cash US Treasury and futures markets. A transactional cost analysis report is generated for each execution, providing full post-trade transparency on the order and slippage performance.

“Fixed income traders are continually looking for better ways to actively manage their enterprise-wide risk,” said Christian Hauff, CEO and co-founder of QB. “By marrying QB’s best execution algorithms with RiskVal’s proven relative value analytics, we have created a unique platform that integrates powerful trade discovery with superior execution tools.”

“The fixed income markets are rapidly evolving, and traders are seeking access to smarter and more transparent execution,” said Jordan Hu, founder and CEO of RiskVal. “As the market structure evolution continues, we are excited to address some of the key issues that fixed income traders face in the move to a more electronically-driven model.”

In 2014, both FINRA and the SEC approved QB as a broker-dealer for government securities.

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In honor of the upcoming U.S. Veteran’s day holiday, one Wall Street institutional broker is increasing the amount of profits it donates that are aimed to help U.S. servicemen and women.

Veteran’s Day is next Tuesday, November 11.

Mischler Financial. a California-based investment bank and institutional brokerage owned and operated by Service-Disabled Veterans, announced it is expanding its current give-back program. This year, the broker is donating a portion of its profits to three additional and separate non-profit organizations in honor of those who have served the country’s military.

The new charities are:

The Bob Woodruff Foundation
Children of Fallen Patriots
BuildOn.org

Dean Chamberlain, CEO Mischler Financial Group

“Through our ongoing commitment to Veterans on Wall Street, this Veteran’s Day we are honored to pledge our financial support to these new organizations,” said Dean Chamberlain, chief executive and principal of Mischler Financial Group. “We also look forward to continuing our commitment to the non-profit devoted to inspiring our young generation to drive positive change through community service and education.”

Headquartered in Newport Beach, California with regional offices in Stamford, CT, Boston, MA and Chicago, IL., Mischler Financial Group is a federally-certified minority broker-dealer and a Service-Disabled Veterans Business Enterprise. It provides capital markets services, agency-only execution within the global equities and fixed income markets and asset management for liquid and alternative investment strategies

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  Brokerdealer.com blog update profiles Broker-Dealer industry publication Traders Magazine’s “2014 Women of Excellence Awards”

“..Unveiled last night, the 2014 “Wall Street Women: Celebration of Excellence” Awards cited 19 of what one NYSE floor trader called “The Street’s Smartest and Sweetest Gals” for their performance across 19 categories, including leadership, mentorship and trading.

Mary Clark, ETF Trading Desk, WallachBeth Capital

Giving equal accolades to women from both sides of the market aisle (buy-side investment managers and sell-side broker-dealers), in the “most-watched” equities trading category, Blackrock’s Vivian Bakonyi, the buyside firm’s program trading “czarina” shared the top slot with the sell-side’s “dame doyenne of ETF best execution,”  industry veteran Mary Clark of WallachBeth Capital.

For Mentor of The Year, Traders Mag judges also came to a split decision, with top honors shared by Citigroup’s MD Of Global Markets Christine Sperry and OhioPERs trader Joan Stack.

BrokerDealer.com salutes all of the nominees and each of the winners!

The full list of winners is available by clicking on this link to TradersMag.

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BrokerDealer.com blog post courtesy of extract from tradersmagazine.com and John D’Antona Jr.  

The Financial Industry Regulatory Authority (FINRA) announced Monday that it has filed a complaint against Los Angeles-based Wedbush Securities Inc. for systemic supervisory and anti-money laundering (AML) violations in connection with providing direct market access and sponsored access to broker-dealers and non-registered market participants.

During the period at issue, Wedbush was one of the securities industry’s largest market access providers, which included overseas high-frequency, high-volume, algorithmic day-trading firms, and made millions of dollars from its market access business.

The complaint alleges that from January 2008 through August 2013, Wedbush failed to dedicate sufficient resources to ensure appropriate risk management controls and supervisory systems and procedures. This enabled its market access customers to flood U.S. exchanges with thousands of potentially manipulative wash trades and other potentially manipulative trades, including manipulative layering and spoofing.

Despite its obligations to monitor, review, and detect suspicious and potentially manipulative trades, Wedbush largely relied on its market access customers to self-monitor and self-report such trading without sufficient oversight and controls to detect “red flags.”

FINRA also alleges that despite receiving notice of regulatory and compliance risks associated with its market access business – including published industry-wide notices, disciplinary decisions taken against other industry participants and multiple self-regulatory organization inquiries and examinations – Wedbush’s regulatory risk management controls and supervisory procedures were not reasonably designed to manage such risks, and, in fact, created incentives that rewarded Wedbush compliance personnel with compensation based on market access customer trading volume. Additionally, the complaint alleges that the firm failed to establish, maintain and enforce adequate AML policies and procedures, and failed to report suspicious and potentially manipulative transactions.

The issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States.

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A Middle East stock exchange is tapping the knowledge of one of the Northeast’s bourses.

The Bahrain Bourse and NASDAQ OMX have joined forces with the former activating its newest trading engine, which is powered by NASDAQ OMX’s X-stream trading platform. The project went live on Monday, July 14, providing Bahrain Bourse with a multi-asset trading platform.

“Replacing our trading platform is a milestone in the history of the Kingdom of Bahrain’s capital market, and is one of the key projects of the Bourse’s strategy that was adopted in 2011 to develop all work aspects at Bahrain Bourse,” said The Shaikh Khalifa bin Ebrahim Al-Khalifa, chief executive at the Bahrain Bourse.

Bahrain’s new platform will enable it to provide more and advanced trading options for brokerdealers and investors and a variety of market participants, as well as create innovative products and services to match international demand. In addition to the new X-stream technology, the Middle East exchange will also continue to leverage the existing CSD technologies that have been provided and supported by NASDAQ OMX since 2000.

NASDAQ OMX’s exchange technology, including trading, clearing, CSD and market surveillance systems, is in operation in over 100 marketplaces across USA, Europe, Asia, Australia, Africa and Middle East.

The Bahrain Bourse was established as a shareholding company in 2010 to replace the Bahrain Stock Exchange that was established in 1987. There are 50 companies listed on the exchange, two mutual funds, and nine bonds/Islamic Sukuk. The three indices tracking the market’s performance are the Bahrain All Share Index, the Esterad Index (which consists of a basket of selected local-publicly listed companies), and the Dow Jones Bahrain Index.

Since its establishment, BHB has joined several regional and international organizations such as World Federation of Exchanges, Arab Federation of Exchanges, Federation of Euro-Asian Stock Exchanges and the Africa & Middle East Depositories Association.

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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.

For the entire story, please visit Traders Magazine via this link

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