Episode Transcript
[00:00:06] Welcome to the John Lothian News daily Update podcast for March 28, 2024. I am your host, John Lothian. This podcast is brought to you by John Lothian News, the home of markets wiki and markets wiki Education. Thank you for joining us. Here are the hits and takes comments from today's GLN Bernard Goeder of Risk.net has a big scoop that BGC group, led by Howard Lutnik, is in discussion with banks and principal trading firms, or ptfs, to form a consortium that would have a stake in its electronic trading and exchange businesses. The story is titled BGC Forming Consortium to take on CME groups rates empire with the sub headline banks and PTF's are being offered a stake in FMX, which has CFTC approval to launch a futures exchange. Here is a summary of the article. Negotiations ongoing for several weeks involve major us treasury dealers such as bank of America, Barclays, Citadel Securities, Citi, Goldman Sachs and JP Morgan. The consortium aims to challenge CME groups dominance in the US rates market, where CME operates Brokertech, the largest interdealer venue. FMX, a unit of BGC, recently obtained CFTC approval to launch a futures exchange competing directly with CMEs interest rate futures complex.
[00:01:46] Final details of the consortium, including governance, economic terms and asset inclusion, are still being negotiated. Despite complexities, consortiums are common in fixed income trading, with examples like broker tech and Tradeweb. A BGC spokesperson challenged the accuracy of Risk.net quote s report without specifying the inaccuracies. However, both the banks and PTF's involved declined to provide any comments on the matter. Goiter wrote a previous story about the cash treasury markets on March 6, titled Clobbered how toxic flows reshaped US treasury trading with the sub headline volumes have dropped by more than a third at broker tech, reasons are complex, the outlook uncertain. Here's a summary of that story. Since CME Group acquired Broker Tech in 2018, daily trading volumes for US treasury securities on the platform have plummeted by 39%, with dealers increasingly relying on internalizing customer flows and sourcing liquidity from non bank market makers. Even as US treasury issuance has soared, around 10% of all US treasury trading now occurs via streaming channels and bgcs. Fentyx has secured a 25% share of inter dealer volumes since its 2018 launch. Non bank liquidity providers say it has become harder to profitably monetize the remaining dealer flows. On broker tech, it's just leftovers, says a PTF source. The issue of toxic flows on broker tech has prompted dealers to seek alternative venues such as streaming services offered by Tradeweb and market access, which have seen significant growth. Lutniks Fentix UST has emerged as a big winner with its curated order book approach. Despite the decline, Brokertech remains a significant player in the US treasury trading, particularly during periods of volatility, though it faces challenges from evolving market dynamics and increased competition. But things are looking up. Regulatory changes such as the US treasury clearing mandate could impact broker techs future trajectory, boosting CME's critical role in a fully cleared inter dealer US treasury market.
[00:04:38] The Langer versus CME group in class action lawsuit has continued to grind through its various steps since the January 30 hearing laid out the timetable for the CME to make its case, to decertify the class action status, and to exclude the expert testimony of Doctor Jonathan Arnold. The judge has also outlined the schedule for the replies in a status conference. The plaintiffs have until April 12, 2024, to reply to the CMEs motion for summary judgment, to decertify the class, and to exclude the testimony of plaintiffs expert Jonathan Arnold. On May 14, the CME will have a chance to reply one more time, and on May 29 there will be a status conference via Zoom. If you're interested in reading any of the filings, you can read the CME's February 16 Memorandum of law in support of their motion to decertify the class or its memorandum of law in support of their motion for summary judgment. The latter is an excellent history of the CME and CBOT and their journey through the transition to electronic trading, demutualization, and merging. Lastly, there is a February 16 defendant's memorandum of law in support of their motion to exclude the testimony of Doctor Jonathan Arnold, which made me want to pass a law preventing lawyers from using sharp knives, as Doctor Arnold appeared to have been eviscerated by the CME's legal team. For his part, Doctor Arnold's report this past July, when he estimated the total foregone fees across all plaintiffs is $1.008 billion, excluding prejudgment interest, and 1.390 billion, including prejudgment interest through June 30, 2023, can be found with a link in today's newsletter. The Financial Times is reporting that research shows that the melting of polar ice during climate change is impacting global timekeeping by slowing down the earth's rotation. This phenomena has been observed through changes in Earth's gravity field measured by satellites since 1976. As a result, the earth's rotational speed deviates from standard time, leading to periodic additions of leap seconds to coordinate universal time or UTC. Recently, fluctuations in the earth's core have caused it to rotate faster, prompting discussions about the possibility of implementing a negative leap. Second by 2026. The New York Times is reporting that Angila has raked in over $32 million, a significant portion of its gdp, from registration fees for the AI Internet access. With the rise of artificial intelligence, companies clamor for domain names reflecting their involvement in the sector, fueling a surge in demand for AI addresses, including notable entities like Elon Musk's AI company.
[00:08:21] CNN is reporting that Germany is considering a ban on breeding dachshunds and other dog breeds prone to skeletal anomalies families sparking concerns among dog lovers. The proposed law aims to prevent torture breeding and strengthen animal protection regulations. However, this move has raised eyebrows, leaving stupi and other beloved breeds wondering if theyll be next on the chopping block. I for one, will tell you the world would be worse off without the comedian dogs known as dachshunds.
[00:08:58] Fia boca is done, which means one thing Fia is getting ready for IDX. You can see details and register for the June 17 19th conference with the link in today's newsletter the SEC's Office of Human Resources is hosting a virtual information session on April 9, 2024 from 11:00 a.m. To 12:00 p.m. Central Daylight time. Designed to share information about the agencys SEC Scholars program application process and helpful tips for interested applicants, the Climate Investment Summit returns to London Climate Action Week on June 26, 2024 for its fifth consecutive year, partnering with the London Stock Exchange Group for the third time.
[00:09:50] The summit is focused on current and emerging investment trends in clean energy, decarbonization and climate and nature based solutions. With Climate Finance taking center stage at the upcoming CoP 29, the urgency of funding transformative solutions for climate change is apparent. Participants can attend virtually or in person. Learn more, or register with the link in today's newsletter. Our most read stories from our previous edition of JLN options were a turbocharged bitcoin. ETF is more popular than TSMC in Korea. From Bloomberg LiS completes migration to euronex Optic from the trade volatility shapeshifters arbitrage free shaping of implied volatility surfaces from risk.net dot. Subscribe to the free JLN Options newsletter with a link in today's JLN. Here are more stories from the first read section of today's JLN. Here's a video from our FIA Boca coverage. Google Cloud's Rohit bot discusses the future of data, AI and the cloud in financial markets. Data is the next gold rush, says Google Cloud's Rohoot bot bot was interviewed at FIA's International Futures conference in Boca Raton, Florida, by John Lothian, news for the JLN industry leaders series sponsored by Wedbush. Bot spoke about the critical role of data, artificial intelligence, and cloud technology in driving innovation and differentiation. You can watch this video on johnlothianews.com.
[00:11:42] Heres a story from Coindesk. House Republicans demand SEC explained whats up with crypto platform Prometheum as Prometheum Inc. Nears an unprecedented moment in us crypto history by beginning a custody operation that intends to hold customers ethereum tokens, the industry friends in Congress are demanding the securities and Exchange Commission explain what it means to do about this first us special purpose broker dealer for digital assets.
[00:12:20] We are faced with an alarming scenario in which a SPD has announced that it intends to offer custodial services for ETH under a regime that does not permit such activity, the republican chairman of the Financial Services and Agriculture Committees wrote in a letter to the SEC chair, Gary Gensler, also signed by 46 other members of Congress.
[00:12:49] This action, if allowed to proceed, could have irreparable consequences for the digital asset markets.
[00:12:59] The prometheum conundrum. You gotta click on a link to see the picture. Here's another story, this one from Bloomberg. The headline? Don't be fooled. The worst corporate April Fool's jokes and how to spot them. Some April 1 jokes hit the mark. Some fail miserably. Classics include Volkswagen Circus CEO's and talking tulips. It's that time of year again. April Fool's day is around the corner, with investors waiting to see where the first joke will land and whether anyone will fall for it. Will it be via an ex post or a company statement or a video message from TGI Fridays Inc. Announcing that its chief executive officer will step down to join the circus. To Volkswagen AG's purported name change. To Volkswagen in the US, whats meant to be a fun ploy to bolster a brand runs the risk of turning into a flop. Mike Hammond look for announcements like this. Future Trade Inc. A leading innovator in the financial technology sector, is proud to announce the launch of the world's first time traveling trading platform, Time Trader. This groundbreaking platform revolutionizes the futures markets by allowing traders to access future market data before it even happens, providing an unprecedented advantage in trading strategies. Time trader utilizes cutting edge quantum algorithms and temporal displacement technology to bring traders market insights from the future. With this platform, traders can accurately predict market movements with 100% accuracy, enabling them to make informed decisions and capitalize on market trends before they unfold.
[00:15:01] Here's another story, this one from the Wall Street Journal. The headline Dear Donald Trump, here's how to manage your stock market fortune. It requires recognizing a fundamental truth about truth social the current valuation can't last. From James McIntosh dear Donald Trump, congratulations. You've finally managed to make it as a multibillionaire, at least on paper. And thanks to the memification of your Trump media and technology group under the ticker DJT, you are in the unusual position of being majority owner of a company bigger than some members of the S and P 500. Now comes the hard part, turning it into cash. You have a few options, but the bad news is that none of them are assured. My comment I can't wait to hear whose fault it is that the price of DJT went down when he tries to cash out. Here are the top three stories from Wednesday's JLN our most clicked item Wednesday was the John Lothian News video Futures Discovery physical delivery versus cash settlement, episode seven in our Futures Discovery video series, which was number two on Tuesday. Second was SEC charges former Arista Networks chairman Andy Bechelsheim with insider Trading, a litigation release from the SEC. Third was how will the cost of Sam Bankman frieds crimes be counted at sentencing? From the Financial Times here are the top four stories from the lead section of todays JLN. The first story is from Bloomberg. The headline, FTX's original sin is a warning sign to all of crypto evidence from the criminal trial of Sam Bankman Fried suggests fraud was built into FTX from the beginning.
[00:17:01] Sometime between FTX's collapse and Sam Bankman Fried's fraud conviction. A year later, a consensus formed about the one time boy genius of cryptocurrency. His wild curly hair and beanbag chair naps at the office were largely for show, but his company, FTX, which had been used by millions of people to buy and sell digital currency, was the real deal. The crypto faithful see FTX as an almost success story, if only its owner hadn't taken customer money to COVID side gambles. As the author Michael Lewis put it on 60 Minutes, they actually had a great real business.
[00:17:44] That idea has been bolstered by a twist in the FTX bankruptcy. When the company collapsed, $8 billion in customer funds had vanished, but the lawyers running it now say they expect to recover enough money to pay back everyone in full. Bankman Frieds allies have used this to suggest that the customer funds werent so much stolen as they were redirected into at least a few surprisingly good investments.
[00:18:13] Whatever else might be said about Bankman freed, he was a brilliant businessman, the law professors Ian Aris and John Donahue wrote in a recent essay, arguing he was wrong to even declare bankruptcy.
[00:18:30] His lawyers have used this argument to call for a light sentence. On March 28, a federal judge will decide whether to go easy on him or send him to prison for 40 years or more, as prosecutors are seeking here's another story. This is a press release from the US Department of Treasury. US Department of Treasury releases report on managing artificial intelligence specific cybersecurity risks in the financial sector today, the Department of the treasury released a report on managing artificial intelligence specific cybersecurity risks in the financial services sector. The report was written at the direction of Presidential Executive Order 14,110 on the safe, secure and trustworthy development and use of artificial intelligence. Treasury's Office of Cybersecurity and Critical Infrastructure Protection led the development of the report. Occip executes the Treasury Department sector risk management agencys responsibility for the financial services sector.
[00:19:43] Heres another story, this one from Bloomberg SBF prison time hangs on persuading judge he is no Bernie Madoff prosecutors are seeking 40 50 years for disgraced crypto mogul FTX customers. Investors incurred losses of over $10 billion.
[00:20:04] The judge presiding over Sam Bankman Fried sentencing Thursday will have to decide whether the fallen crypto mogul is a run of the mill financial fraudster or a villain eclipsed only by Ponzi scheme mastermind Bernie Madoff. Whichever view carries the day will determine whether the 32 year old Bankman Fried spends most of his remaining years behind bars or emerges from prison while still in middle age.
[00:20:33] And then here's a story from Reuters. The headline Coinbase must face us security regulators lawsuit, judge says a federal judge in Manhattan on Wednesday said the US securities and Exchange Commission's lawsuit against Coinbase can move forward but dismiss one claim the regulator made against the largest us cryptocurrency, exchange. US District Judge Katherine Pockela, partly granted Coinbases motion to dismiss the SECS lawsuit, which alleges the company is flouting its rules. While the decision is a partial win for Coinbase in what could be a lengthy and expensive court battle, it largely blesses the SECs approach to cryptocurrency and agrees with other judges who have sided with the regulator. We're grateful for your attentive listening to the John Lothian News Daily update. Please spread the word about our podcast among your friends. We would greatly appreciate it if you could spare a moment to leave a review on Apple Podcasts or whatever platform on which you access this podcast. Your Reviews play a crucial role in introducing our content to new listeners. Also, if you haven't yet subscribed to the Daily Johnlovia newsletter, email, you can enjoy a complimentary 90 day trial by visiting johnlothianews.com trial. Have a great day and stay safe and treat people the same way you want to be treated, with respect, equality, and justice. This has been. John Lothian Goodbye. This podcast has been produced by Andrew Lothian.
