Close, But No Cigar

Having taken a look at Colin Lambert’s predictions for 2018, Galen Stops finds that he was almost right with all of them. “Almost” being the operative word.…..1.“Bitcoin. That’s The Thing That Goes Up, Right?” – “The advent of futures in Bitcoin will take volatility out of the market. The cryptocurrency will end the year lower, not at zero, but in the single digits of thousands of dollars.” Colin definitely scored a hit with his price prediction, with bitcoin currently at $3,500 at the time of writing. However, he did give himself a rather generous amount of leeway by effectively predicting that it would end the year anywhere between $1 and $9,999.
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P&L’s 2018 Crystal Ball – How Did We Do?

We’d all like to write our own reviews, but if the recent emphasis on third party transaction cost analysis (TCA) has taught us anything it’s that it can be beneficial to have an independent party conduct reviews too. With that in mind Profit & Loss challenged some of its readers to look over our 2018 predictions and provide feedback.Prediction: “The Great Divide” - 2018 will be all about the data and it will empower those willing to pay for it, however there will be challenges for those who cannot or will not pay up to consume and store the vast amounts of data required. Those with data will be more protective of how their pricing is used by counterparts and those without will struggle in an increasingly fragmented market as more platforms package and sell their data.
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Understanding Blockchain Forks

Most published analysis of the legal consequences of blockchain forks has been underwhelming. Discussions often centre around the legal risks to miners and developers, questions of little relevance because of the general absence of contracts between users of public blockchains and the constellation of jurisdictions from which they operate. In other words, it will freeze in hell before anonymous developers based god-knows-where win a lawsuit against unidentified Chinese miners aggregated in a mining pool. I should add that several articles appeared to be advertorials by law firms looking for new business.
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FX Sees Flash Crash in Asia – But What Caused It?

FX markets in early Asia experienced what dealers refer to as a “mini flash crash” today as risk aversion levels were ramped up and volatility ensued following a profit warning from Apple. USDJPY fell 400 points at one stage before reversing more than half of the drop, while AUDUSD also collapsed sharply to hit a new multi-year low. There were also sharp moves in other pairs, with Cable dropping more than 200 points and even EURUSD saw what is for the normally stable cross, a decent move.
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Virtu Pays $1 Billion for ITG

Virtu Financial has continued to expand its business by entering into a definitive agreement to acquire Investment Technology Group (ITG) in a cash transaction valued at $30.30 per ITG share, for a total of $1 billion. The deal has been rumoured for several months, as reported by Profit & Loss in October. Describing what it terms as a “significant acquisition” Virtu says the deal underscores its commitment to its institutional client franchise and is a natural next step in its growth.
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StanChart Survey Finds Democrat House Win Priced In

A survey conducted by Standard Chartered Bank, both internally and among its client base, finds that a “small” Democratic House win is “well priced in” to markets ahead of the poll next month. “A Democratic win was associated with weaker equities, lower bond yields and weaker DXY, with a stronger Democratic win exacerbating the moves,” the bank says in a release detailing the results. “A Republican win was associated with stronger equities, higher bond yields and a somewhat stronger DXY.”
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Research Paper Finds Fix Tracking Error Increased Post-Reform

A new research paper that looks at trading around the WM Reuters benchmark fix between 2012 and 2017 argues that while the mechanism has been made more robust and less open to manipulation, the shift to a five minute window has made actually achieving the benchmark harder for some market participants. The paper uses what the authors term “a unique dataset that allows us to identify the actions of individual traders” that provide new insights into how trading decisions affect the properties of the fix benchmark, and how the presence of the fix affects trading patterns.
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Why the Rising Tide of FX Options Volumes Means Ballooning Brokerage Fees

A storm is brewing in the world of FX derivatives. Driven by, surprise surprise, Brexit uncertainty and Trump - there’s a sizable chunk of activity in GBP/USD options relative to the other major currency pairs. Now the geopolitical landscape is of course backed into the price of the underlying currency pair, as opposed to the activity of the options. But the challenge is that as volumes increase, investment banks have to inevitably pay more in interdealer broker (IDB) fees. And the bigger the volume, the bigger the brokerage cost. Already under intense scrutiny to reduce costs wherever possible, this is a major headache that any desk head could do without right now.
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The New Learning Curve: Using the Data

The paradox of data is, as observed by panellists at Forex Network Chicago, while the data itself is becoming cheaper and more easily accessible than ever before, the resources being allocated to analysing it are increasing, bringing with it increased costs. “The core fundamental cost of collecting data and storing and processing it is cheaper than ever,” observed John Ashworth, CEO of Caplin. “The premium is going to be on the labour force that will be doing the work on the data.”
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Is the Golden Age of Crypto Already Over?

On September 18, at approximately 1:00pm Eastern, the golden age of cryptocurrencies came to an abrupt end. At that time, the Office of the New York Attorney General dropped a report on the operations of many major cryptocurrency exchanges that found serious faults with both specific firms and the industry as a whole. Most ominously, the report stated that it had referred three platforms that had declined to provide information voluntarily to the NY AG to the “Department of Financial Services for potential violation of New York’s virtual currency regulations”
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