In a wide-ranging interview with John Lothian News, Massad—now a research fellow at the Harvard Kennedy School—argued that the rise of internet-facilitated, "permissionless" global markets has caused the traditional boundaries between investing, speculating, and betting to largely disappear. As retail traders pivot from stocks and bonds to NFTs, meme coins, and even sneakers, Massad suggests the U.S. regulatory framework is struggling to keep pace with the convergence of entertainment and finance.

Chen outlined Injective’s strategy for modernizing financial systems by bridging traditional and decentralized finance. The company has prioritized upgrading exchange resilience and reliability while developing institutional-grade tools and digital assets for building blockchain-based financial applications. Recent advancements were highlighted, showcasing Injective’s alignment with its long-term vision to facilitate more accessible and robust markets.

Uddin detailed the company’s approach to fostering partnerships and driving the adoption of blockchain solutions, emphasizing the growing role of stablecoins in their ecosystem. He also addressed the challenges and opportunities of introducing blockchain technologies to traditional financial institutions. Since 2018, Injective Labs has been backed by prominent investors like Mark Cuban and Pantera, solidifying its position as a leader in blockchain innovation.

Rafael Zanatta of Eurex emphasized the growing institutional interest in Ethereum, noting it "represents about 15% of the total crypto market cap currently." Zanatta pointed out that its unique value comes from smart contracts and its widespread use in decentralized finance (DeFi), making it a key asset for portfolio allocation.

The launch of these products supports Eurex's goal of offering institutional investors a diverse range of regulated tools for managing digital asset exposure, he said. Eurex is responding to growing customer demand to move beyond Bitcoin, Zanatta added.

Zanatta highlighted the benefits of trading on a regulated exchange like Eurex, emphasizing 'regulatory oversight' and 'market integrity.' He also praised FTSE Russell as a valuable partner in the development of the Ethereum Index futures and options.

"The partnership with FTSE Russell to offer these insights index-based products further enhances the robustness of our offering," Zanatta said."FTSE's established reputation providing reliable and transparent market indices ensures that the underlying benchmark for these products are of the highest standard, which is crucial for institutional grade products," he said.

Kristen Mierzwa of FTSE Russell detailed their rigorous vetting process for digital assets and exchanges. 'In 2019, we created a framework to vet both the exchanges and the assets in the digital asset space,' she said. "The idea behind vetting these venues is because we had a problem we had to solve."

Given that these assets are often traded over-the-counter (OTC) across various venues, FTSE Russell focused on centralized exchanges with robust KYC policies and market stability, such as Coinbase, Kraken, and Gemini, to meet the needs of institutional clients, Mierzwa said.

She said FTSE Russell designed a flexible framework to capture trade data from various centralized exchanges, acknowledging the evolving nature of the digital asset space. "FTSE Russell aggregates executed trade data from eight exchanges every 15 seconds using VWAP to establish a price for our hourly fixes and futures contract settlements," Mierzwa explained. She also noted that, with 7,000 to 10,000 new digital assets emerging daily, FTSE Russell partnered with Digital Asset Research to evaluate these assets based on their presence on exchanges, market cap, and liquidity.

Mierzwa also mentioned that FTSE Russell takes a long-term view by evaluating the universe of digital assets every quarter. "We're looking at variables like how many of these centralized exchanges these assets are listed on, market cap, and liquidity," she said. FTSE Russell currently covers 400 digital assets and has plans to expand this coverage.

She also discussed the criteria for selecting assets. For asset vetting, FTSE Russell evaluates several crucial factors, including developer activity to gauge ongoing engagement and protocol security to mitigate hacking risks, Mierzwa said. FTSE Russell ensures that the consensus mechanism involves significant community validation to maintain blockchain integrity, and it also assesses traditional metrics like trading volume and market cap to determine the significance of an asset.

On the exchange side, FTSE Russell prioritizes platforms with strong KYC and AML policies, effective market surveillance, and the capability to audit activities when necessary, she said. It also favors exchanges with identifiable C-suite executives and proper geographic registration and licensing to ensure compliance and reliability. Mierzwa emphasized that these criteria help FTSE Russell ensure that the data and pricing reflect genuine market activity and maintain high standards of trustworthiness.

FTSE Russell ensures the accuracy and reliability of the data used in the FTSE Ethereum Index through rigorous monitoring and evaluation processes, Mierzwa said. After vetting both the exchanges and the assets, FTSE Russell continuously tracks the 15-second trade data feeds to detect and address any anomalies, recognizing the inherent volatility of digital assets. "If there's anything that looks unusual, we're right on it," she said.

The FTSE Russell team, with over five years of observation, identifies reasonable patterns and builds models to manage data fluctuations, Mierzwa said. The team also conducts monthly reviews with its governance and compliance units to ensure that the data set meets its expectations, focusing on filtering metrics and trends to maintain data integrity over time.

Zanatta said that offering Ethereum Index futures and options on a regulated platform like Eurex provides institutional clients with several key advantages over unregulated exchanges. First, Eurex operates within a well-defined legal framework, ensuring that all trading activities are secure, transparent, and compliant with both local and international standards. This regulatory oversight fosters client confidence by upholding the integrity of the exchange's operations, he added.

Second, Zanatta noted that Eurex's sophisticated market surveillance systems and the presence of reputable market participants contribute to a stable and reliable trading environment, enabling precise and efficient order execution. Additionally, Eurex offers a comprehensive risk management framework, which includes daily mark-to-market settlements, margin requirements, and a robust clearinghouse. These measures help mitigate counterparty risk and ensure smooth trade settlements, he said.

"This level of security and operational efficiency is critical for institutional clients managing capital, making it the platform of choice," Zanatta said.

The cash-settled nature of Eurex’s contracts, combined with its global recognition, enables investors to confidently engage with the Ethereum market without needing to handle the physical cryptocurrency itself, he said.

"We knew this was going to be a long journey," Mierzwa said, discussing future product development. "I think that the next step is taking a basket of assets, pulling them together, moving past these single asset products."

Both executives emphasized their firms' long-term commitment to the digital asset space. Mierzwa remarked, "I think both firms have strong conviction that this asset class is here to stay, and we wanted to ensure our clients could have access to it from a trusted partner that wasn't going to abandon ship."

Terry Cheung, who has been with Liquiditybook for 12 years, is a veteran in the fintech industry with 18 years of experience who sheds light on this journey as he discusses the firm's trajectory and its adaptation to emerging market needs. He is joined in this podcast by Liquiditybook's chief technology officer, Shawn Samuel, who with Cheung addresses the firm's origins, dating back to its inception in 2005. 

Liquiditybook started with a small team at a broker-dealer and grew organically as it started to use technology to solve its own problems, Samuel said. The first problem Liquiditybook addressed involved automating straight through processing, from trade conception to order entry, order management, execution to post trade, he said. The idea was to automate anything they could in that process, to eliminate risk and save traders money that could help keep them from going out of business, Samuel said.

They started with a FIX networking and evolved to what they are today, "a full end-to-end system for everything, for all market participants in the front office, from order management to execution management to portfolio management to post trade in (the) middle office," Samuel said.

Another aspect of Liquiditybook's work was replacing legacy systems that were "heavy, slow, hard to work with," he said. Samuel expounded on different examples of how Liquiditybook's newer, more powerful technology allows traders to move faster, while also seeing real-time data powered by APIs. 

Liquiditybook offers a managed service to clients, which allows it to configure the system to meet the client's needs, rather than forcing the client to become an expert in the solutions offered by Liquiditybook, Samuel said.

Cheung says that with the move to T+1 all the steps of clearing a trade will be much quicker, with brokers asking clients to send instructions electronically, if possible. Executing brokers will also try to simplify their workflows so they can send out the confirmations as early as possible so they get to the custodian firm to confirm by 9:00 p.m., he said.

Cheung said he expects artificial intelligence (AI) will impact the sell side broker serving the buy side trader, who might send in a basket of 50 stocks, but send them individually. Using AI, the sell side broker can identify other 50 lot trades with the same stocks and be prepared to allocate the trades the same way as the first trade, thus speeding up the workflow, Cheung said.

Also, if a client trades a particular stock the day before, using AI, when the client trades the stock the next day, the firm can project the account the trades will be allocated to, he said.

Cheung laid out the history of settlement of stocks from T+5 to T+1 for the podcast, noting when Europe and Canada made similar moves. On the Monday of Memorial Day, Canada and Mexico will move to T+1 and then Tuesday the U.S. will move to T+1. 

The last time there was a move in settlement days, Europe moved first. This time it is the U.S., Canada and Mexico. Cheung said he expects the rest of the world to catch up quickly in the next few years. He said he hopes we can get to T+0 in fewer than 10 years. 

Other topics explored in this podcast include:

• Transition from T+2 to T+1 settlement cycle
• Historical timeline of settlement cycle changes (Europe, US, Canada, Mexico)
• Client concerns and adaptation to settlement cycle changes
• Importance of liquidity and counterparty interaction
• Role of customer support in adapting to changes
• Comparison of T+1 transition to Y2K
• Challenges and benefits of automation in settlement processes
• Impact on broker operations and trade allocation
• Broker scorecards for T+1 compliance
• Automation and technology solutions for T+1 transition
• Role of AI and machine learning in settlement processes
• Future skills and training for back office personnel
• Impact of technology on the financial industry
• Future plans and challenges for liquidity book in 2024
• Focus on leveraging new technologies (Gen AI) internally
• Expansion into different asset classes and services
• Importance of straight-through processing and automation
• Post-trade hub concept for faster processing and reconciliation
• Challenges and solutions for onboarding and interfacing with clearing brokers
• Optimization of reconciliation processes for efficiency

The new head of the CFTC's Whistleblower Office, Brian Young, might be able to help you secure that big yacht if you've witnessed and reported commodity fraud to the CFTC Whistleblower Office, resulting in a recovery of more than $1 million from a CFTC enforcement action. 

Approximately one third of enforcement cases that are pending at the CFTC involve whistleblower tips or complaints, Young said. The whistleblower program promotes fair markets through deterrence, he said. According to Young, the knowledge that someone might report wrongdoing acts as a deterrent for companies, discouraging them from engaging in illicit behavior.

Young dedicated 19 years to the Justice Department, specializing in criminal securities and commodities fraud. During his tenure, he prosecuted cases related to Libor manipulation, FX front running, precious metals spoofing, and more. Notably, some of the cases he handled early in his career involved whistleblowers.

When the position of the head of the CFTC's Whistleblower Office became available, Young saw it as a unique opportunity to leverage various aspects of his background. He viewed it as a chance to transition into roles focusing more on policy and investigation rather than litigation. Young expressed appreciation for the economic and legal dimensions of the Whistleblower program, further highlighting his interest in the role.

Recognizing the vital role of the whistleblower program in enforcing regulations at the CFTC, Young believed that by excelling in his role, he could significantly influence enforcement efforts, he said.

Submitting a whistleblower tip involves visiting Whistleblower.gov and completing a TCR form, which stands for tips, complaints, and referrals.

"You fill out that form and that'll ask you for information about yourself," Young said. "It'll have a couple of boxes that you check sort of generically to describe the matter. And it will enable you to put your own narrative description of what you know, what the person has observed. The process can be anonymous. It does provide the whistleblower or the tipster to remain anonymous." 

Whistleblowers can have their lawyers represent them early in the case, providing a degree of anonymity. However, this anonymity may be temporary, as the CFTC will eventually need to know the whistleblower's identity to proceed with the case.

The tip is submitted electronically, and upon receipt, it undergoes review by the agency. Young explained that there are individuals in a triage unit who collaborate with the Whistleblower Office to identify promising leads. Subsequently, these leads are forwarded to the Enforcement Division attorneys, who may initiate an investigation.

For a case to qualify for a whistleblower award, it must entail a minimum of $1 million for the CFTC to recover. The whistleblower must furnish original information, not previously known, which is substantial enough for the CFTC to either launch a new investigation or significantly contribute to an ongoing one, as Young explained.

Since issuing its first award in 2014, the CFTC has awarded approximately $365 million to whistleblowers. Enforcement actions associated with those awards have resulted in monetary relief totaling more than $3 billion.

Whistleblowers can find encouragement in the fact that if the case exceeds $1 million and is grounded on original information they supply, leading to successful action and resolution by the CFTC, they stand to receive between 10 and 30% of the recovered amount, Young said. 

If the case is in a priority area for the CFTC, that could lead to an award at the higher end, he said. 

Young said that whistleblower regulations direct the CFTC to safeguard the identity of whistleblowers by refraining from disclosing any information that could reasonably lead to their identification. He explained that when the award press release is issued, it will contain no details about the whistleblower. Additionally, the CFTC meticulously scrubs all documents related to the litigation discovery process to ensure that no information regarding the whistleblower is inadvertently revealed, thus preventing any risk of exposing their identity to the opposing party.

"There's really a lot of precautions and a lot of energy put into place and trying to preserve all whistleblowers' confidentiality," Young said.

However, Young cautioned that if a court mandates the CFTC to reveal the identities of the whistleblowers, they are legally obligated to comply with the order. While rare, such occurrences can indeed transpire, he added.

Some whistleblowers will out themselves, he said. 

Young highlighted a recent significant development in the whistleblower program wherein the CFTC clarified through a press release that a compliance officer could be eligible for a whistleblower award under specific conditions. To qualify, the compliance officer must first report a complaint to someone within the company and then wait for 120 days before approaching the CFTC. Young pointed out that a recent case awarded a whistleblower award to such a compliance officer, illustrating the practical application of this update.

Young advises potential whistleblowers in the markets, including precious metals, foreign exchange, agriculture, energy, and digital assets, to consider the whistleblower program if they observe any form of market manipulation, insider trading, front running fraud, or regulatory violations such as trading off exchange, failure to supervise, or unauthorized phone conversations. He emphasizes that these are the types of activities that often result in whistleblower awards.

The Financial Industry Regulatory Authority ("FINRA") today approved Prometheum Capital LLC to operate as a Special Purpose Broker-Dealer (“SPBD”) to custody digital asset securities

Prometheum founder Aaron Kaplan and Thomas Sullivan, a managing director at Societe Generale, recently discussed blockchain, crypto regulation, and special purpose broker dealers in a podcast interview with John Lothian of John Lothian News. They explored how blockchain technology is poised to enhance market efficiency by streamlining operations. Kaplan highlighted the inefficiencies in traditional Wall Street systems and stressed the advantages of instantaneous settlement and improved record-keeping that blockchain can offer.

Sullivan further emphasized the need for continuity and data connection in current market infrastructure, highlighting the potential for distributed ledger technology to bridge these gaps. He cited an example of a green-backed bond issued on the blockchain with performance metrics related to environmental, social, and governance (ESG) factors.

The discussion turned to the regulatory landscape, with Kaplan mentioning the SEC's view that most digital assets, excluding Bitcoin, are considered securities under the Securities Act of 1933. The interview shed light on the significance of a federally licensed ecosystem for digital assets, emphasizing compliance and regulatory adherence as key factors in institutional adoption.

Prometheum's role as a special purpose broker dealer was explained as essential for handling clearance, settlement, and custody of digital assets. This federal-level licensing enables the transition away from state-licensed custodians and virtual currency exchanges. It also ensures investor protection and provides institutions with confidence to participate in the digital asset space. Kaplan and Sullivan's insights suggested a promising 2024 for the digital asset industry, anticipating increased regulatory compliance and institutional involvement.

Kaplan emphasized that historically, many entities prioritized their own revenue interests over customer protection and market fairness. The introduction of special purpose broker dealers is expected to address these issues by providing a regulated framework that ensures investor protection and responsible participation in the digital asset space.

Sullivan added that a responsible way for the public to engage with digital assets is crucial, and compliance at the federal level will play a vital role in achieving this. The discussion highlighted the importance of federal regulatory clarity and oversight for the digital asset industry.

Kaplan also addressed the process of obtaining a special purpose broker dealer license, explaining that Prometheum's success in securing the license was due to their belief in federal securities laws as the best regulatory framework for digital assets. They invested significant time and effort in building custom technology and meeting regulatory parameters.

Regarding the launch of Prometheum, they mentioned that custody services are expected to be available in the first quarter of 2024, with trading services for institutional and retail clients to follow. The founders expressed optimism about the development of a national market system for digital assets, similar to traditional equities markets.

Sullivan, representing Societe Generale, highlighted the gap in the market for regulated entities to engage in the issuance and trading of securities. The presence of Prometheum as a federally regulated player was seen as a positive development, providing opportunities for various types of financial instruments.

The conversation also touched on Prometheum's Alternative Trading System (ATS), which will facilitate public trading of digital assets. Unlike private share markets, the ATS aims to offer real liquidity, depth of order book, and a comprehensive ecosystem for trading, settlement, and custody of digital assets.

Kaplan clarified that Prometheum does not trade against its customers. Instead, the ATS offers a platform for both institutional and retail trading. Sullivan highlighted the importance of having venues like Prometheum for trading various products and the need for greater market availability.

The interview included a discussion of the clearing and settlement process, with Kaplan explaining that Prometheum aims to create an entire ecosystem for the issuance, trading, clearance, settlement, and custody of digital assets under federal securities laws. The founders expressed confidence that this infrastructure would empower the digital asset industry in 2024 and beyond.

Prometheum's focus on being a regulated infrastructure provider and their commitment to avoiding conflicts of interest were underscored. Additionally, they clarified that Prometheum has no plans to issue its own digital currency, emphasizing their dedication to providing a secure and compliant trading environment.

The conversation also touched on the regulatory/political landscape for digital assets. Kaplan mentioned that Prometheum had received attention from Washington due to its approval as a special purpose broker dealer. 

Regarding potential federal legislation on digital assets, Kaplan and Sullivan expressed uncertainty about comprehensive regulations but highlighted the importance of addressing issues related to stablecoins and other digital assets. They discussed the role of different regulatory agencies, with a focus on the SEC's capabilities in handling retail-type products.

The conversation also addressed cybersecurity concerns in the digital asset space. Sullivan emphasized the importance of thorough third-party risk management and the unique risks associated with blockchain technology, such as network forks and airdrops. Kaplan discussed the importance of following regulations and standards to enhance cybersecurity, noting that regulation helps establish a framework for secure operations.

The podcast concluded with optimism about the future of digital assets in 2024, with expectations of increased regulation at the federal level, innovation in traditional securities migrating to blockchain, and the tokenization of real-world assets. Both participants expressed their excitement for the evolving landscape of digital assets.

The discussion kicked off with a focus on the origins and development of the Cboe S&P 500 Dispersion Index. Hiatt revealed that the concept stemmed from the need to measure and understand dispersion within the S&P 500. Dispersion, the extent to which individual stocks within an index deviate from the overall index performance, is a critical aspect of risk management and market analysis. The index was developed through a collaborative effort, with Cboe Labs providing innovation and technology infrastructure, and S&P Dow Jones Indices contributing their extensive experience in index construction.

Edwards elaborated on the collaboration between Cboe and S&P DJI, emphasizing the importance of leveraging each organization's strengths. Cboe Labs provided the innovative environment, while S&P Dow Jones Indices brought their expertise in index design and calculation to the table. This partnership was pivotal in ensuring the index meets industry standards and delivers on its objectives.

As the launch date approached, the conversation shifted to the educational efforts and market ramp-up strategies. Hiatt stressed the significance of educating market participants about the index's applications and benefits. To facilitate adoption, the team will offer educational resources, webinars, and documentation. The ramp-up is expected to be gradual as market participants become more familiar with the index and its potential uses.

In a lighter note to conclude the interview, Edwards said indexes get their nicknames from the markets, not from companies offering the products, noting that the "Fear Index" for VIX came from the market. However, he said he hoped the S&P 500 Dispersion Index would be referred to as the "Opportunity Index." 

In Part Two of an exclusive video interview with John Lothian News, John Hiatt, director of research at Cboe, and Tim Edwards, managing director at S&P Dow Jones Indices, provided further insights into the forthcoming launch of the Cboe S&P 500 Dispersion Index.  This groundbreaking index, scheduled to make its debut today, September 27, 2023, was jointly developed by Cboe Labs and S&P DJI and promises to give new ways for traders to analyze markets and manage risk.

One of the key questions addressed during the interview was how traders will utilize the Cboe S&P 500 Dispersion Index once it becomes available for trading, and how it relates to the well-known VIX (Volatility Index). Hiatt explained that the dispersion index is designed to measure the extent to which individual stocks within the S&P 500 deviate from the overall index performance. Traders can use this data to gauge market risk and make informed decisions. While VIX focuses on market volatility, the dispersion index offers a complementary perspective by analyzing stock-specific dispersion.

The interview also delved into opportunities beyond the traditional 30-day horizon. Edwards highlighted that the index's flexibility allows traders to explore longer-term structures, offering a broader view of market dynamics and risk assessment.

With the growing popularity of zero-day options expiration, the interview questioned how these options fit into the dispersion index. Hiatt explained that the index's utility extends to various trading strategies, including those involving options with shorter expirations. 

The discussion then turned to the possibility of creating sub-indexes derived from the dispersion index. Hiatt spoke about another index the Cboe Innovation Lab developed, an implied correlation index.  

Finally, the interview concluded with a question about the probability of success for this innovative product. While both experts expressed optimism, they emphasized that success would depend on market adoption and the extent to which traders recognize the value of the dispersion index in their decision-making processes.

Term CORRA, which stands for Canadian Overnight Repo Rate Average, has garnered significant attention in the financial industry due to its potential to reshape the landscape of Canadian interest rate benchmarks.

Tran began by sharing insights into the implications of the launch of Term CORRA for TMX/MX, the Toronto-based stock exchange operator. She highlighted the importance of this benchmark in enhancing transparency and accuracy in the Canadian financial markets. Term CORRA is set to provide market participants with a reliable tool for risk management and pricing across various financial products.

One key aspect that Tran emphasized during the interview was the extension of trading hours for the MX, which plays a pivotal role in the success of products like Term CORRA. The extended trading hours not only enhance the liquidity of CORRA but also align with international trading schedules, facilitating global investor engagement.

The conversation also touched on the Canadian experience, drawing parallels to the United States' transition from LIBOR (London Interbank Offered Rate) to alternative reference rates. As Canada moves closer to the expiration of CDOR (Canadian Dollar Offered Rate), a comparable benchmark transition is underway. Tran shared her expectations for the Canadian market, emphasizing the gradual shift toward alternative reference rates like CORRA.

Regulatory alignment and cooperation have been critical in this transition process. Tran highlighted the collective effort of all relevant stakeholders, including regulatory authorities, in ensuring a smooth transition to Term CORRA. This cooperation is vital to maintaining the integrity and stability of the financial markets.

Lastly, Tran provided a glimpse into the nature of Term CORRA's data. This benchmark derives from transactions in the Canadian money market and offers term rates for different tenors, enhancing its applicability across financial instruments. Term CORRA's robust and reliable data has the potential to become a cornerstone of the Canadian financial landscape.

As the president of the Joyce Foundation in Chicago, she helped Sandor start the Chicago Climate Exchange and served on the CCX board and as president of CCX - International.   

DiPerna joined the Cousteau Society after being gifted a membership and answered an advertisement in the society newsletter for a writing job helping Cousteau with a book that he had a contract to write, The Cousteau Almanac. 

DiPerna was offered the one job writing available and she ended up working for Cousteau for the next 20 years. That led to her appearing at the Rio Summit, connecting with Sandor and ultimately writing her latest book, "Pricing the Priceless: The Financial Transformation to Value the Planet, Solve the Climate Crisis, and Protect Our Most Precious Assets."

Barbuto's efforts to start building the new benchmark started 10 to 15 years ago as issues with supply gluts at Cushing, OK encouraged a solution to move oil from the middle of the country to the Gulf Coast. 

In 2011, the Brent-WTI spread went negative for the first time, after running at about a two-dollar premium for the West Texas Intermediate the North Sea Brent crude over, Barbuto said. WTI would go as much at $25 below Brent in 2011 because of supply gluts in Cushing as more Canadian crude oil made its way to Cushing and more pipelines of crude were coming up to Cushing but not having an outlet, Barbuto said.

The infrastructure of Cushing, the so-called pipeline crossroads of the world, was built to bring imported oil in, with crude coming in from the Gulf Coast. As production in the U.S. grew, the glut in Cushing grew, he said. Other oil, like Canadian crude, would also flow to Cushing, he said.

So Barbuto started discussions five years ago with Magellan Midstream Partners about a Gulf Coast benchmark with access to the water, with more direct pipelines to the refining terminals in Houston. He also wanted it to be connected to larger storage facilities. 

In 2015, the U.S. lifted a ban it had in place on exporting domestic crude to overseas customers, which also played a role in this.

Magellan and ICE developed a Permian WTI contract and ICE listed it with the symbol HOU. However, CME Group listed a competing futures contract with Enterprise Partners, which split the liquidity and interest. Barbuto said it became clear there was not enough liquidity to support two benchmarks in the same area, so both contracts floundered and never fully developed. 

When the demand shock occurred during the COVID-19 pandemic, and WTI spot prices traded negative due to a glut of oil and a lack of available storage at Cushing, that was a catalyst for renewing the effort to build a benchmark for the Gulf Coast, he said.

Barbuto said he was watching CNBC during the fallout from the negative prices and saw Continental Resources' Harold Hamm talk about how negative prices should never happen. Subsequently, Barbuto was able to connect with Hamm and discuss ways to move the benchmark project forward. Hamm was able to connect Enterprise and Magellan, and with ICE they all were able to create the new contract, Midland WTI Gulf Coast or Midland WTI for short. The symbol for the contract is the same, HOU.

The biggest advantage of the new contract is access to the water, Barbuto said. Refiners can pump oil to a sea terminal rather than leave it in tanks in Cushing, he said. Enterprise and Magellan combined have 14 docks, Barbuto said. The HOU contract has a tight Midland WTI specification, as opposed to Cushing, where there is a DSW specification, or domestic sweet blend. 

There is deliverability at the Magellan East Houston terminal and the Enterprise Echo terminal. Once oil is piped to Houston, it can be pumped from one facility to the other at no cost until the end of 2023, creating one big pool of fungible Midland WTI exchange guaranteed specification. 

Barbuto said there are about five million barrels of Midland WTI HOU oil delivered monthly.

The Brent contract has been evolving for years as production from North Sea fields have continued to fall. ICE and its index partner Platts were looking for a light sweet crude that was similar to other blends deliverable to the contract. 

Once the HOU contract was added to the Brent deliverable mix, open interest in Brent has climbed and the number of market participants has increased, Barbuto said. 

Barbuto said that HOU is unlikely ever to go negative, mostly because there is almost five times the amount of storage in the Gulf Coast compared to Cushing. Also, the access to the water is an escape valve for supply on the Gulf. Barbuto noted that when WTI went negative, Brent stayed positive.

Some hedge funds are starting to participate in HOU, and the number of participants is about 80 now, he said. Customers who price oil on a differential basis to Cushing are starting to do so versus HOU, which is bringing new business. Open interest continues to climb as more swap positions are converted, he said. 

Barbuto said he did not think Cushing would go away as a pricing center, even as HOU becomes the new benchmark. There are still too many deals connected to Cushing WTI prices. 

There is room for more terminal sites to participate in the contract, Barbuto said. However, he said there is already an exchange for physical trade using the HOU benchmark, so including other terminals in the Midland WTI benchmark is not necessary.

Barbuto said open interest is about 33,000 contracts, and the first three or four months have about 70 percent of the open interest. 

He said one of the biggest advantages of the developing benchmark for clients is having their open contracts in physical delivery futures and over-the-counter swaps contracts in the same clearinghouse. This gives clients margin savings of 90 to 95 percent or so, depending on the day and level of volatility. ICE has 700 futurized swap contracts that clear in the same clearinghouse as the HOU futures. This represents billions of dollars of arb risk to be saved, Barbuto said. 

JLN asked about the origin story of the Eris products and when they began to trade on the CME.

We asked about the recent events that have driven the growth of the products. We asked about the impact of the regional banking crisis on the products.

Riddle and Mirza also discussed who the users of the products are and what plans Eris Innovations has to extend the product mix in the next three to five years.

We asked him what lessons were learned from the BAKKT experience and what was ICE trying to accomplish with the exchange and clearing offering and what didn't work?

Edmonds said the lesson learned was that the market did not want a physically delivered bitcoin contract.

We asked him why the crypto market doesn't seem to want a physically traded market.

Edmonds was asked what were the lasting lessons from having FTX try to change the rules of the regulated markets.

We also asked him what advice he would give to Congress about regulating the crypto market. 

He also addressed the question of whether the SEC's regulation by enforcement and Chairman Gensler's comments about the industry being full of hucksters and fraud was part of a campaign to get Congress to act.

John Lothian News interviewed Weild for a podcast about the impact of the JOBS Act and what it accomplished, what challenges it left unaddressed and what we need to do to meet those challenges.

Wield speaks passionately about the impact of the JOBS Act, noting that it played a role in the development of Moderna's COVID vaccine, which helped save 2 million lives during the pandemic. The JOBS Act helped triple the number of life science IPOs, Weild said. 

Weild said the JOBS Act allowed poor people to solicit money from people who did not have much money, something that was restricted before the legislation was passed. 

Weild, who is a former Nasdaq vice chairman, and some former associates wrote some whitepapers that outlined problems in our markets, namely the lack of small company IPOs and the depletion of the number of operating companies listed on the U.S. stock exchanges. The number of companies had fallen from 9000 to 5000, and no one knew this, Weild said, until he and his associates pointed it out. 

This problem spurred a bipartisan response in Congress to pass the JOBS Act, Weild said. Another effort to create a new type of stock exchange was sidetracked when the government shut down over the fight over "the wall" during the Trump administration. Weild is hopeful this can still be accomplished.

He spoke about the importance of the JOBS Act to the U.S. economy in creating jobs, noting that most jobs are created by small companies. He explained the difference between big companies and small companies, and how there is a need for different stock markets to meet each of their needs. 

Weild also spoke about the importance of manufacturing in the U.S. and its role in supporting national defense and how this all plays into the JOBS Act and efforts like it to make small company equity raising more efficient. 

Babcock began by reviewing with JLN the two-tier structure of the Canadian markets and then spoke about four key initiatives of the Venture Forward plans.

TSX embarked on a survey of its community of stakeholders, including online surveys. After digesting and discerning the data, TSX conducted over 100 one-on-one interviews and small group conversations to probe into the themes they discovered from the online surveys, Babcock said. TSX was looking for ways to address both the challenges that exist in the market and the opportunities, he said. 

What TSX heard was that the "market was not broken," but there were opportunities for TSX to do more for its issuers and market users. The biggest issue they heard about was speed, particularly around the "go public" process. 

Another theme was transparency and a third was increasing the visibility of issuers to investors, Babcock said. Lastly, how does TSX bring more companies to their ecosystem? All of these themes brought forth the Venture Forward Initiatives report released in June, with 10 commitments. He addressed the four key action steps in the interview. 

Venture Forward includes "introducing an innovative TSXV Passport Listing Process to significantly accelerate the listing and capital-raising timeline for qualified TSXV new listing applicants" and "accelerating the exchange’s ongoing digital transformation by providing issuers with increased access to digital products, services, and resources." 

Babcock also spoke about "launching TSXV Sandbox, an initiative to encourage innovation and provide support for listing unique businesses or transaction structures" and "evaluating the need and appetite for a new, highly differentiated exchange to complement TSXV, with the goal of providing new categories of early-stage companies, alternative asset classes, and investors with access to public markets."

His options software won a tender competition from Euronext-Liffe for a white label version, which was a big move for the company. Even bigger was when NYSE bought out Euronext, making NYSE Euronext his software company's client. Cohen's software and options work is used by many well-known traders. He spoke with us about how traders use it and why some information is better than other information. 

He has also worked with Nasdaq and ISE. 

Cohen is also working to establish his own hedge fund operation to trade using the OVI. 

Listen to the podcast interview with Guy Cohen by JLN.

I did not know Hobert, but knew of him and WH Trading, so I figured he was my in to learn more about M3, as the organization is called. After connecting with Hobert, I asked if he would do an interview; he suggested a joint interview with him and Jamal Cole, the founder of M3.

M3 is a Chicago success story for social and racial justice that was spawned from the drive of its founder, the support of Will Hobert and WH Trading and being in the right place at the right time doing the right things. M3 is meeting important needs in Chicago and is creating a model that may expand to other cities around the world. 

Cole's success with M3 led to his being honored by the Chicago Reader with the 2022 Activist of the Year Award. DePaul University bestowed upon him a 2023 honorary doctorate degree in humanities, and he was given an honorary doctorate degree in humanities and philanthropy from Adler University. He was named one of the 25 most powerful Chicagoans by Crain’s Magazine.

Hobert met Cole when WH Trading was moving buildings and the firm needed some strong bodies to move some boxes. Hobert's systems administration team hired Cole and a couple of other guys to help with the move, but Cole's work ethic and effort stood out so much that Hobert's team wanted to hire Cole full-time. Cole showed up early, worked hard and stayed late. 

When Hobert asked what Cole knew about computers and system administration, the answer was nothing. But that can be taught, and Cole was sent to classes to acquire the knowledge, skills and certifications to become a systems administrator for WH Trading. Cole enjoyed tremendous support from Hobert and the WH team to accomplish these goals, Cole said. 

One day Hobert asked Cole to accompany him down to the Cook County Jail as part of the UCAN volunteer program helping youth behind bars. Before joining WH Trading, Cole had been a community activist and sold books he had written and self published. This experience of working with the youth at the jail in the UCAN program touched Cole and he wanted to show them there was a world beyond their "hood," as they called it. 

Cole started by taking some youth downtown to Giardanos for lunch and a tour of WH Trading's offices. Cole wanted to do this on a bigger scale for more youth and that led him to leave WH Trading and begin the process of forming M3. 

Cole entered an entrepreneurial contest and won a $50,000 prize that gave a jump start to M3. All along the way, Hobert offered his assistance, serving on the M3 board of directors and offering financial support as well. But more importantly, Hobert offered Cole mentoring every step of the way, from the time M3 was a two man operation to the 20-person operation it is today.

These two men fed off of each other's skills, drive, experiences and desire to help other people. This is my interview with Will Hobert and Jamal Cole of WH Trading and My Hood, My Block, My City about the founding of the organization, what it does, and the power of these two men's relationship.

John Lothian News interviewed the founders of Smart Confirm and this story is based on the podcast we recorded. The podcast is being published separately.

The Smart Confirm software brings greater speed and efficiency to pre and post-trade processing of complex open outcry trades executed on the trading floor. Before the pandemic closed the markets, Smart Confirm was only used by one firm at the CME Group. That firm was MarkIV, the brokerage firm that developed the software as a premium service for its trading floor brokerage execution services business, but then pivoted after the floors reopened after the pandemic to offer the service to any brokerage group that wanted to use it.

MarkIV floor broker Mark LeeMaster said half the SOFR option pit broker groups, some 10 broker groups, are now using Smart Confirm. Brokers using Smart Confirm have seen their businesses grow 300 to 400%, LeeMaster said. The community as a whole is seeing Smart Confirm as a benefit, he said. There are 25 separate CME clearing firms that are now connected to Smart Confirm. 

LeeMaster hired Mike Ashcraft to build a system to improve the efficiency of the trading floor experience after floor brokers assumed new responsibilities to report fills by email and provide end of the month reports. The repetitive nature of having to retype the same information over again and again prompted LeeMaster to seek Ashcraft's help to find a way to reduce this redundant and inefficient activity. 

Ashcraft built a prototype tool in Excel that allowed the trade information to only have to be entered once. This tool addressed three issues: key punch, manual punch and confirmations, the biggest inefficiencies LeeMaster was dealing with. 

However, the prototype was still printing trading cards to be key punched by FCMs' back-offices. LeeMaster said the biggest breakthrough came when Smart Confirm was able to submit trading confirmation data directly to the exchange, eliminating the need for the FCM keypunch. The data flowed directly to the FCMs to be allocated into their middle and back office software. 

The Excel product was limited, however, and data flowed only one way, so LeeMaster and Ashcraft had Smart Confirm take the difficult step of becoming an outside vendor to the CME Group. 

The first market problem Smart Confirm sought to solve was one that small S&P 500 pit traders were facing when trading the end of the month contract roll using the open outcry trading pit versus the Globex market. The Globex trades would hit their trading accounts immediately, but the open outcry trades would take hours to be processed. This would leave their accounts seemingly one-sided, long or short, as opposed to spread. Without the proper capital to hold these one-sided positions, they would have to sit out trading until their open outcry trades were processed and their accounts were properly margined again. 

These traders needed a solution to clear their open outcry trades faster and Smart Confirm offered them a solution. Clients saw benefits of Smart Confirm from the start, LeeMaster said.

Next, Smart Confirm addressed Eurodollar options, and MarkIV funded the development of the product by the growth of its business, which grew 400% while using the tool, which was now cloud-based. MarkIV offered Smart Confirm to clients as a premium service starting in 2015 and could execute spreads on their electronic book with 50 to 60 legs to the trades.

LeeMaster told me the story of a client who gave him and another broker an order with sixty-two legs to the trade just five minutes before the close of trading at 2:00 pm. Using Smart Confirm, LeeMaster and his team were able to execute and report the trade within 10 minutes, while the other broker group, without the aid of Smart Confirm, worked until 7 p.m to report and process the trade for the client. 

LeeMaster said the Eurodollar option pit at the CME, now the SOFR option pit, has the best brokers in Chicago in it, but that Smart Confirm set MarkIV apart. LeeMaster said that when the CME Group set a new volume record in March in SOFR products, MarkIV traded a record 10 million contracts during the month, with a team of nine and one floater. The previous record was seven million contracts in a month, executed by a much larger team.

Smart Confirm has processed over 600 million contracts so far and in March did 24.3 million contracts across all the brokers who use the product. 

Of course, there are many reasons why SOFR options are growing in popularity and have grown to an average daily volume in futures and options of 5.6 million contracts, which is about 30% above the highest annual ADV ever recorded for Eurodollar futures and options, the CME says. Open interest has reached 56 million contracts. 

The CME says, "The adoption of SOFR represents a strong success story for the industry and global market participants."

• This year marks the 35th anniversary of the annual Russell Reconstitution. What exactly is it and how does it work? 
• Why is the annual Russell US Indexes rebalancing such an important event for the markets and investors? How many assets are benchmarked to products tracking the Russell US Indexes?  
• What are some of the main highlights and notable changes that will take effect at the conclusion of this year’s Reconstitution after US market close on June 23rd?
• What does this year’s Reconstitution signify for what lies ahead for this year’s equity markets? How might this be used as an economic indicator? 
• How can market participants use derivatives, specifically E-mini Russell 2000 futures and options, to hedge around the annual rebalancing?
• How can investors take advantage of the small cap market to enhance portfolio performance and manage market risk?
• Russell Reconstitution concludes with traditionally one of the highest trading volume days of the year on major US equity exchanges. How much trading typically occurs?
• Where can people go for more information ahead of the June 23rd conclusion? The answer is the Russell Reconstitution landing page: www.FTSERussell.com/Resources/Russell-Reconstitution

John Lothian News interviewed Richard Baker at the ISDA 37th Annual Meeting in Chicago. JLN spoke to the former CEO of ClearTrade Exchange about his experience creating, running and selling the exchange in this podcast interview. We also talked to him about his new enterprise Tokenovate, which uses blockchain and the ISDA agreements to build smart contracts to digitize and automate trading. 

Baker caught the wave of over the counter trading moving to cleared markets with ClearTrade before selling the exchange to EEX in 2016. 

After that, Baker, who started in the telecom business, started to look at blockchain technology, the original bitcoin blockchain. 

Baker likes deep dives. First it was the deep dive into the Dodd-Frank Act. Then it was a deep dive into blockchain. 

Combining his experience in derivatives markets and blockchain, as well as his time as an engineer and having built a database business, he launched a company called Tokenovate. It is a software platform business. Tokenovate works to create smart contracts to activate the digital life cycle of an ISDA agreement, Baker said. Tokenovate creates templates that execute the whole pre-trade to post-trade lifecycle as digital agreements that now report to the blockchain, Baker said. 

We asked him about the development of Tokenovate. The company is just over one year old and raised some initial money from a family office. Baker said Tokenovate is about 60% through building its platform. They have a lead customer, a London technology firm. Tokenovate now has a minimally viable product and will do their first trade this month in the voluntary carbon credits market. 

Tokenovate currently has a team of 12 people based in the U.K., Baker said. 

JLN asked Baker about how big a market there is for Tokenovate, which Baker said can work with any asset class. ISDA prioritized interest rates and so has Tokenovate, though the carbon credit market is a pressing concern, Baker said.

Baker said there are a lot of data silos across the trading world that are highly inefficient. Blockchain can help replace those silos. Digitization and automation are key to improving this efficiency, he said. 

Baker spoke about this experience building an exchange and the importance of intermediaries in the industry. He said you need to be careful about who you displace. 

We asked him about what he says to unbelievers in blockchain. Baker said he is not a believer in crypto journey, that it has been "highly distortive." He said he "does not think the planet needs 22,000 currencies, or tokens." He called cryptos, meme or product building - entertaining, but serving very little purpose in developing market confidence and robustness.  He said cryptos have distorted the real use case of the underlying technology. 

To tell the blockchain story he said he starts at the beginning. He equated the development of blockchain to the early development of the internet and the TP/ICP protocol and all the applications that opened up. 

We asked him about what blockchain he found to be successful. He mentioned shipping and gaming. He also said a blockchain needs to be energy efficient and scalable. 

The podcast discusses the first customers, whom QB calls "legends." The first trade using QB was in Eurodollars, a 45 lot, which earned the firm $22.50. In the interview, Hauff and Almgren talk about the first algos they offered and their subsequent offerings. 

The podcast also discusses the evolution of the CEO role, the addition of Tom Ascher as executive chairman, what synergies new majority owner Deutsche Boerse brings to the company, and what the future holds for QB. Lastly, Hauff and Almgren were asked about the best swag the company has ever given away. 

During my recent trip to Florida, I met up with Joe Adamczyk, the owner of Exchange Analytics, to talk about the firm, its history and future. 

Adamczyk relocated to Sarasota, Florida to get away from the harsh winters of Chicago. I met up with him in a Panera on the south side of Sarasota. I asked him just six questions and let him talk. He told me about the history of the firm, why it was started and how he got involved.

He spoke about the future of training and what Larry Israel, from whom he bought Exchange Analytics, is doing these days.

Rajarathinam said TMX was seeking to expand into more information businesses and cited the acquisition of Wall Street Horizon as an example. Wall Street Horizon is a provider of global market-moving action and global corporate event data. 

He said there is more client demand for ETF services and TMX desires to create new exciting products for clients in partnership with VettaFI, not only in Canada, but also globally.

Rajarathinam said the VettaFi investment leverages the data sets and sales capabilities of VettaFi and uses its deep industry expertise in industry calculation.

TMX wants to expand its distribution capability and provide more information services to a global client base, he said. TMX invested $175 million US in VettaFi for a 21 percent interest. The exchange group gets two seats on the VettaFi board and will wait and see whether it makes sense to acquire the firm outright, Rajarathinam said.

This is not the only index company TMX deals with, Rajarathinam said, noting the exchange group's deal with S&P. However, this deal gives TMX the ability to develop specific products, including thematic indexes, custom indexes and, perhaps, a global mining index. 

This deal is deeply integrated into the TMX Datalinx business, and there is a heavy focus on growth and becoming more global and more of an information company, he said.