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CME Group Inc.
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(Bloomberg) -- Charles Schwab Corp.’s reported plan to buy TD Ameritrade Holding Corp. for $26 billion is proving a boon for the fortunes anchored by two of America’s biggest brokerages.TD Ameritrade founder Joe Ricketts is set to add $400 million to his $2.4 billion net worth after his firm’s shares rose 21% in Thursday. Charles Schwab’s $8.8 billion fortune will increase by about $500 million based on his company’s gains. The deal is worse news for Thomas Peterffy, chairman of rival Interactive Brokers Group Inc., whose net worth was down about $100 million at 11:50 a.m. in New York.The transaction could be announced as early as Thursday, according to a person familiar with the matter. It would create a firm with roughly $5 trillion in combined assets, consolidating an industry under pressure from a price war that escalated when Schwab last month announced plans to eliminate commissions for U.S. stocks, exchange traded funds and options.The combination may pose a threat to fund managers such as Vanguard Group Inc. and BlackRock Inc., according to Bill Capuzzi, chief executive officer of Apex Clearing, a custodian that focuses on fintech firms.“It signals Schwab is going to continue to lean really hard into the advisory side,” he said. “A gigantic percentage of the advisory world will be leveraging one firm for passive custody and clearing services.”For Schwab, the net worth gain may be particularly sweet. In an October interview, he criticized wealth taxes like those proposed by Democratic presidential candidates Bernie Sanders and Elizabeth Warren as a “negative reward for success.”Other winners from the potential acquisition include Toronto-Dominion Bank, which owns 43% of TD Ameritrade, and Canadian insurer Sun Life Financial Inc. with a 3.9% position as of Sept. 30. Generation Investment Management LLP, the firm co-founded by former U.S. Vice President Al Gore, owned a 2% stake in Schwab at the end of the third quarter.(Updates net worth totals in second paragraph, adds Apex CEO’s comment in fourth.)To contact the reporter on this story: Tom Metcalf in London at email@example.comTo contact the editors responsible for this story: Pierre Paulden at firstname.lastname@example.org, ;Michael J. Moore at email@example.com, Steven CrabillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- You have to hand it to Charles Schwab Corp. As the market leader in the online brokerage industry, the company seems to have realized the inevitable endgame of zero fees and consolidation and decided that it really ought to get on with it.Schwab, just seven weeks after rocking Wall Street by announcing plans to eliminate commissions for U.S. stocks, exchange-traded funds and options, is now set to buy rival TD Ameritrade Holding Corp. for $26 billion, according to reports Thursday. The combined company would have an impressive $5 trillion of assets and be better equipped to step forward into this new, no-fee world than competitors such as E*Trade Financial Corp. and Interactive Brokers Group Inc. The concept of a first-mover advantage usually applies to marketing, but it’s a relevant way to think about Schwab’s strategy, too. By staying ahead of the competition, Schwab is reshaping the discount brokerage space on its terms rather than waiting to react to any changes. Bloomberg News’s Annie Massa smartly broke down the various brokerage companies’ commissions as a percentage of net revenue in 2018, which makes it obvious why Schwab chose to take the plunge toward zero fees: It stands to reason that Schwab’s calculus went something like this:Yes, our stock price will take a big hit when we announce that we’re eliminating commissions (it did, dropping to the lowest since 2016 last month). But the short-term pain will be worth it because our rivals will have no choice but to follow suit (as they did within days). Because they depend on fees much more than we do, investors should sell our competitors’ shares to a greater extent (this happened, too). That will put us in a position to more cheaply execute the next phase of our plan, which is to grow. (It’s possible Schwab already had this deal in mind after TD Ameritrade announced in July that Chief Executive Officer Tim Hockey would leave by the end of February 2020.)Investors expressed approval of Schwab’s decision, lifting its shares as much as 13.9% on Thursday to the highest in more than a year. It’s not as if purchasing TD Ameritrade will solve all that ails the company and the online brokerage industry. But, like the consolidation in the mutual-fund space, it ensures survival. And in an era of rapid technological change on Wall Street, living to see another day and having the size and scope to keep pace with advancements is critically important. What’s next for Schwab? My Bloomberg Opinion colleague Nir Kaissar posited last month that the only option seems to be a more urgent push into financial advisory services. That will most likely be more of a grind for the company compared with the big splashes of the past two months. Schwab is competing with other market stalwarts like Fidelity Investments and Vanguard Group Inc., which are more difficult to push around than its discount broker rivals.Still, even if this is the last big move for now from Schwab, it has been a whirlwind couple of months. In two sweeping moves, the company has radically reshaped an industry and positioned itself to remain the market leader for the foreseeable future.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Chicago trading legend Don Wilson suspects the scandal-tainted Libor interest-rate benchmark is going to stick around past its 2021 expiration date, defying the expectations of the Federal Reserve and other regulators.In two years, banks will no longer be required to supply data used to calculate the London Interbank Offered Rate. But that doesn’t mean they’ll stop, Wilson, the chief executive officer and founder of futures-and-options giant DRW Holdings LLC, said in an interview Monday at his office.Assuming Wilson’s right and banks do keep feeding Libor, that means there’s a future, too, for eurodollars. Those contracts at CME Group Inc.’s exchange are futures on three-month U.S. dollar Libor, and they can’t exist in their current form without it. They’re also the most-traded rates contracts in the world and a staple of Wilson’s firm from the start, making this more than just an ivory-tower discussion about rates benchmarks.Traders are gradually embracing products based on the Federal Reserve Bank of New York’s Libor replacement, the Secured Overnight Financing Rate. But while SOFR has its place, Libor administrator Intercontinental Exchange Inc. has addressed the benchmark’s problems, and doing away with it would be a mistake, Wilson said. His view is informed in part by SOFR’s volatility during September’s upheaval in U.S. funding markets.“SOFR is a useful risk-management tool, but SOFR is not a good replacement for Libor,” Wilson said. “Why do we want to start this kind of forced march towards the death of Libor when there are clearly some problems?”He’s not the only one who thinks Libor will live on. “Whether Libor is going to be dead or not in a couple of years is yet to be seen,” CME CEO Terry Duffy said in an October interview. Accenture Plc released a survey in September revealing almost a quarter of global financial firms and corporate users expect Libor’s phase-out to be delayed.Few voices are more prominent than Wilson’s on the subject of rates derivatives and their benchmarks. DRW is one of the biggest high-frequency traders in the world, and it’s a large player in eurodollar contracts, a primary way investors around the globe bet on or hedge against moves in interest rates.The 51-year-old’s roots with those products are deep. He started working in the Chicago Mercantile Exchange’s eurodollar trading pits in 1989. From there, he grew DRW into a company with more than 1,000 employees that’s not only a huge market-maker in futures, options and other conventional financial products, but also a major presence in cryptocurrencies as well as a real-estate and venture-capital investor.SOFR, “a wonderful tool if you’re hedging repo exposure,” can’t easily fill Libor’s shoes, Wilson said. As a secured rate -- because the loans it references are collateralized -- it lacks the credit component of Libor, which involves unsecured transactions. There’s no term structure for SOFR, or maturities beyond overnight. And it’s “affected by exogenous factors in a big way,” Wilson said. That vulnerability was exposed by the mid-September chaos in the U.S. market for repurchase agreements.“We saw in September the repo market basically break, resulting in SOFR trading at a 300-basis-point premium for one night,” Wilson said. Borrowers who saw their interest expense spike because of such a jump would have good reason to be annoyed, he argued. “I just don’t think that that’s a great characteristic for our new benchmark rate to have.”U.S. regulators are clear on where they stand. They want Libor -- which banks were caught manipulating -- gone and for SOFR to take its place. New York Fed President John Williams is fond of counting down to the end of Libor. Speaking on Tuesday, he said the clock stood at roughly 775 days and “only goes one direction.”Officials globally are working on similar transitions, and while details are still being worked out, “the one thing we do know is there’s some point in the future when Libor -- which doesn’t meet standards of a strong, robust reference rate -- won’t be around any more,” Williams said.CME last week proposed plans for what it will do in the event that Libor becomes unavailable to settle eurodollar futures. Basically, it will convert them into SOFR futures, which began trading in May 2018.“If I were running CME, I don’t think I would do anything different,” Wilson said. Volume and open interest for these SOFR products have mounted quickly, but remain dwarfed by eurodollar futures.Williams dismissed criticism of SOFR in his appearance Tuesday. He said that while any transactions-based rate is vulnerable to spikes, SOFR on a three-month average basis “hasn’t been volatile at all.” The New York Fed’s plan to produce SOFR averages and an index by mid-2020 should address concerns, he said.There’s a sense in which killing Libor now seems like a waste, Wilson said. ICE Benchmark Administration, which took over running the rate in 2014, “has put additional things in place to make the Libor reporting more robust,” he said. “Is the benefit of killing Libor -- i.e. moving away from something that is a little bit less tangible to something else -- really worth the risk?”Either way, DRW is already preparing for December 2021. It’s trading CME’s SOFR contracts.To contact the reporters on this story: Elizabeth Stanton in New York at firstname.lastname@example.org;Nick Baker in Chicago at email@example.comTo contact the editors responsible for this story: Benjamin Purvis at firstname.lastname@example.org, Mark Tannenbaum, Dave LiedtkaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investing.com – Volatility was back forcefully in oil Wednesday with the market jumping nearly 3% to recoup almost all it lost in the previous session.
FT subscribers can click here to receive Moral Money every Wednesday by email. If you want more Moral Money content throughout the week, check our hub page regularly at ft.com/moral-money for breaking news, analysis and curated commentary on this bubbling revolution. The European Investment Bank’s move to stop funding fossil fuel companies received a lot of play in the European media this week.
Zacks.com featured highlights include: Medtronic Public, Arconic, Nasdaq, Hewlett Packard and Target
Online brokers record a rise in new account opening in October. While this means that their strategy to attract more investors is working, it's wait and watch as to how they gain financially.
Investing.com - It was a matter of time and the Chinese have finally said it. They have concerns over the impeachment proceedings of President Donald Trump. Oil prices slid Monday on that news, leveling some of Friday’s pop that came on the hype that the two sides were close to a deal.
Investors target stocks that have been on a bullish run lately. Stocks seeing price strength have a high chance of carrying the momentum forward.
A Hong Kong university remains under siege after a second day of ferocious clashes between riot police and protesters holed up on the campus. Officers from the special tactical contingent, known as the “raptors”, had attempted to storm the university on Monday but were beaten back by volleys of petrol bombs that set the main entrance to Hong Kong Polytechnic University ablaze. Black-clad young protesters throwing Molotov cocktails fought fierce battles with police in the streets around the university as they attempted to break the siege.
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It suggested that oil companies such as Shell and ExxonMobil would “cease to exist in their current forms within 35 years” under measures being discussed at UN talks on the global climate accord due to be struck in Paris the following year. Fossil fuels would have to be phased out by 2050 under one option, or only used if countries could bring about something called net zero emissions. In other words, emissions would have to nosedive so much that any still being pumped out after 2050 could be offset by, say, planting forests that suck up carbon dioxide as they grow.
In the recent series of record highs, the S&P 500 crossed the 3,100 level for the first time ever. We have highlighted 10 best performing stocks in ETF that tracks this index.
CME Group, the world’s largest futures exchange, said on Thursday it planned to launch futures and options on blocks of US cheddar from early next year. The move reflects shifting consumer tastes away from processed cheese and towards fresher and more healthy choices — and the growing popularity of foods that use large amounts of the dairy goods, such as Italian and Mexican dishes. , which are based on a blended monthly average price of block and barrel cheese.
(Bloomberg) -- CME Group Inc. plans to start Brazilian soybean futures with the country’s B3 exchange, giving traders a new hedging tool as the U.S.-China trade war disrupts the global flow of beans, people familiar with the matter said.The contract for soybeans loaded at the port of Santos, Brazil’s biggest, would be cash-settled, according to the people, who asked not to be identified because the plan hasn’t been announced. Futures will be based on assessments by a price-reporting agency, most likely S&P Global Platts, the people said.Brazil has become a powerhouse in soybeans and overtook the U.S. as the top exporter in the 2012-13 season. Its dominance grew in the past year as the U.S.-China trade spat prompted Chinese buyers to turn to Brazilian supplies. Price dislocations have also boosted the need for new hedging tools as benchmark futures traded in Chicago are for beans delivered in the U.S.Both B3 and CME declined to comment.CME, which also owns benchmark futures for corn and wheat, had previously confirmed it was considering starting a Brazilian soybean contract. In May, Chief Executive Officer Terry Duffy said the bourse was working on developing risk-management tools for the Brazilian market and that he wanted to ensure changes in trade flows didn’t skew prices.The soybean contract would extend CME’s suite of cash-settled products, which also include Black Sea wheat, corn and Ukrainian sunflower oil. Cash-settled contracts are gaining popularity as agriculture follows the path of energy markets, where thousands of contracts are already based on assessments from price-reporting agencies.\--With assistance from Fabiana Batista and James Attwood.To contact the reporters on this story: Isis Almeida in Chicago at email@example.com;Megan Durisin in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Tina Davis at email@example.com, Nicholas Larkin, Liezel HillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A Bolivian opposition senator took office as interim president on Tuesday, hoping to fill a power vacuum created by the resignation of socialist former leader Evo Morales, who has fled to Mexico after allegations of election fraud. Jeanine Añez of the opposition Democratic Union party described her move as “a constitutional succession” triggered by “the definitive absence of the president and vice-president” and her position as deputy head of the senate.