Friday, March 17, 2017

Dash (for credibility), BTC Reddit, CSDR, TR, Redi...Cognitive Bias and Dunbars number

Been a while between blog posts. (Just pushing this out today - post already up on the web). I've been thinking about the format of blogging - are blog posts too long in this new immediate information age? Are posts too wide ranging - from DLT, Crypto, Securities, Brexit etc. On reflection, I'm just going to stick with what I'm doing (unless strong feedback says otherwise). Some people have said the blog is quite rich in content, good!, but why do I do it? I started blogging, selfishly, for me (at the suggestion of one of my email readers). I can't remember every story I read and link that piques my interest....putting it in a blog makes it more likely I'll rediscover that elusive article (hence there is a search function on the blog site, which allows me to search the blog rather than trawling through Google). If you have comments / feedback / suggestions about the blog / good or bad I'd be delighted to hear from you.

My blog site also has some pages / tabs. I've been doing some housekeeping and updating the DLT pages.

Ethereums and Dash's dash up the market cap rankings is impressive. https://coinmarketcap.com/. Contrast this to BTC's performance and the Winklevoss ETF. For me, what differentiates these new comers is their Governance. Before we even get to the Tech, we need Governance (dispute resolution), Legal Framework (certainty and finality) and Regulatory Clarity.

Nice discussion thread on forking here - including comments by Vitalik.
Cryptocurrency trading volumes here:
Cryptocurrencies are now an asset class! Welcome Polychain Capital.

Exciting news (?). Alan Cameron is up for Global Custodian Person of the Year!
You can vote for him at this web site using the poll code 'gcpoty'.
https://iqpolls.com/vote/
He's got my vote.

I'll also be moderating at:
Marketforce’s 2nd Annual The Blockchain Summit
Moving beyond debate: putting the technology into practice
28th March 2017, Hilton Tower Bridge, Central London
http://www.marketforce.eu.com/events/financial-services/blockchain-summit
I look forward to catching up any interested parties there.

Also did a recent DLT Q&A with the CommTech people here:
Congratulations to the Irish on their legacy of stopping two great teams on world record winning streaks: thwarting both the ABs and the English at number 19.
Current atrocities leave me speechless.

All the best on the blockchain!

S.
www.clearingandsettlement.blogspot.com


DLT



Ethereum Sets Record Highs, $40 Price and $3.6b Market Cap
...cheer at community forums for the upcoming “Flippening” – the moment that Ethereum overtakes the place of Bitcoin in the world. They point to the technological and governance problems holding back Bitcoin from being used as an efficient payment system and to the many new solutions that are based on Ethereum coming out every day.
http://www.financemagnates.com/cryptocurrency/trading/ethereum-sets-record-highs-40-price-3-6b-market-cap/

Hyperledger Continues Strong Momentum in 2017 with 11 New Members
The latest members include: Bank of England, Bitmark, China Merchants Bank, Federal Reserve Bank of Boston, Initiative for CryptoCurrencies and Contracts (IC3), Kaiser Permanente, Kubique S.p.A., MadHive, Monax, OSCRE and RadarWin Cyber Technology.
https://www.hyperledger.org/uncategorized/2017/02/27/hyperledger-continues-strong-momentum-in-2017-with-11-new-members

Blockchain: A Better Way to Track Pork Chops, Bonds, Bad Peanut Butter?
https://www.nytimes.com/2017/03/04/business/dealbook/blockchain-ibm-bitcoin.html?_r=1

The Promise of FinTech – Something New Under the Sun? - speech by Mark Carney
http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech956.pdf

DTCC Using Distributed Ledger Technology to Improve the Post-Trade Process.
DTCC announced that it has selected IBM, in partnership with Axoni and R3, to provide a distributed ledger technology (“DLT”) framework to drive further improvements in derivatives post-trade lifecycle events. The firms will work collaboratively to re-platform DTCC’s Trade Information Warehouse (“TIW”).
The solution has been developed with input and guidance from a number of market participants including Barclays, Citi, Credit Suisse, Deutsche Bank, J.P. Morgan, UBS and Wells Fargo, and key market infrastructure providers, IHS Markit and Intercontinental Exchange.
The end-state vision to establish a permissioned distributed ledger network, governed by DTCC, with peer nodes at participating firms.
IBM will lead the initiative, provide program management, DLT expertise, and integration services, and offer the solution-as-a-service. Axoni will provide distributed ledger infrastructure and smart contract applications, with R3 acting as a solution advisor.
Development is expected to begin in January 2017 and build on Axoni’s AxCore distributed ledger protocol which will be submitted to Hyperledger when the solution goes live, anticipated in early 2018.
http://www.dtcc.com/news/2017/january/09/dtcc-selects-ibm-axoni-and-r3-to-develop-dtccs-distributed-ledger-solution

DTCC is also working with New York-based startup Digital Asset Holdings on developing blockchain-based technology for the syndicated loans market.
http://www.reuters.com/article/us-blockchain-dtcc-cds-idUSKBN14T1EA

The Global Blockchain Business Council (GBBC) was due to launch this week at Davos.
http://www.gbbcouncil.org/


Bitcoin



Blockchain Research Institute (BRI).
Don Tapscott and Alex Tapscott, co-authors of the best-selling book Blockchain Revolution are pleased to announce the formation of the Blockchain Research Institute (BRI).
Founding Members:
Technology Industry – Accenture, IBM, SAP
Financial Industry –  Digital Asset, NASDAQ
Global Corporations – Pepsico, Centrica, Liberty Global
Government – Province of Ontario, University Health Network
Blockchain Pioneers – Nuco Inc., Paycase, Artlery, Votem, Cosmos, Youbase, Wisekey
Affiliate Organizations – The Hyperledger Project, the Chamber of Digital Commerce, Coala.io, Enterprise Ethereum Alliance
http://www.the-blockchain.com/2017/03/16/multi-million-dollar-research-institute-launched-explore-blockchain-use-cases-opportunities-challenges/

Bitcoin and Ethereum Exchange Coinbase Granted New York BitLicense
Coinbase, the San Francisco headquartered Bitcoin and Ethereum cryptocurrency exchange and wallet provider, has been granted a New York virtual currency license – commonly known as a BitLicense.  Founded in June 2012, Coinbase has issued 10.9 million cryptocurrency wallets, making it the dominant player in the US market. It also supports 45,000 merchants and 9,000 developer apps.
http://www.financemagnates.com/cryptocurrency/exchange/bitcoin-and-ethereum-exchange-coinbase-granted-new-york-bitlicense/

“Bitcoin Jesus” Roger Ver Suspended from Reddit.
Investing in startups including bitcoin.com, Blockchain, Z.cash, BitPay, Kraken, Purse.io and Ripple, Ver contributed over a $1 million toward creating the bitcoin ecosystem over the past six years.
He has now been blocked from Reddit for referring to the real name of Bitcoin forum administrator “Theymos”. Ver was thus accused of an offense known as doxxing (exposing a private individual’s details) despite the fact that a simple Google search will return a number of sources with the real identity of the person behind the Theymos moniker.
Theymos has repeatedly been accused of employing very harsh censorship policies, crushing debates about how to reform the blockchain both on Reddit and on Bitcointalk.
http://www.financemagnates.com/cryptocurrency/news/bitcoin-jesus-roger-ver-suspended-from-community-forum-on-reddit

Canadian Securities Regulators Adopt Rules for Over-the-Counter Derivatives Clearing
National Instrument 94-101 Mandatory Central Counterparty Clearing of Derivatives requires certain counterparties to clear certain standardised OTC derivatives through a central counterparty clearing agency, subject to exemptions set out in the instrument.
National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions is designed to protect a local customer’s positions and collateral when clearing OTC derivatives and to improve clearing agencies’ resilience to default by a clearing intermediary. The instrument includes requirements related to the segregation and portability of customer collateral and positions as well as detailed record-keeping, reporting and disclosure requirements.
NI 94-101 comes into force on 4 April, 2017 and NI 94-102 on 3 July, 2017.
https://www.securities-administrators.ca/aboutcsa.aspx?id=1551

China Passes New Cybersecurity Law
https://www.cov.com/-/media/files/corporate/publications/2016/11/china_passes_new_cybersecurity_law.pdf

Japanese Giant GMO Enters Cryptocurrency Exchange and Trading Business
...the Ministry of Finance and the Financial Services Agency are considering the elimination of the consumption tax on cryptocurrency transactions by the spring of 2017, and if this is happens, the further spread of cryptocurrency in Japan is expected.
http://www.financemagnates.com/cryptocurrency/exchange/japanese-giant-gmo-enters-cryptocurrency-exchange-and-trading-business

Russia’s central bank is continuing to grow its blockchain footprint, having announced the creation of a new FinTech association focused in part on studying the technology.
http://www.coindesk.com/central-bank-russia-blockchain-footprint/


Market Structure


CSDR implementing measures published in the OJ
The following implementing measures which supplement the Regulation on improving securities settlement in the EU and on central securities depositories (the CSDR) have been published in the Official Journal of the European Union:
http://www.regulationtomorrow.com/de/csdr-implementing-measures-published-in-the-oj/

ESMA publishes first set of CSDR Q&A's
https://www.esma.europa.eu/press-news/esma-news/esma-publishes-first-set-csdr-qas

The European Securities and Markets Authority (ESMA) has put for public consultation future guidelines on the transfer of data between trade repositories (TRs)
https://www.esma.europa.eu/press-news/esma-news/esma-consults-future-guidelines-portability-between-trade-repositories
[The 6 approved TR's : DTCC, KDPW, Regis-TR, UnaVista, CME TR and ICE TVEL]
https://www.esma.europa.eu/supervision/trade-repositories/list-registered-trade-repositoriesare:

AMF to Launch its ‘I See Why’ Surveillance System in Mid-2017
France’s financial markets regulator, the Autorité des Marchés Financiers (AMF), today said it will implement a new market surveillance system for the country’s financial market, dubbed the ‘ICY system’. The system was developed internally with the backing of IT company Neurones
http://www.financemagnates.com/forex/regulation/francs-amf-launches-its-i-see-why-surveillance-system-in-mid-2017

LSE says no plans to move clearing operations after Deutsche Boerse merger
http://uk.reuters.com/article/us-lse-m-a-deutsche-boerse-relocation-idUKKBN1501KE

Thomson Reuters Completes REDI Acquisition
REDI will now operate as Thomson Reuters REDI.
http://thomsonreuters.com/en/press-releases/2017/january/thomson-reuters-completes-redi-acquisition-to-deliver-integrated-trading-workflow-to-the-buy-side.html

UK’s Competition Appeal Tribunal Upholds ICE’s Mandatory Sale of Trayport


Participants


Virtu Offers $1.3 Billion for KCG to Create Trading Leader
Virtu Financial Inc. offered to buy KCG Holdings Inc. for as much as $1.3 billion, amid signs the high-speed trading industry is finding it harder to make money.
New York-based Virtu, which combined with Madison Tyler Holdings LLC in 2011, closed down 0.6 percent.
KCG was formed when high-frequency trader Getco LLC combined with the ailing Knight after a mishap with one of Knight’s trading algorithms cost the firm $440 million in 30 minutes.
https://www.bloomberg.com/news/articles/2017-03-15/virtu-makes-unsolicited-1-3-billion-offer-for-rival-trader-kcg

Interactive Brokers Group Announces Decision to Cease Options Market Making Activities
Interactive Brokers Group, Inc. (NASDAQ GS:IBKR) announced that it will discontinue options market making activities globally, which are conducted through its Timber Hill companies.
Thomas Peterffy, Chairman and CEO, said, “Having initiated the first automated option market making operation in the mid ’80s, which grew into the largest such business on a global scale over the next 25 years, it’s been painful for me to see it deteriorating in the last few years. But we do not have a choice in this matter. Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity.
http://www.businesswire.com/news/home/20170308006416/en/Interactive-Brokers-Group-Announces-Decision-Cease-Options


Brexit


ICMA response to the commission consultation on capital markets union mid-term review
http://www.icmagroup.org/News/news-in-brief/icma-response-to-the-commission-consultation-on-capital-markets-union-mid-term-review/

Planning for Brexit - Operational impacts on wholesale banking and capital markets in Europe
AFME has commissioned a report from PwC, outlining the operational impacts and transformation challenges that Brexit poses to the provision of banking services in the EU [53pages]
http://www.afme.eu/en/reports/publications-and-data/publications/planning-for-brexit/

Euro Clearing and Brexit - The Practitioners' View.
The paper suggests why it could be in the best interests of the EU for clearing of these products to continue outside the Eurozone and highlights 4 key findings...
http://www.fsnf.uk/2017/01/euro-clearing-and-brexit-practitioners.html

Brexit:
Passporting appears to be out, which leaves the UK with a "Third Country Regime" status. Good explanation of the implications here.
https://www.thecityuk.com/assets/2017/Reports-PDF/the-eus-third-country-regimes-and-alternatives-to-passporting-executive-summary.pdf

Speech by the President of the Eurogroup, Jeroen Dijsselbloem, at The Future of Europe event, 24 January 2017
https://www.neweurope.eu/press-release/speech-by-the-president-of-the-eurogroup-jeroen-dijsselbloem-at-the-future-of-europe-event-24-january-2017/


Upcoming Events


The Blockchain Summit
Moving beyond debate: putting the technology into practice
28th March, 2017.
Hilton Tower Bridge, London
http://www.marketforce.eu.com/blockchain


Cognitive Bias

Back on the topics of blogs, getting Cryptocurrency / DLT news means reading a whole host of new sources....some of which I suspect are one or two man bands (and kudos to 'em). What's real news, fake news, regurgitated news?
I liked this blog post from Scott Adams - yes, he of the wonderful Dilbert cartoons:
Some Fake News:
As ever, it is often the comments that provide such great insight:
e.g.:
Scott's experience is an extreme example, but if you have ever had the media cover a story or situation that you know something about, you already know that:
a) they are typically too ill-informed to get the story right, 
b) they are looking to fit facts and quotes into the narrative that they decided on prior to arrival or within the first minute of investigation
c) they are not particularly bothered by a or b
"Everything you read in the newspapers is absolutely true—except for the rare story of which you happen to have firsthand knowledge." 
--Knoll's Law of Media Accuracy (Erwin Knoll, editor, "The Progressive")
"Early in life I have noticed that no event is ever correctly reported in a newspaper, but in Spain, for the first time, I saw newspaper reports which did not bear any relation to the facts, not even the relationship which is implied in an ordinary lie. ...I saw newspapers in London retailing these lies and eager intellectuals building emotional superstructures over events that had never happened. I saw, in fact, history being written not in terms of what happened but of what ought to have happened according to various ‘party lines’."
--George Orwell, "Looking Back on the Spanish War" (1943)
I don't know why people generalize the media like they do. It consists of a ton of different groups with different viewpoints, motives, and standards of quality. It's like saying all black people or all Hindu people are terrible. Some are. Some are awesome.
Some people take it seriously and do really good work and watch for their own biases while other people are clowns that crave attention and feel their job is to entertain and will debase themselves and anyone involved with them to get it. Sometimes those people exist within the same organization because it's hard to afford the good without the rage and/or self-righteousness clicks the clowns bring in.
“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”


Cognitive Bias Codex


Bits

Updated video clip from the Solent swim for MND.
http://www.swimmingthesolent4mnd.com/2016-swim-gallery/

Henry Thomas Buckle
Great minds discuss ideas; average minds discuss events; small minds discuss people.
http://quoteinvestigator.com/2014/11/18/great-minds/

Simon Sinek: How great leaders inspire action.
This was filmed in 2009...30 million views since.
He talks about the need for businesses (or individuals) to address the:
1. Why we do what we do.
2. How we do what we do (differentiate).
3. What we offer (product).
The nice hook here is he correlates these processes to the biology of the brain:
The outer brain / neo-cortex, responsible for language and rationalisation, he equates to the 'what'.
The inner brain / limbic brains, responsible for feelings like trust, loyalty and 'gut feelings', i.e. decision making, he equates to the why (passion and commitment) and how.
He also talks about the Law of Diffusion of Innovation (originally from 1962!) and metions both the tipping point for market penetration at between 15% and 18% and 'crossing the chasm' (Geoffrey More).
https://en.wikipedia.org/wiki/Diffusion_of_innovations
https://en.wikipedia.org/wiki/Crossing_the_Chasm

18 minutes.
https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action#t-750621


http://www.textcaseconverter.com/


Dunbar's number
By using the average human brain size and extrapolating from the results of primates, he proposed that humans can comfortably maintain only 150 stable relationships.
https://en.wikipedia.org/wiki/Dunbar's_number

The modern military company became popularized during the reorganization of the Swedish Army in 1631 under King Gustav II Adolph. For administrative purposes, the infantry was divided into companies consisting of 150 men, grouped into regiments of eight companies.
https://en.wikipedia.org/wiki/Company_(military_unit)

The Space Shuttle and the Horse's Rear End
The United States standard railroad gauge of 4 feet, 8 1/2 inches derives from the original specification for an Imperial Roman army war chariot. 
http://www.astrodigital.org/space/stshorse.html

People and Space in Early Agricultural Villages: Exploring Daily Lives,

Community Size, and Architecture in the Late Pre-Pottery Neolithic
http://tuvalu.santafe.edu/~bowles/PeopleSpace.pdf

Friday, December 2, 2016

DLT: Noun, Adoption, R3, Sandbox, VMCH...Rupeee

Each time I set out to do a blog post...so much more comes along. Anyway, time to turn thoughts back to adoption and governance.

1. DLT is a noun.
I enjoyed attending and moderating the DLT section of the Annual Clearing and Settlement conference. One takeaway I tried to give at the conference is that DLedgerT is a noun. A ledger is a ledger. It is a thing, a noun, it doesn't do anything. There are people claiming DLT will do all sorts of wonderful things. It won't. What it will do is allow things that are already being done to be performed much more efficiently.

2. Adoption of DLT.
I had the pleasure of 3 "fireside chats" with DAH, Paxos and Clearmatics. Each of them very real use cases. My observation on all of this is that DLTechnology is becoming commoditised. I don't mean the fabrics / chains, they are still very much evolving. I'm keen to see the new release of Hyperledger (and how Corda will dovetail into this) and see how Ethereum gets on. Regardless, of the technology, as we move from Proof of Concept to adoption we need legal certainty, dispute resolution and governance. So whilst we're becoming familiar with the technology just being 'an enabler' what is the critical overlay for adoption is governance. It comes as no surprise to me that we're seeing a flurry of legal position papers, each of they will be trying to position themselves as the legal certainty partner for adoption.

The models I see emerging are Vendor based (e.g. DAH working as a vendor to ASX where ASX leverage their existing legal framework for the process of adoption. Consortia based. Slightly longer lead time as the governance arrangements take time to put into place and then finally Strategic Partner.

Some of those papers:
Norton Rose: Can smart contracts be legally binding contracts?
http://www.nortonrosefulbright.com/knowledge/publications/144559/can-smart-contracts-be-legally-binding-contracts
Mayer Brown (Law firm) will present "Regulatory Approaches and Issues in Practice of Blockchain DLT in Financial Markets”.
http://www.isitc-europe.com/entries/working-groups/next-blockchain-dlt-work-stream-meeting
EY: Blockchain: five profound legal impacts
https://eylaw.ey.com/2016/11/22/blockchain-five-profound-legal-impacts/
Accenture files patent for editable blockchain...(Ummm, I don't think this is the right way to view privacy. I don't think they'll get a lot of value from this patent!)
https://www.cryptocoinsnews.com/accentures-editable-blockchain-prototype-draws-criticism/

3. R3 in the news (and on the street!)
Spoiler alert, dreadful pun intended. Every coin has two sides....I'm amazed that the funding status found it's way onto the web. When I started my DLT journey I had no idea of which sources of news to 'trust'. (I was anchored to traditional media - since then I've become(?) a twit / twitter'er). For as much as there is news of firms embarking on a different DLT fork, what is clear, is that everyonne is still in the game - some are just realigning their chips.

4. FCA Sandbox.
24 firms have been announced into the sandbox. Now, you may have different categorization to me but I thought it interesting to see where the use cases 'clustered'. Payment type cases are 25% (6), 'retail' interface applications 25% (6), another 25% (6) are not ready yet (so they're phase 2), and the balance is made up of 3 in Capital Raising, and One (yep 1) each in insurance, loans and Id.
https://www.fca.org.uk/news/press-releases/financial-conduct-authority-unveils-successful-sandbox-firms-second-anniversary
 
5. ...and another thing...VMHC.
Sorry, I just wanted to have a rant about this. Variation Margin Hair Cutting has once again come to the fore. It enrages me! (Sorry, I know, who gets agitated about VMHC?). Anyway, this is the idea that once a CCP runs out of money / skin in the game they then start to pilfer funds from anyone that has a positive variation margin. i.e a profitable position. This is just stupid. What about the contagion risk of international markets and hedged portfolio books? Robbing Peter to pay Paul in one jurisdiction / asset class just compounds the problem. Yes, it's a G20 inspired regulatory remedy, intended to prevent the tax payer from bailing out the market. OK. I get user pays and I'm on board with that concept too. But really, VM? Surely IM would be a better instrument for this. VM is a blunt instrument not best suited for the job. Poor choice. Yes, I further appreciate this is a super Black Swam event where we're talking about the simultaneous default of at least 2 of the top clearing firms but that is still no justification for enshrining the wrong principle. Grrrr.

6. ...and finally, oh what to do with those rupees? Risk, in whatever form is like a stress ball. You strap down one avenue...and just as quickly another seam opens. The unintended consequence of a super well intentioned motive to squeeze the Indian Black economy...Bitcoin. And then we have the IRS demanding wallet details. I expect India will join the chorus.

Festive and season greetings to all. Time to get those Xmas decorations up!

S
PS. The piccie was going to be Trump and the remodeled HairForce One but the project managers dilemma made me smile.

DLT


Blockchain company R3 CEV has reduced the amount it aims to raise from bank members in its first large round of equity funding to $150 million from $200 million and is changing the structure of the deal, according to a person familiar with the plans.
R3, a New York-based startup that runs a consortium of more than 70 financial institutions, now plans to give bank members a 60 percent equity stake in exchange for the funding, the source said.
Initially, it aimed to create a new company providing shared services for the owners, who would get a 90 percent stake. R3 would have run this utility for 10 years and retained a stake in it.
Goldman Sachs Group Inc (GS.N) and Banco Santander SA (SAN.MC), both original participants, are not renewing their memberships and not investing in the deal, spokespeople said.
http://www.reuters.com/article/us-blockchain-r-idUSKBN13G25J
Updated w/ MS and NAB out.
http://www.reuters.com/article/us-blockchain-r-idUSKBN13G25J
Updated with amazing leak:
Opted-out: Banco Santander, Goldman Sachs, J.P. Morgan, Macquarie Group, Morgan Stanley, National Australia Bank, and U.S. Bancorp.
http://www.coindesk.com/leaked-r3-funding-book-reveals-7-banks-blockchain-distributed-ledger/
http://web.archive.org/web/20161126042239/http://pastebin.com/UZczM1a4

Only weeks after the execution of a hard fork to mitigate various DoS (denial-of-service) attacks, the Ethereum network and its developers are struggling to deal with yet another major flaw. This time, major issues in regards to smart contracts have emerged, which have rendered the efforts of decentralized applications in the Ethereum network purposeless
https://www.cryptocoinsnews.com/ethereum-smart-contract-issues-frustrate-developers-fatal-bugs/

IRS Demands Records of 4.8 Million Bitcoin Users
The IRS (Internal Revenue Service), filed a petition in federal court seeking disclosure of all Coinbase US customer records over a three year period, 2013-2015.
“The government has not alleged any wrongdoing on the part of Coinbase and its petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes.”
http://www.financemagnates.com/cryptocurrency/news/irs-demands-records-of-4-8-million-bitcoin-users-over-3-alleged-tax-dodgers

UK's Royal Mint, CME Group launch blockchain-based gold trading platform
http://www.reuters.com/article/us-gold-blockchain-royal-mint-idUSKBN13O0M4

R3's Corda's code will be contributed on Nov. 30 to the Hyperledger project - a cross-industry project led by the non-profit Linux Foundation to advance blockchain technology by coming up with common standards.
http://www.r3cev.com/press/2016/10/20/exclusive-blockchain-platform-developed-by-banks-to-be-open-source

R3 Projects: Barclays Smart Contract Template (ISDA agreement).
This is a nice youtube clip demonstrating the Barclays ISDA agreement use case.
https://r3cev.com/projects/

R3 has collaborated with the Monetary Authority of Singapore (MAS) to launch its first dedicated distributed ledger technology (DLT) Center of Excellence in Asia. The lab will be established at Lattice80 in the Central Business District (CBD) of Singapore.
http://www.r3cev.com/press/2016/11/8/r3-partners-with-monetary-authority-of-singapore-to-launch-asia-blockchain-centre-of-excellence

Singapore’s Central Bank Wants Blockchain for 24/7 Inter-Bank Payments
http://www.financemagnates.com/cryptocurrency/news/singapores-central-bank-wants-blockchain-for-247-inter-bank-payments

Connecting digital islands in trade finance
Michael Vrontamitis, Global Head of Trade, Product Management, Standard Chartered, talks about the industry’s slow progress in digitalising trade finance.
https://www.finextra.com/videoarticle/1369/connecting-digital-islands-in-trade-finance
** This piece was recorded at SIBOS '16. I think Michael does a good job and succinct job. Basically, Trade is a good use case as it has external drivers (i) price reduction in underlying commodities and (ii) reduced commodities demand and lower growth rates. However, a) you need to digitise trade, before you can digitise trade finance, and b) complexity of counterparties in the ecosystem with disparate approaches results in digital islands. He mentions some technologies: OCR, Cloud, AI, Algo's, Big Data...all of which I think are irrelevant until you get a DLT solution in place. Once you have the data addressed, then you can start to be creative.

Financial inclusion and the 'un-banked'
http://www.financialinclusioncommission.org.uk/advisory_panel

Singapore FinTech Startup KYCK! to use IBM Blockchain and Bluemix to aid customer onboarding process in financial institutions.
http://www.automatedtrader.net/headlines/156625/ibm-blockchain-helps-fintechs-and-banks-address-kyc-challenge

In traditional applied cryptography, security assumptions tend to look something like this:
No one can do more than 279 computational steps
Factoring is hard (ie. superpolynomial)
Taking nth roots modulo composites is hard
The elliptic curve discrete logarithm problem cannot be solved faster than in 2n/2 time
https://github.com/ethereum/wiki/wiki/Problems
*** I love this. So much content out there and I am still naive in my crypto security and authentication journey. Even the sources alone are interesting. So, much in the GitHub and Reddit domains.

Your money's no good: rupee note cancellation plunges India into panic.
https://www.theguardian.com/world/2016/nov/10/rupee-note-cancellation-panic-in-india-banks-500-1000
India’s rupee restrictions are boosting demand for bitcoin.
http://www.cnbc.com/2016/11/15/india-rupee-restriction-boost-bitcoin-digital-currency.html

Market Structure


ESMA prepares for MIFID II Systematic Internaliser regime
The earliest mandatory deadline on which firms must comply with the SI regime, when necessary, is 1 September 2018
https://www.esma.europa.eu/press-news/esma-news/esma-prepares-mifid-ii-systematic-internaliser-regime

FSB: Essential Aspects of CCP Resolution Planning
http://www.fsb.org/2016/08/essential-aspects-of-ccp-resolution-planning/

Adding it all up: the macroeconomic impact of Basel III and outstanding reform issues
...the results suggest that Basel III can be expected to generate sizeable macroeconomic net benefits even after the implied changes to bank business models have been taken into account
http://www.bis.org/publ/work591.htm

Central clearing predominates in OTC interest rate derivatives markets
Central clearing predominates in the over-the-counter (OTC) interest rate derivatives markets but is less prevalent for other OTC derivatives, as the combined results of the BIS semiannual and Triennial surveys of outstanding OTC derivatives positions show.
https://www.bis.org/press/p161110.htm

Exchanges struggle to attract derivatives trading from OTC markets
xchanges have not won a bigger share of derivatives trading, according to the latest BIS Central Bank Triennial Survey of foreign exchange and over-the-counter (OTC) derivatives market activity. Since 2009, the trading of derivatives on exchanges has shown no trend, whereas their OTC trading has trended upward
http://www.bis.org/publ/qtrpdf/r_qt1609x.htm

ESMA has finalised its technical advice to the European Commission on aspects of future rules for benchmarks.
In particular: how benchmarks’ reference values can be calculated by using data reporting structures under existing EU rules such as MiFID II and EMIR; some of the criteria for deciding when third country benchmarks can be endorsed for use in the European Union (EU); and what constitutes making a benchmark figure available to the public.
https://www.esma.europa.eu/press-news/esma-news/esma-finalises-advice-future-rules-financial-benchmarks

CFR Policy Statements for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia
The Council of Financial Regulators is today releasing two policy statements setting out Regulatory Expectations for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia and Minimum Conditions for Safe and Effective Competition in Cash Equity Clearing in Australia.
http://www.cfr.gov.au/media-releases/2016/mr-16-02.html

ASX Welcomes Guidelines for Equities Clearing Competition
The ASX, which has been under pressure from trading firms to lower costs, has said it will decide by the end of 2017 whether a new blockchain-style system will replace its current method for clearing and settling stocks.
http://www.financemagnates.com/institutional-forex/regulation/asx-welcomes-guidelines-for-equities-clearing-competition/

Post-Trade: From the EEC to Here
http://ds.thomasmurray.com/opinion/post-trade-eec-here


Firms


The creation of Credit Suisse (Schweiz) AG.
The new legal entity going live has involved the transfer of around 1.4 million clients into the new bank. Credit Suisse will reveal at a later stage the amount of assets transferred.
Local rival UBS established a new Swiss subsidiary in 2015.
http://uk.reuters.com/article/uk-credit-suisse-swiss-ipo-idUKKBN13F0JP
Credit Suisse said on Tuesday it will dismantle its asset management unit into its private bank
http://uk.reuters.com/article/uk-creditsuisse-asset-management-idUKBRE88O15L20120926

KCG completes acquisition of Neonet
http://www.neonet.com/Pressroom/Press-releases/KCG-COMPLETES-ACQUISITION-OF-NEONET/

Kees van Dijkhuizen succeeds Gerrit Zalm as CEO of ABN AMRO
https://globenewswire.com/news-release/2016/11/08/887977/0/en/ABN-AMRO-Press-Release-Kees-van-Dijkhuizen-succeeds-Gerrit-Zalm-as-CEO-of-ABN-AMRO.html

Cinnober Extends Clearing Capabilities, Launching New Subsidiary
http://www.financemagnates.com/institutional-forex/execution/cinnober-extends-clearing-capabilities-launching-new-subsidiary/

Stuff


Hacker holds San Francisco railway to ransom, demands 100 bitcoins
http://bravenewcoin.com/news/hacker-holds-san-francisco-subway-to-ransom-demands-100-bitcoins/

For those that doubt Global Warming, or it's more politically correct term: Climate Change.
https://www.youtube.com/embed/hC3VTgIPoGU?rel=0

US Jason Chaffetz Serves FBI Asst Director With Subpoena During Hearings
https://www.youtube.com/watch?v=iu_V0FnJnS0
http://www.zerohedge.com/news/2016-09-16/chaffetz-destroys-stunned-fbi-official-and-serves-him-subpoena-during-testimony

Dad turns 6-year-old son's drawings into reality... with slightly disturbing results
http://imgur.com/gallery/4lzgk


Quotes


"Edison’s electric light did not come about from the continuous improvement of the candle"
Oren Harari

"If I had asked people what they wanted, they’d have told me ‘a faster horse’!"
Henry Ford.

I was actually searching for the Harari quote, which I found coincidentally I found in this 2009 blog post - which is still as true today. Impressive blog post to stand the test of time!
http://garysaarenvirta.blogspot.co.uk/2009/03/disruptive-innovation-versus-continuous.html





Sunday, September 18, 2016

Happy T2S (Wave3)!

As ever lots going on.

I was delighted to complete the Solent Swim for MND. The piccie is me with warrior Dave Setters who is advancing the MND awareness campaign in the City. For those of you that could still donate to this cause, that would be great. You can read more about the story here: https://www.justgiving.com/fundraising/ScottRiley-MNDSwim

Very much looking forward to Anbima Cetip Fixed Income Conference this week.
20 Sep 2016. San Paulo, Brazil
http://conferenciaderendafixa.com.br/?lang=en-US

So, whats being going on....


DLT


Blockchain Will Become ‘Beating Heart’ of the Global Financial System
Blockchain, the technology behind bitcoin could profoundly alter the way banks do business worldwide, lowering their operating costs and making financial services securer and more accessible, a World Economic Forum Report finds.
https://www.weforum.org/press/2016/08/blockchain-will-become-beating-heart-of-the-global-financial-system/
*** Another nice 130 page document. I confess, I've not read it all, I just cherry picked the potential use cases (deep dives) that were of interest to me. I think the editorial team have done a great job. the report is consistent through-out and the icons and logos are great too!

ASX Update.
Interesting insights from their annual report (slide 10/38).
Key updates
• Clearing fees reduced 10% from 1 July 2016
• Clarity on equities clearing market structure
Investment in distributed ledger technology
• Initial phase complete
‒ Developed working solution for subset of use cases
‒ Engaged with regulators and stakeholders on concept
‒ Met performance, security and scalability thresholds
• Increased investment in Digital Asset Holdings on 30 June 2016 to 8.5%, total investment US$17.4 million
• Next development phase
‒ Build an industrial strength platform that could replace CHESS
‒ Engage with customers and other stakeholders
‒ ASX to decide on CHESS replacement in FY18
‒ CHESS will continue to operate as normal
*** Some takeaways...clarity on equity market structure, subset of use cases, engaged on concept, could replace Chess, industry engagement, Chess...BAU.

ItBit Rebrands as Paxos Amid Blockchain Pivot
http://www.coindesk.com/itbit-rebrands-paxos-amid-blockchain-pivot/
*** All part of recent restructuring / realignment between DLT and BTC

Global Banks Announce Partnerships and Investments at Ripple
Ripple CEO Chris Larsen stated that Standard Chartered’s backing came as part of a strategic investment round of $55 million, from a wide swath of the financial industry. Alongside this new round, the company announced eight new bank customers, including Standard Chartered, BMO Financial Group and Shanghai Huarui Bank.
Ripple has received a total of over $93 million in funding.
http://observer.com/2016/09/global-banks-announce-partnerships-and-investments-at-ripple/

Devcon2
#Devcon2 in Shanghai is around the corner after it's highly successful Devcon London last December. This years event stands to be even bigger. Held in conjunction with the Global Blockchain Summit where Microsoft is a key sponsor. Vitalik is expected to comment on Ethereum2 and it's new roadmap to address concerns about consensus networks.
http://www.coindesk.com/vitalik-buterin-new-mauve-paper-devcon2/
Registration for Shanghai is full. (Amazing in itself).
https://ethereumfoundation.org/devcon/
All part of International Blockchain Week in Shanghai
http://www.blockchainweek2016.org/index_en.html#summit

Blockchain Requires Radical Change, Not Compromise
Frances Coppola (@Frances_Coppola)
http://www.coindesk.com/dont-compromise-technology-redesign-business/
*** I liked this author's style. I also like her twitter account which I'm now following. It prompted me to comment (which I rarely do - I used an old passport photo as an avatar to hopefully capture that 'hipster' look)....
Very nicely presented piece...but just doesn't resonate 100% with me.
"To use radical new technology effectively, you have to be radical"....hmmm, some best radicals find new simplicity and patterns. (e.g. it was radical to think of the earth not at the center of the universe....but look how much simpler orbits were to explain as a result of that radical thinking).
"So they compromised. They went for a permissioned DLT." Nothing wrong with permissioned. Markets are already permissioned via membership requirements. And dark pools are not all bad either (appreciate the "Flash Boys" arguement).
You cannot radically change settlement and clearing processes while leaving trading practices untouched.
I think you can, and we do decouple the transaction value chain (Think trading / exchanges, Clearing / CCPs and Settlement / CSDs). These components of the transaction value chain are often represented by different legal entities which interface. The debate is vertical / horizontal.
Part of the difficulty in going through all this subject matter is the ambiguity of some of the processes (i.e. domestic market practices). This piece covers so much ground, admirably, but each issue needs a further level of granularity to really tease out the issues.
Regardless, I enjoyed reading the post, it is in a nice style and more insightful than most (if I may say).

Blockchain's Numbers Don't Add Up
So a real-world example, then, that it takes 20 years for a new, efficient 2 billion-euro post-trade system with full central-bank backing to start recouping its cost. It would be a miracle if blockchain could repeat this feat in a fraction of the time without similar backing or funding.
https://www.bloomberg.com/gadfly/articles/2016-09-08/blockchain-s-ambitions-thwarted-by-funding-resources
*** I think this is the wrong analogy. FinTech 'mice' can work in harmony with the 'elephants' of FMI, you just need to know the melody (and that;s not 2 billion)

Traditional investment banking model 'no longer an option,' states McKinsey & Company ‘blockchain technology could deliver a broad range of benefits’
http://bravenewcoin.com/news/traditional-investment-banking-model-no-longer-an-option-states-mckinsey-and-company-blockchain-technology-could-deliver-a-broad-range-of-benefits/


Standards


ISITC DLT Standards working group.
https://www.finextra.com/blogposting/13074/blockchain-and-hyperledger-project-beyond-the-hype

Hyperledger to Address International Trade Standards Body
http://www.coindesk.com/hyperledger-address-international-trade-standards-body/

Australia to lead ISO Blockchain standards endeavor
http://bravenewcoin.com/news/australia-to-lead-iso-blockchain-standards-endeavor/

Just on Standards, they're Standards...and by their very nature open.


DLT Land Registry


Land Registry is one DLT use case I've had the pleasure to look into with BAT.
Interesting stance on UK privatisation.
https://weownit.org.uk/evidence/land-registry
Now put on hold:
https://hansard.parliament.uk/commons/2016-06-30/debates/16063030000001/LandRegistry
Lammy added: “It pays rich dividends to the public purse and there’s absolutely no reason why it should pay dividends only to wealthy investors and shareholders in the future.”
https://www.theguardian.com/money/2016/jul/01/land-registry-sale-privatisation-new-government-george-freeman

Incorporating blockchain technology in land registries is not new. The Republic of Georgia and Honduras have been conducting such experiments in recent years, while Sweden is the first advanced western country to take steps in this direction
(BTW, the jurisdiction BAT looked at is not listed above).
http://www.citymetric.com/politics/forget-privatisation-land-registry-needs-blockchain-2233

Sweden Conducts Trials of a Blockchain Smart Contracts Technology for Land Registry
...Rather it is about reforming the workflow of selling a property that integrates with existing systems for keeping track of who owns what.
https://bitcoinmagazine.com/articles/sweden-conducts-trials-of-a-blockchain-smart-contracts-technology-for-land-registry-1466703935
*** Love it! This comment hits the nail on the head.
bit.ly/2bQQyiE


Bitcoin


Florida Senator Drafting Bill That Could Recognize Bitcoin as Money
http://www.coindesk.com/florida-senator-drafting-bill-recognize-bitcoin-money/

How Bitcoin Succeeded Where Ethereum Failed
Ethereum recently hard forked their blockchain to reimburse users who were affected by a poorly structured smart contract, known as The DAO. The hard fork was cheered as a great success shortly after it was initiated, and some supporters of a Bitcoin hard fork for the purpose of increasing the block size limit even took the opportunity to claim that hard forks aren’t as scary as some make them out to be.
“Ethereum isn’t fixing something technical – they’re doing a bailout of a company [or] group that screwed up,” Bitcoin Core contributor Peter Todd told CoinJournal. “Nothing in this bailout hard fork actually fixes anything technical.”
http://coinjournal.net/bitcoin-succeeded-ethereum-failed/

A Primer on Bitcoin Governance, or Why Developers Aren’t in Charge of the Protocol
https://bitcoinmagazine.com/articles/a-primer-on-bitcoin-governance-or-why-developers-aren-t-in-charge-of-the-protocol-1473270427
*** Great piece and highlights governance of code and implementation(s).

Why the coffee shop doesn't want your Bitcoin!
....Starbucks doesn’t want your stupid bitcoin. Fraudulent coffee transactions are not a pain point. The card is physically present, so the barista knows you didn’t just go on Alphabay and buy a list of stolen numbers. Plus she’s watching you consume the coffee right there. If you have a problem with said coffee, you ask for a new one. There’s not gonna be a chargeback.
http://elaineou.com/2016/08/01/the-value-of-settlement-finality/
*** An unconventional read - but I enjoyed the reality check.

How Bucket Shops Democratized Access to the Financial Markets
http://elaineou.com/2015/05/05/how-bucket-shops-democratized-access-to-the-financial-markets/

And a further insight into Credit Card charging process (for that coffee).
https://www.merchantmaverick.com/the-complete-guide-to-credit-card-processing-rates-and-fees/

Capital Markets


Happy T2S
With wave 3 on board, T2S is now processing about 45% of the total transaction volume expected after the end of full migration in 2017. The next migration wave (wave 4) is planned for 6 February 2017.
https://www.ecb.europa.eu/paym/t2s/html/index.en.html

Goldman Sachs Has Started Giving Away Its Most Valuable Software
The bank’s new gambit: deploy its technology to win more business from clients
http://www.wsj.com/articles/goldman-sachs-has-started-giving-away-its-most-valuable-software-1473242401

Former BoE official expects euro clearing to leave London post-Brexit
Britain's dominance in euro-denominated clearing of financial contracts will end after the country's withdrawal from the European Union, former Bank of England Governor Charlie Bean said on Wednesday.
French President Francois Hollande has said this should move to the euro zone in future after Brexit, but banks have privately expressed scepticism that this can be done.
"I think it's certain that we will lose it," Bean told a House of Lords committee.
He said he had "absolutely no doubt at all" that euro denominated clearing will be mandated to be taken back to the euro zone.
http://uk.reuters.com/article/uk-britain-eu-clearing-idUKKCN11D124

In Global Banking, Apps and Security Don't Mix
Back in February, Bangladesh's central bank revealed that it had fallen victim to an $81 million theft. (Actually, the Philippine Daily Inquirer broke the news – the Bangladesh bank would have preferred to keep the information under wraps pending investigation.)
Since then, dozens of banks around the world revealed a series of thefts involving Swift, the global financial messaging system. Just last week, Swift disclosed new cyberattacks involving its system. In each case, bank computers were compromised to enable unauthorized transfer requests.
https://www.bloomberg.com/view/articles/2016-09-07/in-global-banking-apps-and-security-don-t-mix

Deutsche Bank calls for reform of global financial messaging system SWIFT
SWIFT is only as strong as its weakest member, Deutsche Bank's Chief Information Security Officer Hinrich Voelcker said on Wednesday, adding the bank was in discussions with SWIFT about the consequences of the Bangladesh heist.
http://www.reuters.com/article/us-deutsche-bank-swift-idUSKCN11D1WA

Basel III monitoring
The Committee is making available publicly the Basel III monitoring workbook, accompanying instructions and a list of frequently asked questions.
https://www.bis.org/bcbs/qis/

What Else Can Central Banks Do?
The latest Geneva Report on the World Economy argues that central banks can do more to stimulate economies and restore full employment when nominal interest rates are near zero. Quantitative easing and negative interest rates have had beneficial effects so far and can be used more aggressively, and the lower bound constraint can be mitigated by modestly raising inflation targets.
http://voxeu.org/content/what-else-can-central-banks-do
*** Note, requires one time registration, but it's worth it. Not a spam site!

State of the Union 2016: Completing the Capital Markets Union – Commission accelerates reform
On the occasion of President Juncker’s 2016 State of the Union address, the European Commission has today set out the next steps to accelerate the completion of the Capital Markets Union (CMU), a flagship project of the Juncker Commission to boost jobs and growth in Europe.
http://europa.eu/rapid/press-release_IP-16-3001_en.htm

ESAs reject proposed amendments from the European Commission to technical standards on non-centrally cleared OTC derivatives
The three European Supervisory Authorities (EBA, EIOPA, ESMA - ESAs), published today their Opinion addressed to the European Commission expressing disagreement with its proposed amendments to the final draft Regulatory Technical Standards (RTS) on risk mitigation techniques for OTC derivatives not cleared by a central counterparty
https://www.eba.europa.eu/-/esas-reject-proposed-amendments-from-the-european-commission-to-technical-standards-on-non-centrally-cleared-otc-derivatives

PM should seek parliamentary approval over article 50, says Lords committee
“It would be constitutionally inappropriate, not to mention setting a disturbing precedent, for the executive to act on an advisory referendum without explicit parliamentary approval – particularly one with such significant long-term consequences. The government should not trigger article 50 without consulting parliament.”
http://www.theguardian.com/politics/2016/sep/13/pm-theresa-may-article-50-parliamentary-approval-house-of-lords-committee
*** Hmmm, should a democratic government (where the majority of MPs will vote for gravy train, opps, sorry remain), be able to over-rule an 'advisory' (ballot paper never suggested to me they were asking for my advice!) referendum. I guess only honourable Lords know the difference between responsible 'speculation' and citizens reckless 'gambling'.

The next big thing in CSR.
The Modern Slavery Act: How should businesses respond?
https://www.pwc.co.uk/assets/pdf/msa-updated-briefing-document.pdf

Nestlé in society: Creating Shared Value and meeting our commitments
http://www.nestle.com/csv

Stuff


Fiji's appreciation for Ben Ryan's role in guiding their men's sevens side to Olympic gold has seen him awarded a three-acre plot of land which features a mountain and waterfalls.
http://www.espn.co.uk/rugby/story/_/id/17420407/ben-ryan-given-land-mountain-waterfalls-fiji

How I Used & Abused My Tesla — What a Tesla looks like after 100,000 Miles, a 48 State Road trip, 500 Uber Rides, 20 Rentals & 2 AirBnB sleepovers.