Friday, November 20, 2015

Whats wrong with Bitcoin, MtGox, Blockchain, C&S, la France.

First thoughts to the French and all those touched by the dreadful events there. Although I'm not a soccer aficionado I could not help but be positively moved by the goodwill of the France v England match. Humanity can be so strong in the face of terrorism.

This week I was at Clearing and Settlement World. Good to catch up with may familiar faces and some new ones too. I spoke on Bitcoin. (I'll put the slides up on this site under the blockchain tab).

I started blogging for a variety of reasons. One of them was that blogging on an article would force me to have an internal discipline to formulate an opinion on what I read. We're all bombarded with news but I wanted to force myself to digest and comprehend more than the vanilla message of corporate communications.

And so to Blockchain and Bitcoin. I felt I was just regurgitating links. So, I've been immersing myself into Bitcoin to better understand the rise of the blockchain. And I have some conclusions on Bitcoin that give me some context to shape my opinions (of course I reserve the right to change my opinions as new information comes to light or indeed as and when I'm corrected). Hence a lot of background articles in this blog post.

Bitcoin gets a bad rap. Black market money like Silk Road and trading scandals like MtGox.  So what? Hard or fiat currency has always been used for crime (at least from what I gather from the movies). Why is digital currency any different? We're all familiar with trading scandals. Nick Leason is vermin...that does not mean Barings and derivatives are bad. I like Bitcoin (BTC).

Bitcoin has got problems.
1. Bitcoin relies on a code base. Those people that maintain and support that code base are not economically aligned with the success of bitcoin. At best, the great work of Bitcoin is supported by the Bitcoin Foundation (much the same as Wikipedia).
2. Bitcoin is slow. Not only is it slow, it is positively lethargic. Bitcoin relies on new blocks being validated every 10 minutes.
3. Bitcoin is expensive. Bitcoin ain't going to fix our micro transaction problems. (When I say expensive I do so in the context of transaction fees).
4. Bitcoin is not green. I think it is an environmental nightmare. There are various estimates, but one conservative academic paper I read put the consumption of electricity of Bitcoin miners on a par with the daily power consumption of Ireland (i.e. the country, not just a small island).

None of this is new and consensus is that the Blockchain, the Bitcoin enabling technology is the way to harness all that is good in Bitcoin. So we can focus on the commercial applications of the blockchain.
...and there is a funny thing. The blockchain is all about a open, publically shared ledger (OK, you can have a private ledger, personally I think we'll end up with consortium ledgers where regulators have a lens to see all activity). And then you go to all these web sites to try and get underneath the mechanics of the technology application and all I can say is details are scarce. I used to moan about Central Market Infrastructure transparency of pricing but at least you could down load their rulebooks and circulars.

Whatever your pleasure, go about it this weekend unreservedly but respectfully. (I went to see a couple of emerging live bands last night).

Via la France.


Economist article on blockchain.
* Note if you're not a subscriber it may want you to register.
The article is good, but I would say generalist. Nothing revolutionary here.

Mt. Gox and Ripple Founder Jed McCaleb Unveils Project 'Stellar'
McCaleb is the original founder of defunct Japanese bitcoin exchange Mt. Gox and a co-founder of digital currency-focused payment network Ripple Labs. ( users in London are able to spend bitcoins at a number of restaurants and coffee shops around London. This can be done due to SpectroCoin integration to a WoraPay platform.

Timeline of history / events.

...and a nice Bitcoin timeline of events.

The shady history of Mark Karples

Some of Karples initial online dialogue after taking over at MtGox.

MtGox Business Plan

Mt. Gox and Ripple Founder Jed McCaleb Unveils Project 'Stellar'

Some great stats and graphs here:

General News

Coal is dead? No one told ChinaThis one from real world mining.

Bitcoin Group Makes Third Attempt to IPO in Australia

Bankchain Gold Trading


Clearing and Settlement World comes around again.
17th -18th Nov.
I'm delighted to be presenting Bitcoin / Blockchain.


ICE agrees $650m Trayport acquisition
initial clients, which include, the San Francisco-based blockchain API company that partnered with Nasdaq to develop the platform, ChangeTip, a Bitcoin company specializing in micro-payments, and PeerNova a blockchain-inspired ledger and database company

...The first participants will include:, ChangeTip, PeerNova, Synack, Tango and Vera....
....Nasdaq recently announced it will undertake an effort to manage proxy voting via blockchain technology in Estonia, as its next proof-of-concept for the company's blockchain initiative....


Dyson on innovation.
“Creativity should be thought of as a dialogue. You have to have a problem before you can have the game-changing riposte.”(otherwise referred to as the "problem phase” of innovation).
Personally I subscribe to the 3 phase model of innovation:
1. Tinkering and refining Day to Day processes; (run the bank)
2. Thoughtful restructure or re-engineering of processes; (change the bank) and
3. Implementation and adoption of disruptive technologies.

Clever advice on how to use your settings

Emotional Intelligence

I'm a big believer in EI. This article, due to the bullet points, is interesting, but I don't think it totally nails the topic, hence it doesn't inspire me to buy the book they're promoting.

A wonderful crowd sourcing success story
Radical Bee Hive Rakes in $4.8 Million

Pythagoras' Theorem: .....................................24 words.
Lord's Prayer: ................................................66 words.
Archimedes' Principle: .....................................67 words.
Ten Commandments: ................................... 179 words.
Gettysburg Address: ......................................286 words.
US Declaration of Independence: ..................1,300 words.
US Constitution with all 27 Amendments: .......7,818 words.
EU Regulations on the Sale of CABBAGES:.....26,911 words.
(source: Mum)

The tree that is beside the running water is fresher and gives more fruit.
Saint Teresa of Avila

“The harder the choice, the less important it is”
Fredkin's paradox

Friday, October 9, 2015

Solent swim, John Lothian in London and a Symphony ABC...RWC

Please note the following with this posting.

1.    The Isle of Wight swim: please give me a heads up if you’re aware of anyone with MND.

2.    The forthcoming John Lothian education event in London. Free registration and spots available at:

3.    Do enjoy the Rugby World Cup, whoever your team.

Well, after much preparation, conditions did not lend themselves to the Isle of Wight crossing going ahead.
I always knew health and safety was a risk...and so it was.

That said, it takes nothing away from the frustration.
I geddit: The Harbour Master has to have his (/her) say, as after all there is a shipping channel to cross; The RNLI have to have their say, as they're on the water on standby; and The Organisers and support crew have to have their say, because they want to host an event of good repute and be able to adequately support the swimmers.
As a participant, you hear the logic but you do feel there is no voice calling out to say, well maybe we could try this, or that. (I did suggest entering the water up-current and making a final call on the channel crossing once we were actually at the shipping lane, which is a good 40mins into the swim, allowing time for the weather to break).
Then what about fund raising? What do you say to people that sponsor you...for an event you don't do?
Anyway, rant over (and I do see the selfishness of this).
I'm just grateful to have the luxury of the opportunity to take up the challenge.

There were 2 reasons I chose to take up the Solent challenge.
My mother had initially sewn the seed in 2013. A friend of hers, Ian Pratt, had been diagnosed with MND and the swim was being done in his honour.
Her logic: She likes Ian and I like swimming.

But the real catalyst was when, after returning from another stint in Australia, I bumped into a long standing industry colleague, Dave Setters (ex FOW) at an FIA event. It was when he explained the immobility in his arms was a result of MND that my resolve was set. I wanted to do something to acknowledge the bravery that Dave displayed.

We’re lucky to have choices, even if they are not always easy ones...but we have choices.
My heart goes out to those who don’t have choices, like those with MND.

The image with this weeks blog is Dave and I with the Isle of Wight in the background.
Not prepared to settle down, Dave has…
… just started to investigate with the MND Association as to the possibility of setting up a City Network for MND with the goal of raising awareness and funds. I'm therefore interested in finding out through my contacts, if they know of anyone in the City who has been "touched" by MND in some way. That is people who have it, like myself, and are still relatively healthy or people that are caring for or have cared for or who know friends, family and colleagues with it.

If you think that you know someone whose life has been touched by MND, please do let me know and I’ll pass your details onto Dave.

Events & John Lothian

I have been a long term fan of John Lothian News, indeed, an important news feed for me, for many of my blog musings.

The team there also do a tremendous amount of good work in terms of educating both new and old on what is happening in our markets. E.g.

Occasionally, they come to visit London with the intent of spreading the good word. This event in October is free to register / attend. It is ideal for those who are new to the industry and looking for a better understanding and some insights.
Do feel free to pass this link:

Blockchain and Disruptive Technology

Whose doing what?
I’m pulling together a matrix of all the providers and vendors in the space.
My objective is to end up with a sample of ‘real’ use cases (supported by web sites with tangible content).
This is one starting point.

Ripple Labs
Ripple Unveils Next-Generation System for Digital Transaction Consensus

Basically Ripple have published a White Paper: The Ripple Protocol Consensus Algorithm (RPCA) which takes a new look at getting around the burdensome proof-of-work.

The goal of the RPCA is to make it possible for a globally disconnected network to agree without relying on proof-of-work infrastructure.
Each server in the Ripple network is tasked with voting on a new batch of candidate transactions during rounds that take place every few seconds. Transactions agreed upon by the network are confirmed and made permanent once the round closes.
This approach is different from bitcoin’s, for which several confirmations by the mining network are often needed before bitcoins can be used or re-spent. Election node systems have been utilized in other block chain applications in the past, including projects like darkcoin that mix transactions through a network of master nodes.
Full paper available here:


Google Alphabet is to participate in a new round of funding for bank-backed messaging platform Symphony, valuing the startup at $650 million.

The financial institutions partnering to establish this new communication ecosystem include BofA Merrill Lynch, BNY Mellon, BlackRock, Citadel, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Jefferies, JPMorgan, Maverick, Morgan Stanley, Nomura and Wells Fargo.

What's the difference between Google and Alphabet?
Most of Alphabet's staff still work for Google, which remains the corporate home of Android, YouTube, Google Apps, Google Maps and Google Ads, as well as the eponymous search engine that started it all. Another seven companies have been established as Alphabet subsidiaries. These are Calico, Google Life Sciences, Nest Labs, Google Fiber, Google X, Google Ventures and Google Capital.
and some good (cynical) comments at the foot of this article.


£400 million – to be spent on RBS and NatWest branches refurbishments this year, with 16 a week expected at the programme’s peak
2% – of payments and transfers by HSBC customers are now done in a branch

The Bank of England on Cash (and the future of)

..Despite the advancements in technology, cash continues to offer a unique set of attributes as a medium of exchange that sets it apart from the alternatives. The Bank commissioned 2014 survey found that people like cash because it is:
·         Fast and convenient;
·         Universally accepted;
·         Helpful for budget management;..
·         provides immediate final settlement at no visible to the consumer;
·         with no reliance on technology and central infrastructure; and
·         is entirely anonymous, enabling transfers of value without any record being kept.

Bank of England quarterly bulletin update on OTC Clearing.
Over-the-counter (OTC) derivatives markets have grown significantly over recent decades. These markets facilitate the hedging of risk, but they can also give rise to complex exposures within the financial system. These include the greater use of central counterparties (CCPs) to ‘centrally clear’ transactions, managing risk within the system. The concentration of risk within CCPs does however highlight other challenges, including the need for supervisory co-operation internationally. Authorities are working to address these issues.

The Forum
The Bank will hold an Open Forum on 11 November in the Guildhall.  To map a positive future for financial markets, the event will bring together policymakers, financial market participants and users, academics, media representatives and wider society. 
Public registration is now open.  The online portal will be available until 23 October, with attendance determined shortly thereafter by a ballot.

Bank of England will announce the results of the UK stress tests on 1st Dec 2015.

The Basel Committee on Banking Supervision has today published a report on the regulatory consistency of risk-weighted assets (RWAs) for counterparty credit risk. This study is a part of its wider Regulatory Consistency Assessment Programme (RCAP), which is intended to ensure consistent implementation of the Basel III framework.

Foreign Exchange Benchmarks: Report on progress in implementing the September 2014 recommendations

In 2014 the FSB published recommendations for reforms to foreign exchange (FX) benchmarks. The recommendations responded to concerns raised about the integrity of FX benchmarks stemming particularly from the incentives for potential market malpractice linked to the structure of trading around the benchmark fixings. This report draws on assessments of progress made by the main foreign exchange committees, as well as by central banks in other large FX centres, to meet the 2014 recommendations. 

Santander Group chair Ana Botin has called for a level playing field between banks and the raft of new tech firms looking to muscle their way into the financial services industry.
Although hailing the fact that digital has enabled Santander to have a 47% cost-income ratio, she stressed that "we have 13,000 branches and we believe very much in that personal contact.”

This paper discusses the EU’s finances with particular reference to two complaints frequently made about the European Union’s finances: that the European Court of Auditors each year ‘refuses to sign off the accounts’; and that the EU budget is subject to high levels of fraud.
By Jove….these are some jolly senior experts…eh wot!
Full paper here:

ICE names William Hague as incoming chairman of European unit
"Our markets will benefit from Mr. Hague's private and public sector expertise as we seek to continue to grow by serving our customers in new ways," Jeffrey Sprecher, chief executive officer of ICE, said in a statement.

Iress expands in UK with acqusitions of Proquote and Pulse
Proquote, an LSE portfolio company since 2003, operates the Retail Service Provider network that offers retail trading in the United Kingdom. The acquisition by Iress also includes LSEHub, a FIX order routing business which provides trade order connectivity between institutional investors and brokers.
In announcing the sale, the LSE says that Proquote is "not central to its strategy" for the enlarged Information Services Division.

Amazing, Aust has another PM.

That’s 5PMs in as many years.

A tale of blood letting here:
Australia: Coup capital of the democratic world

Rugby World Cup: England exit prompts ticket resale bonanza

Friday, September 4, 2015

Blockchain: Consortium and Consultation, Domestic Market Practice...and 2.5wks to Solent

Well, a fast week coming back from the bank holiday and lots of discussion on block chain.

Of the various types of ‘chain’ available, public / private / consortium, I feel my initial sentiment, that the consortium model is most appropriate, appears to hold true.
I was also delighted to learn the meaning behind the name of Mt Gox (which never made sense to me) Magic: the Gathering Online Exchange i.e. Mt Gox!
As ever, there is just too much news to distill. What’s happening in the operation and regulation of our day to day markets (MiFID II) and where those markets might be going (distributed ledger).

We now appear to have fairly well organised structures / roles for tracking and commenting on market structure changes (a role that was far less defined pre-MiFID).
It now strikes me that as an industry, there is a lot going on in the distributed ledger space, although as yet, our responses are not that co-ordinated.
For example, we have FCA with Project Innovate, the Blackett Review, the Payments System Regulator setting up a strategy forum, the EC setting up their Digital Commission and not to mention the interest of HM Treasury and the BoE!
This is a lot of engagement. Who has the bandwidth for all these issues?

On more practical matters. Delighted to see CSDR coming out with uniform rates, fines and implementations. A delight to see so many operational 'domestic market practices' harmonized.

Meanwhile my swimming continues. Lots of lengths, with the plan to swim the Solent crossing on the 21st Sept. The cause is for Motor Neurone Disease.
An earlier scheduled swim has been postponed due to bad weather / conditions. I’ll be mightily disappointed if I book accommodation down there and don’t get the chance to swim!

2 weeks until RWC 2015 kicks off.
Unbelievable…and an exciting prospect.

Have a great week-end all, whatever your leisure.

If we knew what it was we were doing, it would not be called research, would it?
- Albert Einstein


The Rise and Fall of a Bitcoin Kingpin
How a bullied geek forged an empire out of digital currency, and became a suspect in a half-billion-dollar heistMt. Gox was originally a site…made for people to exchange Magic cards (thus the name — Magic: the Gathering Online Exchange, or Mt. Gox for short).
** Note: A Mt Gox problem is a Mt Gox problem – NOT a Bitcoin problem. Bit like a Regulated Market problem is not an equities problem.

Some regulatory regimes are purposefully not tough on new sectors to allow them to grow and self regulate to a degree. Ultimately there comes a point when building something new you have to interact with the regulator. Having the people with the experience to engage strategically with regulators, as well as come up with creative / automated regulation solutions is the key gap in fintech and banking.

Earthport launches the first fully compliant gateway for real time payments
London, UK, August 18 2015 – Earthport, the largest open global bank payment network, today announced the enhancement of its global gateway to enable real-time cross-border payments via distributed ledger protocol. With a single, simple integration into Earthport, its clients can have access to the fastest payments possible, whether through the company’s Expedited Payments (Global ACH); Faster Payments (in the markets where available), and now, Real Time Payments, via a partnership with Ripple Labs.

FCA: Project Innovate
The Call for Input closes on 7th Sept. 

Government for Science report / Blackett Review

The new Payment Systems Regulator (PSR), is currently in the process of setting up a Payments Strategy Forum.

European Commission: A Digital Single Market for Europe: Commission sets out 16 initiatives to make it happen

HM Treasury
"4.7 The government recognises that the technology associated with digital currencies offers considerable promise, making it possible for users to transfer value (or other information) quickly, efficiently and securely, providing a permanent record of what has taken place, and without the need for a trusted third party to oversee the process. In response, the government is launching a new research initiative which will bring together the Research Councils, Alan Turing Institute and Digital Catapult with industry in order to address the research opportunities and challenges for digital currency technology, and will increase research funding in this area by £10 million to support this. 
4.8 In addition, in February 2015, the Bank of England announced it will undertake research on central bank-issued digital currencies as part of its new research agenda. This work covers the potential costs and benefits of doing so as well as the economic impact, technological requirements and necessary regulations for a central bank-run system."


Interoperability reaches India?

Not today…
Committee on Clearing Corporations
On interoperability / viability of single Clearing Corporation, the committee recommended that at this juncture, maintaining separate clearing corporations for each exchange would be prudent.


ESMA advises Commission on implementation of CSD Regulation
ESMA has delivered the Technical Advice on the level of penalties for settlement fails, and the substantial importance of a CSD for the functioning of the securities markets and the protection of the investors in a host Member State. 

Asset Type/liquidity
Daily flat penalty rate
Liquid shares
Illiquid shares and others financial instruments (such as ETF, certificates, DR, etc.)
SME Growth Market shares and other financial instruments
Corporate bonds
SME Growth Market bonds
Government and municipal bonds
Discount Rate per currency with a floor of 0
(page 15)

DRAFT REPORT on stocktaking and challenges of the EU Financial Services Regulation: impact and the way forward towards a more efficient and effective EU framework for Financial Regulation and a Capital Markets Union

CPMI-IOSCO: Harmonisation of key OTC derivatives data elements (other than UTI and UPI) – first batch
This consultative report is one part of the CPMI-IOSCO Harmonisation Group's response to the FSB mandate. It focuses on a first batch of key data elements (other than UTI and UPI) that are considered important for consistent and meaningful aggregation on a global basis.  

FSB: Progress in implementing OTC derivatives market reforms
The report finds that implementation of OTC derivatives market reforms is well underway, with the foundational authority needed to give effect to the full range of these reforms in place in most FSB member jurisdictions.

A group of 11 industry associations have called on regulatory bodies to address the problems of poor data quality in derivatives reporting.
One idea floated by the group would be to create a central 'data dictionary' that defines and clarifies derivatives trade and reference data and workflow requirements for each reporting field required by regulators globally.

The London Stock Exchange has inked a deal with Boat Services to build a MiFID II-compliant multi-asset reporting platform.
The real-time service will bring together the LSE's and Cinnober-owned Boat's existing MiFID-compliant trade reporting platforms and complement the T+1 MiFID and Emir transaction reporting service available via UnaVista.

AIMA: Impact of Basel III on hedge funds and asset managers
AIMA announced a new survey that explores how Basel III bank capital rules impact money managers and their financing relationships 
*** Don’t get excited, this is the survey…not the results.

Looking at FX in MiFID.
A. What is the scope?
Given the implications of a currency contract being a MiFID financial instrument, it is hardly surprising that there has been considerable debate surrounding the issue of when an FX contract is a currency payment or FX spot contract on the one hand, or an FX forward contract on the other: the former does not comprise a MiFID financial instrument, while the latter does. It is broadly agreed that a currency contract which settles within two trading days is a spot contract while one which settles after seven trading days is an FX forward contract. However, Member States have taken different approaches to the classification of FX contracts the settlement date of which is between 3 and 7 trading days. Moreover, some Member States have transposed MiFID so as to exclude certain categories of FX forward contracts from the definition  of financial instrument and those excluded categories themselves vary across the Member States.

B. Does the inevitable regulatory creep provide future commercial opportunities?
Financial data outfit Markit has agreed to buy DealHub, a provider of trade processing and trading services to the foreign exchange market. Financial terms were not disclosed.


Cinnober Interim Results.

Hong Kong Exchange
Record results (full set including LME).