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Michael Lewis Explains How Finance Works


Matt Turner, Business Insider, The heroes of ‘Flash Boys’ just took a huge swipe at the New York Stock Exchange, here. These are the same guys who took 75  pages in Micheal Lewis’ Flash Boys to figure out there are multiple exchanges operating independently in New Jersey. Reminds me of when our doorman told the enraged condo owner who was trying to locate an important piece of mail that the mailman is stupid.

In its response, IEX said that the speed bump is “a response to disparities related to speed and technological capabilities that currently exist in the national market system.”

It then said such a delay wouldn’t be required or could be “materially shortened” if:

Exchanges did not sell co-location services.
Exchanges did not sell high-speed proprietary data feeds with speed advantages over public consolidated data.
Exchanges did not sell low-latency technology used to access their markets.
Exchanges did not sell other low-latency enhancements that drive the emphasis on speed in reaching exchanges.
Exchanges were all located in the same facility.

Hey, I have an idea, why don’t you just have the customers all run their orders through a HFT system written in Erlang.

Julia La Roche, Wall Street is not going to like the ‘Big Short’ movie, here. Wait so the problem wasn’t CDS trading?

“The Big Short” debuted at the Ziegfeld Theater in Midtown Manhattan on Monday evening, and Wall Street is not going to like it.

It’s not because the movie makes Goldman Sachs bankers look super obnoxious, or that the whole narrative of the film is, “Blame the banks!”

Wall Street won’t like it because ultimately the movie is a poorly executed explainer of the 2007-2008 financial crisis.

Tyler Durden, Zerohedge, Swiss Bank “Goes There”, Applies Negative Rates To Retail Deposits, here.

The reason banks haven’t passed on NIRP to depositors is essentially two-fold. First, banks want to avoid damaging customer relationships for as long as absolutely possible. Second – and more importantly – banks have found other ways to offset negative rates. Here’s Detusche again: “The SNB have noted that the consequence of introducing negative rates earlier this year was rising, not falling, mortgage rates as banks sought to protect falling liability margins by raising long-end rates. In a similar vein, Danish banks appeared to raise administration fees on new mortgages after rates first turned negative back in 2012.”

Well this can only go on for so long and sure enough, as AFP reports, “a tiny Swiss bank specialised in financing social and environmental projects will on January 1 go where no retail lender has gone before, applying negative interest rates on individual clients.”

Jamie Lendino, ExtremeTech, China’s Tianhe-2 is still the world’s fastest supercomputer, but Cray is on a resurgence, here. I like the SPARC64 supercomputer –  does not crunch so many numbers but it will context switch like nothing you have ever seen.

Here’s the current list:

1. Tianhe-2: TH-IVB-FEP Cluster; National Super Computer Center in Guangzhou, China; 3.12 million cores (33.86 petaflop/s).

2. Titan: A Cray XK7 system at the Department of Energy’s Oak Ridge National Laboratory (17.59 petaflop/s).

3. Sequoia: An IBM BlueGene/Q system located at the Department of Energy’s Lawrence Livermore National Lab in California, with 1.57 million cores.

4. K Computer: A SPARC64 system with 705k cores at RIKEN Advanced Institute for Computational Science in Japan.

5. Mira: IBM BlueGene/Q; DOE/SC/Argonne National Laboratory, US; 786k custom IBM cores.

6. Trinity: Cray XC40; DOE/NNSA/LANL/SNL, US; 301,056 Xeon E5-2698v3 cores.

7. Piz Daint: Cray XC30 with 116k Xeon and Nvidia cores; located at the Swiss National Computing Centre in Switzerland.

John Reed, FT, We were wrong about universal banking, here. We?

The cause of all this turmoil is the banks’ quest for a formula that will enable them to return to the pre-2008 financial crisis glory days of global reach and big profits. But there is no such formula. The destination will prove unreachable and the quest unfulfilled.

Hugh Son, Bloomberg, McKinsey’s Trading Prophecy Is a Wall Street Ruled by Machines, here. These folks could sell NIMo.

Wall Street’s future will be dominated by firms that embrace technology from electronic fixed-income trading to blockchain and predictive algorithms, reducing the need for people in the front and back office, according to McKinsey & Co.
Global investment banks that successfully adopt automated trading and other measures can increase profit by 30 percent, the consulting firm said in a report released Wednesday. Smaller firms should take a more targeted approach, using technology to streamline operations and trim costs, according to the paper titled “Two Routes to Digital Success in Capital Markets.”
“Banks taking the all-in route will end up with business models and economics
that look very different from those they have today,” according to the report. “On the sales and trading front, digital channels will become the default for transacting with clients. Coverage models will shift radically as banks ruthlessly examine every front-office routine and manual activity for its automation potential.”


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