Let's See How Far We've Come
Looking back at a historic year for exchanges, markets and the world
Welcome to another issue of Front Month, a newsletter covering the biggest stories in exchanges every Friday. If you have questions or feedback, please reply to this email or find me on Twitter. If you like this newsletter and want to follow the exchange industry with me, please hit the Subscribe button below & be sure to share with friends & colleagues:
Happy holidays everyone.
With 2020 rapidly coming to a close, I wanted to look back at the timeline of events, headlines, and stories that shaped this year for markets and exchanges in particular.
Sometimes we forget how quickly COVID-19 went from being a “contained to China” afterthought to a global threat, or the speed with which markets dropped in March only to rebound as quickly when the Federal Reserve came charging in to save the day. We could forget (or maybe want to forget) how an initial message of “two weeks of lockdown to slow the spread” dragged on for nine months with vaccines as the only light at the end of the tunnel.
Below is a timeline of key global & industry-specific events that defined 2020 and set the stage for an important & hopeful 2021.
January
January 2: Qasem Soleimani, one of Iran’s top generals, is killed in Baghdad, sparking an escalation of tensions between Iran and the United States.
January 6: Kelly Loeffler, wife of ICE CEO Jeff Sprecher, begins her Senate career after replacing Johnny Isakson.
January 7-January 31: Pro-democracy protests in Hong Kong grow and become increasingly violent in response to a pro-China extradition bill introduced in the Hong Kong legislature.
January 9: The WHO announces the presence of a novel coronavirus spreading in Wuhan, China.
January 10: Citadel Securities sues a competitor over a leaked trading algorithm valued at over $100 million.
January 13: CME launches Bitcoin options with the price of Bitcoin sitting at ~$8,000 on launch day.
January 23: Moody’s announces the acquisition of RDC, a provider of KYC/AML due diligence services, for $700 million.
January 26: Kobe Bryant is killed in a helicopter crash in Calabasas, California.
January 27: Citadel Securities agrees to pay a $97 million fine to end a five year investigation into alleged trading violations in China.
February
February 3: Nasdaq acquires ESG reporting & analytics firm OneReport.
February 4: Rumors surface that ICE has made a takeover offer for eBay, valuing the company at over $30 billion.
February 4: CBOE announces the acquisition of Hanweck and FT Options, boosting their analytics & portfolio management services.
February 5: ICE puts out a press release acknowledging discussions with eBay and announcing they will not pursue the company further.
February 6: Brian Durkin steps down as President of CME after 37 years with the company, staying on as special advisor to CEO Terry Duffy.
February 25: Citadel Securities assembles a team to attract institutional options order flow and expand an already dominant market making business with ~25% of options trades flowing through their system.
March
March 6: CBOE launches CBOE Market Close, a feature designed to challenge NYSE and Nasdaq for closing auction volume in the equity markets.
March 13: President Trump declares COVID-19 a national emergency.
March 13: CME closes its physical Chicago trading floor.
March 13: CBOE closes its physical Chicago trading floor.
March 16: The VIX closes at a new all time high of 82.69 as the S&P 500 drops -12% in one day, the third largest decline in history.
March 19: California becomes the first state in the US to issue a state-wide stay at home order to help slow the spread of COVID-19.
March 23: The NYSE closes its physical New York trading floor and moves to all-electronic trading for the first time in history.
March 23: The S&P 500 closes at 2237, its lowest close of the year.
March 23: The Federal Reserve unleashes a bazooka of stimulus programs aimed at calming the credit markets.
March 27: The CARES Act is signed into law by President Trump, which includes checks sent directly to families & individuals.
April
April 20: WTI crude oil prices turn negative for first time in history, closing at -$37.63 per barrel.
April 20: Tradeweb announces a stock offering for legacy bank stockholders to sell part or all of their ownership stakes accumulated pre-IPO.
May
May 19: CBOE announces the purchase of MATCHNow from Virtu, a Canadian equities dark pool.
May 26: The NYSE partially reopens the trading floor with strict social distancing guidelines in place.
May 27: MSCI announces an agreement with Hong Kong Exchange for the launch of 37 futures & options products based on MSCI indices.
June
June 1: The Small Exchange, an upstart venture featuring small-sized futures contracts for retail investors, launches for trading.
June 2: CBOE announces the purchase of analytics firm Trade Alert, adding to its earlier Hanweck & FT Options information solutions buys.
June 16: CBOE reopens its Chicago trading floor.
June 16: An appeals court rules in favor of exchanges in a fight with the SEC over experimenting with trading fees.
June 25: LSE appoints Anna Manz as its CFO.
July
July 1: CBOE closes on its acquisition of EuroCCP.
July 16: Euronext receives Danish regulatory clearance to acquire securities depository firm VP Securities.
July 31: Franklin Templeton completes its $4.5 billion takeover of Legg Mason.
August
August 6: ICE buys Ellie Mae from Thoma Bravo for $11 billion, pushing the exchange firmly into the mortgage technology space.
August 10: Virtu hires Sean Galvin as CFO and promotes Cindy Lee to Deputy CFO.
August 17: Robinhood raises a fresh $200 million of capital valuing the firm at $11.2 billion.
August 18: CBOE launches mini-VIX futures as a retail focused complement to its dominant VIX business.
August 31: CME launches micro e-mini options after the successful launch of the corresponding futures in 2019.
September
September 4: SoftBank is unveiled as the “Nasdaq whale” behind the surge in call buying on tech stocks to spark a rally.
September 16: MarketAxess buys Muni Brokers, a trading platform serving legacy dealers in the municipal bond market.
September 17: Deutsche Boerse buys a majority stake in analytics firm Quantitative Brokers for an undisclosed sum.
September 21: MEMX launches as a rival equities exchange backed by BlackRock, Virtu, Citadel and other prominent institutions.
September 23: MarketAxess buys Regulatory Reporting Hub, a pan-European compliance platform, from Deutsche Boerse.
September 29: MIAX launches its PEARL Equities platform to add to the competitive frenzy against the legacy exchanges.
October
October 2: President Trump tests positive for COVID-19 and is admitted to the hospital.
October 5: President Trump is discharged from the hospital.
October 9: Euronext buys Borsa Italiana from LSE for $5 billion, clearing the way for the EU to approve LSE’s pending acquisition of Refinitiv.
October 9: ICAP agrees to purchase electronic trading network Liquidnet for up to $700 million.
October 16: CBOE buys large institutional block equities trading platform BIDS for an undisclosed amount.
October 19: Multiple technical glitches cause market outages at Euronext throughout the trading day.
October 20: FactSet agrees to acquire ESG data provider Truvalue Labs.
October 21: Nasdaq announces the retirement of CFO Michael Ptasznik effective early 2021. Chief Accounting Officer Ann Dennison is announced as his replacement.
October 21: Moody’s announces the purchase of Acquire Media, a KYC analytics firm.
November
November 3: Americans vote and begin to count results in the Presidential election, culminating in an eventual victory for Joe Biden.
November 17: Deutsche Boerse buys 80% of proxy firm ISS for $1.8 billion.
November 19: Nasdaq acquires anti finCrime platform Verafin for $2.75 billion.
November 20: Texas Governor Greg Abbott meets with exchanges to discuss potentially moving operations out of New Jersey to Texas after a financial transaction tax is proposed.
November 30: S&P Global announces merger with IHS Markit in a $44 billion all stock transaction, the largest deal of the year.
December
December 1: Nasdaq files a proposal with the SEC to tighten board diversity standards for listed companies.
December 7: CME launches water futures on the Nasdaq Veles California Water Index.
December 7: Moody’s acquires ZM Financial, a provider of risk management software for the US banking sector.
December 9: The SEC approves a plan to radically overhaul equity market data policy in an effort to spur exchange competition.
December 17: Robinhood settles an SEC probe into its revenue disclosures for $65 million.
December 21: Tesla is added to the S&P 500 index at a market cap of ~$615 billion, making it the fifth largest component of the index with a ~1.69% weighting.
Chart of the Week
I’ll end 2020 with a review of stock performance across the industry. Of the 14 companies I cover regularly, 11 had positive stock performance in 2020 and nine of them beat the S&P 500, most in emphatic fashion. MSCI was the best performing exchange/market data name this year; CBOE was the worst performer. The left chart shows the breakdown of performance.
The right chart shows where each stock landed vs. what the Wall Street analyst consensus price targets were at the beginning of 2020. Other than CME and CBOE, every stock was under-targeted at the beginning of the year. While there were plenty of surprises this year & price targets frequently changed after this point, I think it’s valuable to review predictions vs. realized outcomes for these stocks. The takeaway here is even though analysts may all be leaning one way on a stock, performance can still radically differ from their expectations.
(Source: sell-side disclosures, Seeking Alpha as of 12/24/2020)
Thank you for reading this issue of Front Month. Word of mouth is the #1 way others find this newsletter - If you liked this week’s content, please consider sharing with friends & colleagues. Questions & feedback can be sent via email or Twitter.
Disclaimer: I am not a financial advisor. Nothing on this site or in the Front Month newsletter should be considered investment advice. Any discussion about future results or projections may not pan out as expected. Do your own research & speak to a licensed professional before making any investment decisions. As of the publishing of this newsletter, I am long ICE, CME, CBOE, NDAQ and VIRT. I am also long Bitcoin.