This Wall Street veteran has raised $107 million to build the 'app store' of financial services

• Oscar Williams-Grut
 

• Jun. 11, 2017, 3:00 AM
• 4,631
 

CEO of R3, David Rutter. John Phillips/Getty Images for TechCrunch

MADRID, SPAIN — Fintech startup R3CEV raised $107 million from a consortium of the world's top banks last month, one of the largest funding rounds for a startup working with distributed ledger technology.

The company was founded in 2014 by Wall Street veteran David Rutter to try and bring the technology behind bitcoin — blockchain, a.k.a. distributed ledger technology — to high finance.

It initially formed a consortium of the world's leading banks and 40 of them, including Bank of America Merrill Lynch and HSBC, invested in May's round.

Business Insider sat down with Rutter at the MoneyConf conference in Madrid this week to hear about what R3CEV plans to do with its war chest. He told BI that his company is trying to build the "operating system for finance," comparing it to a platform like Apple's App Store.

"You should really think about us being the operating system, the platform, the app store, a bit of the distributed ledger technology, the foundational pieces that allow you to utilise all of the infrastructures and really build an application that means something to you and your business and to you and your customers," Rutter told BI.

What is blockchain and why are banks excited?

Banks around the world have been talking about the potential of blockchain to transform finance for almost two years now. Blockchain is a form of shared database originally developed to underpin the digital currency bitcoin. It enables all parties on a network to see the same version of a database and uses complex cryptography and group authentication to police the editing of it.

The inbuilt security and trust checks allow banks to potentially cut out middlemen in processes like settlement and clearing and deal directly with each other. This, in turn, cuts down costs. Santander estimated in a 2015 report that the technology could save banks as much as $20 billion per annum collectively.

"What we have today is all these companies that have either bespoke software or third party software and it doesn’t communicate easily," Rutter says of the problems blockchain could address. "You have tens of billions spent each year on writing APIs between your trading systems and your order management systems and your trading systems and the like."

R3CEV works closely big banks to understand what they want about the technology. As well as counting 40 major banks as investors, a further 50 are members of R3CEV's consortium — a kind of club for global banks to get together to discuss the technology.

Rutter says there are several "themes" that banks are interested in when it comes to deploying distributed ledger tech: trade finance, "because it’s massive, it’s very paper-based, and it’s not so automated,"; global digital identification, to help banks cut down on the cost of identity and anti-money laundering checks; post-trade processing; and payments.

'We view it as the operating system for finance'

R3CEV itself doesn't actually build software to tackle these problems. Rather, it builds a platform for these solutions to be built on.

"We view it as the operating system for finance," Rutter says. Just as Microsoft makes the Windows operating system, which runs programmes like Word or Excel, R3CEV has developed Corda, a blockchain-based platform that can be used by developers to build apps for banks.

Rutter says: "Corda is a completely open system that is going to empower entrepreneurs to be able to build Corda apps, roll them out, and actually have them be adopted because they will work with the current financial rails, in a way that is cognizant of and compliant with the regulatory regime"

R3CEV publically announced Corda in April 2016 and open sourced the technology. Rutter says there are some projects running on Corda today but most of R3CEV's revenues still come from membership fees. The company charges banks to join its consortium, allowing them to participate in lab experiments using its technology and shape its development.

But Rutter says: "The revenue mix will go from lab membership fees and services to enterprise software licensing fees being the massive portion of our revenues five years from now."

Developing the Corda platform is one of the main things that R3CEV will spend its $107 million on, as well as encouraging entrepreneurs to start building on the platform through training videos and hackathons.

'R3 has just been legitimised'

But Rutter says the chunky investment is more than just money. "The big step forward with this funding is Corda and R3 has just been legitimised by not just a $107 million investment, but we’re now majority owned by the world’s largest financial institutions. There’s no safer bet in the world."

This endorsement will help R3CEV, which has offices in New York and London, attract developers onto its platform, he believes.

"One point I try to get across when I meet these new entrepreneurs with a great idea is that if you are a JPMorgan or a Goldman Sachs or a Wells Fargo or HSBC, you can see an amazing presentation by a company that has five, ten, 20 employees and $10 million in the bank," Rutter says. "You CANNOT go to your boss and say I want to move this mission critical function to this thinly capitalised 20 man shop.

"It’s why the IBMs of the world, the Accentures of the world, the KPMGs of the world get so much business providing these services. It’s because they’re reliable and they’re going to be around for a long time."

Rutter hopes the endorsement and funding from top banks will put R3CEV into these ranks.

But not all banks are so hot on the project. JPMorgan, Goldman Sachs, Santander, and State Street all joined R3CEV's consortium at the start before leaving and have not invested.JPMorgan is also one of the founding members of the Ethereum Enterprise Alliance, a rival consortium looking at how Ethereum, a rival blockchain platform, can be used in business.

Rutter is bullish. "Those guys [banks who left R3], I’m sure they’ll work with R3 in the future, especially as we become the standard. As you know, the network part of this is very important. There’s been a lot of people that have talked about this as being a team sport. You could talk to the 90 members of R3 and they would increase the confidence that we’re on the right track with the right sponsorship. They’ll come back. They were there at the beginning, they’ll come back."

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EU chief Jean-Claude Juncker urged Theresa May to hold the election that makes Brexit even more complicated

• Will Martin
 

• Jun. 11, 2017, 5:56 AM
• 3,663
 

REUTERS/Hannah McKay

LONDON — European Commission President Jean-Claude Juncker urged Theresa May to hold a general election to make the job of negotiating Brexit easier, a report from The Observer released on Sunday says.

Juncker, who has been one of the most vociferous critics of Brexit in Brussels, urged May on several occasions to hold the election, telling her it would give her more breathing room during "pinch points" in negotiations around leaving the EU.

"It is understood that Juncker had advised May to call an early general election as a result of his concerns that the 17-seat majority she had inherited from David Cameron would not be enough during the pinch points of the negotiations, including over the issue of the UK’s divorce bill, estimated to be as much as €100bn," Toby Helm and Daniel Boffey of the Observer write, citing an EU source.

"During bilaterals, in the margins of summits, Juncker repeatedly told her he thought she should do it," the source reportedly said.

May called an election in April with the rationale that she could win a bigger majority in the House of Commons, and consequently be less in the thrall of hardline Brexiteers in the party. However, her decision backfired spectacularly as a disastrous campaign from the Conservative Party and a huge surge in support for Labour's Jeremy Corbyn robbed May of her majority.

That has made the prospect of negotiating Brexit, which many believe will be one of the most complex political negotiations in history, even more tricky as May will likely struggle to pass legislation through parliament if even a handful of MPs rebel. A Conservative minority government is likely to be propped up by a "confidence and supply" agreement with the Northern Irish Democratic Unionist Party.

Juncker and May's relationship has been strained in recent months, especially after Juncker's team leaked details of a dinner between the pair at Downing Street. 

An extensive leak of a meeting between Juncker and Theresa May appeared in the German press early in May, depicting Juncker as dismayed at May's position on Brexit negotiations. He reportedly told May as he left the dinner: "I leave Downing Street 10 times more skeptical than I was before."

May then claimed in a speech outside Downing Street that EU officials were deliberately attempting to swing the result of the election on June 8th by undertaking such leaks.

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China vigilant as US bombers fly over South China Sea

Al Jazeera

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Man arrested for leaving unattended luggage bag at bicycle bay of Admiralty MRT station

© Provided by Al Jazeera A pair of B-1B Lancer bombers fly in an undated file photo [Staff Sgt Steve Thurow/US Air Force via Reuters]

China said on Friday it was monitoring US military activities in the South China Sea after two US bombers conducted training flights over the disputed waters.

The US Pacific Command said on its website two American Air Force B-1B Lancer bombers flew a 10-hour training mission from Guam over the South China Sea on Thursday, in conjunction with the Navy's USS Sterett guided-missile destroyer.

The exercise comes after a US warship in late May carried out a "manoeuvring drill" within 12 nautical miles of an artificial island built up by China in the South China Sea.

The US military conducts such "freedom of navigation" patrols to show China it is not entitled to territorial waters there, US officials said at the time.

The latest exercise was part of Pacific Command's "continuous bomber presence" programme, but it did not give details on where it was conducted and did not refer to it as a freedom-of-navigation operation.

"China always maintains vigilance and effective monitoring of the relevant country's military activities in the South China Sea," the ministry said in a statement, referring to the United States.

"China's military will resolutely safeguard national sovereignty, security and regional peace and stability," it said.

China claims nearly all of the South China Sea, through which about $5 trillion in shipborne trade passes each year, a stance contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam.

The US has criticised China's construction of islands and build-up of military facilities there, concerned they could be used to restrict free movement and extend China's strategic reach.

US allies and partners in the region had grown anxious as the administration of US President Donald Trump had held off on carrying out South China Sea operations during its first few months in office.

Vancouver Housing Market “Ain’t Seen Nothing Yet”

Joannah Connolly

June 9, 2017

With demand unabated and supply constrained, Vancouver’s affordability issues have only just begun, warns leading new home marketer

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The Vancouver real estate market, far from reaching its peak in terms of unaffordability and lack of housing, is merely “dancing on the edges of a massive problem,” according to one leading development marketer.

Speaking to a packed audience at the Urban Development Institute luncheon on new home marketing at the Fairmont Hotel Vancouver June 8, Cameron McNeill of MLA Canada added, “We ain’t seen nothing yet.”

The panel of well-known development marketing bosses, which also included Scott Brown of Fifth Avenue Real Estate Marketing and Daryl Simpson of Bosa Properties, discussed how blistering demand and a trickling supply of new housing is affecting the affordability of homes in the region.

Event moderator and UDI chair Jon Stovell of Reliance Properties asked the panel whether onerous building permit requirements and slow processing times were affecting home prices – to which the reply was unanimously “yes, absolutely, 100%.”

Cameron McNeill observed that the Metro Vancouver region is expected to grow by 250,000 people in next five years, and that it currently takes around six years to get a highrise residential project from conception to occupancy – “if it all goes well”. He said, “And that’s maybe 300 units. The city is 300,000 people bigger by that point.”

McNeill added, “We’re dancing on the edges of a massive, massive problem. And it’s not going to change. I just came back from Hong Kong and everybody I spoke to said to me, ‘That’s nothing.’ We ain’t seen nothing yet. This is just the tip of the iceberg for Vancouver.”

Daryl Simpson pointed out that population growth numbers, and therefore housing demand, would likely be even higher than projected, as projections are based solely on permanent residents and citizens. “One thing they rarely look at student visas and multiple-entry visas. There were 67,000 student visas in BC last year. And you have to think, if they’re flying to BC to study, these are students with means, maybe wealthy families. In 2016, there were 315,000 multiple entry visas – they last 10 years and allow people to fly back and forth. So you need to layer those on top of the permanent residents and citizen population growth.”

Scott Brown said, “You can’t fix demand. And if this is a housing crisis as the media says, where is the multi-stakeholder group figuring out how to speed up supply? If we were going to war we sure as hell would be working out how to arm up quickly. But we spend more time working out how to break things apart than how to fix things. We need to work together. We’re trying, but putting one project a time on the market, there’s so much demand, prices just keep escalating.”

Simpson added, “Look at the 450 acres in False Creek Flats, with 1,400 residential units in total earmarked for that area. That’s three homes per acre. That’s insane. Ask Ryan Holmes of Hootsuite what he needs, it’s not 450 acres of industrial land, its proximate residential units [so employees can afford to live in Vancouver close to work]. Ask Amazon, they’ll say the same thing. Go to Seattle, there are more residential units being built by Vancouver developers – Bosa, Westbank, Onni – right across the street from the Amazon HQ than will be built in the whole of the False Creek Flats.”

 

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Joannah Connolly

Joannah Connolly is the editor and content manager of REW.ca and Real Estate Weekly newspaper, and editor-in-chief of Western Investor and West Coast Condominium. She also moonlights as the host of the Real Estate Therapist call-in show on Roundhouse Radio 98.3FM. A dual Canadian-British citizen, Joannah has 20 years of media experience in Vancouver and London, with a background in construction, architecture and business media.

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Orange juice has moved more than any other commodity this year

Seth Archer

 Jun. 7, 2017, 02:10 PM

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Orange juice investors seem to have lost their zest for the commodity.

Since the beginning of the year, prices for orange juice future contractshave fallen 33.1% from $197 to around $132.

Several factors have contributed to the dramatic drop in price.

Orange juice is about as bad for you as a bag of M&Ms, and Americans have been drinking less juice in recent years. Sales of frozen juice have been hit the hardest, as sales fell by $98 million from 2012 to 2016.

The decline in sales has mirrored a decline in production. Florida is the largest orange producer in the United States, and its annual production in 2016 was the worst since 2005, according to data from the USDA.

These declines have led to a smaller number of traders even interested in the commodity, according to the Wall Street Journal. The decline in orange juice futures contracts has followed the decline in production since 2016.

The sugar crop is also down noticeably in 2017. That commodity has fallen $6.30, or 30.7% so far this year. The best commodity so far this year has been lean hogs, with prices growing around 23%.

Commodities that more commonly make the news have been moving a lot in the last couple of weeks. Oil fell sharply on Wednesday following news of a gain in US reserves when investors were expecting a decline. Gold is on the rise as geopolitical events like the recent terror attacks and upcoming UK election raise uncertainty for investors.

Traders are cranking up their bets against Snap

• Joe Ciolli
 

• 12h
• 8,844
 

REUTERS/Brendan McDermid

Traders haven't been this bearish on Snap since the period immediately following its initial public offering.

The ratio of bearish put contracts on Snap's stock to bullish calls is 1.7-to-1, the highest since March 17, only the fifth day that Snap options were available to be traded.

After an initial shorting frenzy that pushed the ratio as high as 3-to-1, bearishness leveled off for a couple of months. But now that Snap has been drawing the ire of analysts across Wall Street because of concerns over user growth, pessimism is once again mounting.

The most recent criticism came from Nomura on Wednesday. Looking at data around downloads on the Snapchat app, analyst Anthony DiClemente highlighted slowing daily-average user growth through the first two months of the second quarter.

DiClemente doesn't expect near-term monetization growth to pick back up, and he also noted an acceleration in downloads for Instagram. He warned against competitor growth at a time when Snap's user expansion is slowing.

JPMorgan got in on the action on Monday, lowering its price target on the company. The firm also has concerns over fewer people flocking to the platform than expected. It estimated that only 8 million users will join Snapchat in the second quarter of 2017, missing the previous forecast of 10 million.

Of all the underwriters that participated in Snap's IPO, none have been more downbeat than JPMorgan, which received the third-biggest share of stock to sell in the offering. The firm lowered its price target on the stock after a disappointing first-quarter earnings report last month.

Business Insider / Andy Kiersz, data from Bloomberg

Get the latest Snap stock price here.

SEE ALSO: JPMORGAN: Snapchat isn't adding enough users, and the stock could go lower