First Impressions

OCC Lingo: SIFMU Stands For Clearinghouse Changes

The OCC was designated a systemically important financial market utility in 2012. That led to some big changes at the organization, along with challenges in risk management and credit and liquidity resources. John Lothian News spoke with John Fennell, executive vice president, financial risk management at the OCC, about what the organization is doing to insure that it meets these and other regulatory obligations.
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Quote of the Day

“From a macroeconomic perspective, commercial banks – and possibly central banks – face the potential for disruptive competition in the payments system that could affect the traditional channels of monetary policy transmission.”

Randall Kroszner, a former Fed board governor in the story, ” Could Machines Put Central Bankers Out of a Job?”

Lead Stories

Americans Aren’t Miserable Enough for the Bull Market in Stocks to End
It’s Monday morning, which means Wall Street’s strategists have a lot to say. And for whatever contrasts in investment strategy they may display, most seem to follow the same strategy of firing off reports on Monday mornings so you have something to think about when those markets reopen.

Harvey Pitt on the Future of Stock Exchanges; The Big Board trading floor will become the next Apple store or Trump Tower, and other fearless predictions from the former SEC chief
Predictions about Wall Street and its institutions can be exceedingly difficult. As Paul Samuelson, America’s first Nobel laureate in economics, wryly observed nearly 50 years ago, Wall Street prognosticators “predicted nine out of the last five recessions!”

Smaller and simpler mantra rings through banking boardrooms
Deutsche Bank’s plan to jettison much of its German retail bank and withdraw from one in ten countries sees it join a growing list of banks choosing to shrink and simplify to survive.
The benefits of size and reach, for years considered the holy grail of global banking, are now viewed as being outweighed by the cost and complexity of running businesses across dozens of countries.

Treasury ETFs Inflows Outpacing All Other Bond Funds This Month
Exchange-traded funds that hold U.S. Treasuries are seeing more cash inflows this month than any other fixed-income funds for the first time this year.
U.S. government debt ETFs have brought in $1.5 billion since March, according to Bloomberg data. If that trend holds, it will be the first time since October that inflows into the funds will outpace those of other bond ETFs.

Glut of Capital and Labor Challenge Policy Makers; Global oversupply extends beyond commodities, elevating deflation risk
The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor—a glut that presents several challenges as policy makers struggle to stoke demand.

Deflation? Oil’s 45 percent rebound could be markets’ next headache
Whisper it, but the next challenge for financial markets and policymakers may not be deflation, but the remarkable surge in oil prices from the six-year low touched in January.
Since then, Brent crude futures have risen 45 percent. If that is sustained or even increased throughout this year, inflation next year could rise significantly, posing questions for policymakers largely committed to ultra-loose policy.

US banks push for delay in reporting corporate bond trades
Robin Wigglesworth, US Markets Editor, FT
US banks and asset managers are pushing for a delay in reporting big corporate bond trades as a way of avoiding a possible liquidity crisis, potentially setting up a battle with regulators keen to preserve transparency in the traditionally murky market.

SEC’s stock market reform club locks out retail brokers
The U.S. Securities and Exchange Commission is convening a group of financial industry veterans for the first time next month to consider stock market reforms, but one group will be conspicuously absent: retail brokerages.

Who, Or What, Crashed The Market In A Flash In 2010?
It has been five years since the so-called flash crash on Wall Street raised big questions about computerized trading. What caused the flash crash has been a topic of debate ever since. U.S. officials revived the debate this week by arresting a little-known trader in London.

US has itself to blame for flash crash trading
The Guardian
It’s a bit rich for the US authorities to seek extradition of Navinder Singh Sarao on charges of “wire fraud” (intentionally depriving another person of property or honest services via mail or wire communication) – a federal crime since 1872 – when they themselves set up the environment in which Sarao was allegedly making bets in the unregulated market

US banks face ‘golden parachutes’ challenge
Ben McLannahan in New York, FT
Investors are set to challenge some of Wall Street’s biggest banks on their “golden parachutes,” which can see top executives pocket millions of dollars before taking jobs in government.

Japan’s trading houses rethink strategy
Kana Inagaki in Tokyo, FT
With their extensive intelligence networks and broad global footprint, Japan’s trading houses historically have been reliable sounding boards on topics ranging from energy supply and diplomacy to the world economy.

For Hong Kong regulator, HSBC presents major challenges
A move by British banking giant HSBC to relocate its headquarters back to Hong Kong would present major challenges to the city’s banking watchdog, regulatory experts said.
The Hong Kong Monetary Authority (HKMA) is regarded as one of Asia’s leading regulators and has experience with subsidiaries and branches of large banks. But it has never been the primary regulator of a systemically important global financial institution.

HSBC considering spinning off British retail bank: Sunday Times
HSBC (HSBA.L), Europe’s biggest bank, is weighing plans to spin off its British retail bank in a 20 billion-pound ($30.37 billion) deal, the Sunday Times reported.
Directors at the bank are considering the future of its UK retail operations, the newspaper reported, citing senior sources.

Deutsche Bank granted waivers from SEC sanctions after Libor guilty plea
Neil Roland – MLex
The US Securities and Exchange Commission granted temporary waivers from certain regulatory sanctions to Deutsche Bank following its guilty plea last week to criminally manipulating interest rates, documents show.

Deutsche Bank says no cap hike needed to meet new leverage goal
Deutsche Bank does not need to raise capital to achieve its aim of raising is leverage ratio to at least 5 percent from around 3.4 percent currently, Co-Chief Executive Anshu Jain said on Monday.

Deutsche Bank pledges overhaul, shares slide
Deutsche Bank (DBKGn.DE) will cut 200 billion euros ($217.5 billion) in investment bank assets and exit a tenth of the countries in which it operates as part of a restructuring program designed to boost earnings and cut risk.

JPMorgan’s Bruner Said to Plan Departure for Tradeweb Bond Job
JPMorgan Chase & Co. is losing credit trader Chris Bruner to Tradeweb Markets LLC, where he will help run the company’s corporate-bond trading unit, according to a person familiar with the matter.

Central Banks

Could Machines Put Central Bankers Out of a Job? – Real Time Economics
The fast-changing technological infrastructure of financial transactions, including nonbank finance, digital currencies, peer-to-peer lending and crowd-funding present a challenge to the monetary policies of the Federal Reserve and other top central banks, says Randall Kroszner, a former Fed board governor.

Fed not ready to concede it won’t hike this summer
Even as the market has pretty much given up on the idea that the first interest-rate hike since the Great Recession will be made in June, don’t expect the Federal Reserve to acknowledge as much.
“I think the Fed won’t paint themselves into any corners, they want maximum wiggle room,” said Josh Shapiro, chief U.S. economist at MFR Inc.

Traders Await Fed’s Perspective And Next Chapter In Greek Drama
The U.S. dollar steadied in a tight trading range against a number of currencies on Monday as investors await the outcome of this week’s Federal Open Market Committee (FOMC) meeting, and indications of what to expect from Greece.
No significant news hit the markets regarding Greece over the weekend. Capital markets continue to witness the dealings of Greece acting like a petulant child being scolded by its guardian. The more the parent pushes, the more obstinate the youngling becomes. No progress is bad news given that Greek sovereign debt remains on a downward trajectory, and Athens is getting closer to running out of cash.

Fed Triggers Bank Flight From Emerging Markets
As the Federal Reserve gradually ends its extraordinary efforts to stimulate the U.S. economy, there is increasing concern about the potential for repercussions in faraway places — particularly in emerging markets. To judge from the recent behavior of global banks, those repercussions are already happening.

More central banks meet, but ability to pilot economies in doubt
Most central banks have been easing policy since the start of the year and are set to do more, but it still isn’t clear whether that new activism, which has pushed stock markets to record highs, will help the global economy much.
Several meet this week to set policy, including the U.S. Federal Reserve, the Bank of Japan and Sweden’s Riksbank, which all have turned to government bond purchases as stimulus after running out of interest rates to cut.

Norway’s central bank: policy shouldn’t be overburdened with financial stability
Norway’s monetary policy should take into account the risk of increasing financial imbalances, but it should not be overburdened, and banking regulation and supervision should be the first line of defence, central bank governor Oeystein Olsen said on Monday.


The Democrats are making a stand on currency manipulation — and it’s a really good idea
It’s down to the wire, but Democrats appear to finally be getting serious about making sure the Trans-Pacific Partnership deal — a massive trade pact between the U.S. and 11 other Pacific Rim nations — is worker-friendly. And if it isn’t, it may not happen at all.

Franc Surge Supercharges Swiss Spending Power in German Towns
Swiss shoppers are making the most of the strong franc: they are hunting for bargains abroad.
That’s what customs office data in Loerrach, on the German border to Switzerland, indicate. Export forms, which allow shoppers to reclaim value-added tax on goods they’re bringing back into Switzerland, increased 27 percent in the first quarter from a year earlier.

Colombian Currency Leads Global Gains on Recovery in Oil Prices
Colombia’s peso climbed to a two-month high as oil, the South American nation’s biggest export, traded near its highest price this year.

Citi Research Says Eliminating Cash Will Help Central Banks
This is a “dated” note but thought those who did not see it would be interested.
According to Citi Research, the mere existence of hard currency (ie, cash banknotes) impedes the operational flexibility of central banks in making policy. Citi analysts Ebrahim Rahbar and Willem Buiter argue that a cash-based economy has an effective lower bound (ELB) on nominal interest rates which prevents central bankers from taking interest rates as negative as they need to be.

What Italy Says About The Currency Bloc
Seeking Alpha
Italy’s economy is improving as increasing employment is pushing wages higher, translating into growing consumer spending. Italy’s currency is represented by CurrencyShares Euro Trust.

Indexes & Index Products

Record-setting Nasdaq assumes leadership role
Nicole Bullock, FT
Having reclaimed record territory after an absence of 15 years, the US Nasdaq Composite has assumed a leadership role, and in dollar terms is now outperforming the broad eurozone market for this year.

QQQ ETF Falters as Nasdaq Soars; ETF once represented 40% of trading volume at American Stock Exchange; a net outflow in 2014
Nasdaq stocks are finally having their moment. The 2,579-stock Nasdaq Composite Index has soared past its record set during the dot-com era. The smaller Nasdaq-100 index isn’t far behind.

Taiwan stock futures index hits milestone
The China Post
The Taiwan stock futures index touched the 10,000-point mark for the first time in 15 years at one point Friday before pulling back, but it still ended above its previous close.

Majority of equity, debt MFs underperformed benchmarks
Majority of equity and debt mutual funds underperformed their benchmark indices over the 5-year period ended December 31, 2014, shows data from the SPIVA India scorecard.


London Gold Trade Probably Won’t Move to Exchange, LBMA Says
Bloomberg Business
Bullion trading in London isn’t likely to move to an exchange because it would increase costs and reduce liquidity, according to the industry’s trade association.

India urges its wealthy temples to bolster the economy with gold | World news
World news | The Guardian
Workers for the centuries-old Shree Siddhivinayak Temple in Mumbai spent hours unpacking gold coins, heavy wedding necklaces and lustrous pendants from a closely guarded “strong room”. By the time gold-buyers began mingling with worshippers at the sweltering sanctuary last month, the jewellery auctioneers were ready.

Russia resumes gold stockpiling as rouble crisis eases
The Telegraph
Russia has resumed stockpiling gold after suspending purchases in the first two months of the year, as the central bank prepares to cut borrowing rates.
The move comes as the country’s central bank prepares to reduce its main interest rate by 200 basis points to 12pc when it convenes on Thursday. The bank had been forced to raise rates to 17pc last December at the height of the rouble crisis following the collapse in oil prices and the imposition of tough economic sanctions by the US and Europe.

Is Venezuela The Reason For The Recent Weakness In Gold Prices?
Seeking Alpha
Over the past few weeks gold has been fairly week despite geopolitical issues that would ordinarily provide strong support for the metal. This weakness culminated last Friday as gold hit a multi-week low right before London close (around 10 AM EST).

Lack of fear leaves gold looking vulnerable
After a swift surge in late March and early April, gold prices have turned around, losing some 2 percent in the past two weeks. And the pros say that with a general lack of fear in the market, there’s little reason to jump into the yellow metal just yet.

The Best Way to Own Gold and Silver
Q: I’m looking for information on adding gold and silver to my investments. What are the advantages and disadvantages of buying coins? What about gold and silver stocks or mutual funds?


Don’t Force Decisions; Just Back Off and Adjust. Or Go for a Walk.
NY Times
I love rock climbing. Looking from the ground up, it seems almost impossible for climbers to balance themselves and find handholds where none seem to exist.
And sure enough, even the most talented climbers can end up getting stuck on climbs well below their skill level. I’ve done it, and I’ve seen it happen to other climbers, too. But the fact that the next move feels so hard, like we need to force it, means we’re missing something. In other words, there must be a handhold we just haven’t seen yet.

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