First Impressions

Exchange CEO Series – New Neighbors: Alan Gandelman says ATS Brasil spells trouble for BM&F Bovespa

When it comes to competition in the exchange space,Alan Gandelman is at the front line.

As the CEO of Americas Trading System Brasil (ATS Brasil), a joint-venture between Americas Trading Group (ATG) and NYSE Euronext, plans to launch a competitive equity exchange in Brazil early next year. Gandelman’s effort will offer a new alternative to the BM&F Bovespa exchange, the monopoly bourse for equities and derivatives.

Gandelman, who took the reins in June 2013, said his exchange will offer investors a new model, using technology from NYSE Technologies, now owned by ICE Group.

“It’s very hard for us to talk about competition in Brazil because basically it doesn’t exist,” he said to John Lothian News’ Jim Kharouf at the FIA Boca Conference last month. “We are coming into this marketplace to introduce competition again into Brazil. We believe competition is the healthier way to have markets be where they should be.”

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Quote of the Day

“It’s clear that U.S. Treasuries internationally demonstrated their place not only as the most liquid market but also from a relative value standpoint as very compelling.”

James Camp, a money manager with Eagle Asset Management in the story, “ America’s Fiscal Health Affirmed as Treasuries Demand Rises”.

Lead Stories

America’s Fiscal Health Affirmed as Treasuries Demand Rises
Daniel Kruger – Bloomberg
America’s improving fiscal health is starting to be reflected in the market for Treasuries.
As the Federal Reserve scales back its unprecedented bond buying this year, the ability of the world’s largest debtor nation to attract investors underscores the strides the U.S. has made to strengthen its creditworthiness after the worst financial crisis since the Great Depression.

***DA: That, or it reflects the safety of treasury investment relative to the rest of one’s choice set.

BlackRock shakes up management amid succession planning
By Ashley Lau and John McCrank – Reuters
(Reuters) – BlackRock Inc (BLK.N) is reorganizing its senior management ranks as the world’s largest money manager works towards an eventual succession plan for Larry Fink, its chief executive officer and co-founder.

***DA: I guess we will be seeing some high-level departures soon.

Goldman Sees Chance to Cut Its China Junk Debt Holdings
Rachel Evans – Bloomberg
Goldman Sachs Group Inc. (GS) says now may be a good time to cut holdings of Chinese high-yield bonds after the longest winning streak in six weeks.
“Investors should use the recent rally to reduce overweight positions,” analysts led by Hong Kong-based Kenneth Ho wrote in a note dated April 4. “We believe that there will be more headlines noises to come out of China and expect to see further credit differentiation.”

***DA: Credit differentiation? That’s a new one, to me anyway. Is that a new way of saying “deterioration,” just as Alan Greenspan preferred the term “disinflation” because it sounded less insidious than “deflation?”

Banks Grappling With ECB Exams a Boon for BlackRock, KPMG
Charles Penty and Boris Groendahl – Bloomberg
Cleaning up Europe’s banks is proving to be a boon to accountants and consultants.
BlackRock Inc. (BLK), PriceWaterhouseCoopers and KPMG are some of the firms hired by regulators and banks for the European Central Bank’s review of 3.7 trillion euros ($5.1 trillion) of assets at 128 of the region’s largest lenders. Advisers stand to reap about 400 million euros, based on publicly disclosed costs in Spain, Austria and the Netherlands.

***DA: Let’s not forget the lawyers here. They are faring not too shabbily either.

Interdealers try on the exchange business for size
Sarah Spikes, Financial News
If imitation is the sincerest form of flattery, stock exchanges should feel flattered. As part of the G20’s agenda to prevent another financial crisis, over-the-counter derivatives, which are currently traded over the phone by interdealer brokers, are to be forced onto electronic trading platforms where regulators think they can keep a better eye on what’s going on.

***DA: Of course, exchanges have been trying on the IDB business as well, by becoming SEFs and by creating “futurized” OTC-type products.

Can Ice quench its thirst for Liffe?
Anish Puaar, Financial News
After sealing its position as one of the world’s largest stock exchange operators with the acquisition of NYSE Euronext last November, the IntercontinentalExchange’s next challenge will be to position the new entity to capitalise on the revolution facing global derivatives markets.

Central Banks

Draghi’s $1.4 Trillion Question Lingers as ECB Mulls QE
Craig Stirling – Bloomberg
When Mario Draghi flies to the U.S. this week, he’ll leave a 1 trillion-euro ($1.4 trillion) question mark hanging over Europe.
While the European Central Bank president and other ECB policy makers can use the International Monetary Fund meetings in Washington to reiterate their willingness to use quantitative easing, they may be unable to say much on its design. That suspense risks setting investors up for disappointment, according to economists at UniCredit SpA and Deutsche Bank AG.

Carney’s Policy Autopilot Gives Time for McKinsey Revamp
Scott Hamilton – Bloomberg
Mark Carney picked a good time to implement sweeping changes at the Bank of England.
With the governor and his officials committed to avoiding raising interest rates for months to come, no economist surveyed by Bloomberg News predicts any change at their meeting this week. The policy hiatus is providing breathing space for an institution distracted by his McKinsey & Co.-inspired revamp.

Americans need real debate about the Fed
Dean Baker – Al Jazeera America
There was a major debate on Capitol Hill through this fall and winter over the future of food stamps, or the Supplemental Nutrition Assistance Program (SNAP), which subsidizes low-income families’ food purchases. Republican legislators originally called for cutting $40 billion from the program over the next 10 years. This got scaled back in the bill that finally passed Congress, with cuts of less than $10 billion over the decade.

BOJ Seen Doubling ETF Purchases in Next Round of Easing
Toru Fujioka and Masahiro Hidaka – Bloomberg
Japan’s central bank will probably double purchases of exchange-traded funds in a second round of monetary easing under Governor Haruhiko Kuroda anticipated in coming months, a Bloomberg News survey of economists shows.


ICE Announces Successful First Week for Liffe Ultra Long Gilt Futures
IntercontinentalExchange Group the leading global network of exchanges and clearing houses, today provided an update on the first week of trading for 30 Year Ultra Long Gilt futures listed on Liffe. The contract launched on March 31, 2014 with strong first week volumes of 9,214 contracts traded and open interest of 2,634 as at April 4, 2014.

Ex-Tullett Broker Says He Never Acted on Libor-Rigging Messages
Kit Chellel – Bloomberg
A former broker at Tullett Prebon Plc (TLPR) said in a lawsuit over his firing that he never tried to manipulate Libor rates, calling messages with a UBS AG banker “misleading.”
Noel Cryan, who was dismissed in September for gross misconduct, said in London court documents that despite exchanges with a UBS trader, he never asked anyone at Tullett Prebon to “influence Libor in any way.”

Toxic Cocktail Threatens Pound’s World-Best Gains, RBS Says
Anchalee Worrachate – Bloomberg
Current-account and fiscal deficits as well as growing political risks may prove a “toxic cocktail” for the pound’s world-beating gains, according to Royal Bank of Scotland Group Plc.

SGX Launches Clearing Of Non-Deliverable Interest Rate Swaps
Singapore Exchange (SGX) is pleased to launch the clearing of Non-Deliverable Interest Rate Swaps (NDIRS) in Malaysian Ringgit and Thai Baht on 7 April 2014. This new asset class, which will be settled in US dollars, further augments SGX’s current suite of Over-the-Counter (OTC) Financials clearing which includes Interest Rate Swaps (“IRS”) in Singapore Dollar and US Dollar and Non-Deliverable Forwards (“NDF”) in seven Asian currencies.

The Fed and Bitcoin
Victoria Wagner Ross –
Rob Wile posted an interview on Business Insider today with St. Louis Fed vice president and director of research, David Andolfatto, about his change in view about Bitcoin. He is favorable after he reviewed the basic concept of Bitcoin in the sense that it is a viable cryptocurrency to watch in its use and progress.

Indexes & Index Products

Closed-End Funds Look Appealing, but Weigh the Risks Bond Funds Are Offering Enticing Payouts, but There Are Big Differences From Standard Funds
By Liz Moyer, WSJ
In many ways, closed-end funds are just like their larger and higher-profile cousins, conventional mutual funds and exchange-traded funds: They all sell shares to investors and use the money to buy securities.

***DA: Bargains can be had but, as with all investments, caveat emptor.


Hedge Funds Get Gold Timing Wrong on Rebound: Commodities
Megan Durisin – Bloomberg
Hedge funds and other speculators misjudged gold prices for a second time in three weeks.
Just after the investors sold bullion holdings for a second consecutive week, a disappointing U.S. jobs report sparked the biggest rally in prices since mid-March. Their funds fared better in the five preceding weeks, correctly adjusting wagers 80 percent of the time.

Dubai gold trade reached $75 billion in 2013
Cecilia Jamasmie –
A hefty?$75 billion worth of gold, or about 40% of the world’s physical bullion exchange, was traded through Dubai last year, according to Ahmad Bin Sulayem, Executive Chairman of the Dubai Multi Commodities Centre (DMCC).
The figure, unveiled over the weekend at the Dubai Precious Metals Conference 2014, represents a huge jump from the $6 billion worth of the precious metal traded in 2003, in the DMCC’s first year of operations, Emirates 24/7 reports.

The Dow Jones, Gold and The Fed
Live Trading News
QE-3 began in September 2012 with the Federal Reserve committing itself to the purchase of $85 billion dollars a month of US Treasury bonds and illiquid mortgages from its favorite financial institutions – the big NY banks. And why not? They own the Federal Reserve.

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