First Impressions

2016 Exchange CEO Series: CME’s Gill Looking For Customer Efficiencies

CME Group has been focused on global growth, just like every other major exchange. But to get there, the exchange leader believes it has to work with customers to streamline costs so it can expand.

In part one of our two-part interview at the FIA Boca Conference, CME CEO Phupinder Gill said that the exchange is working on new ways to address capital efficiencies through products such as cleared swaptions, but also new clearing services that will help institutions reduce collateral.

CME is also continuing to work on market disruptors such as blockchain technology, which may change the way in which clearing services are delivered.


Quote of the Day

“[The bitcoin core developers] view themselves as the central planners of the network, and protectors of the people. They seem okay with watching bitcoin fail, as long as they don’t compromise on their principles.”

Coinbase CEO Brian Armstrong in the story, “Rift Among True Believers Threatens Bitcoin’s Future”

Lead Stories

Asset managers cheer rejection of EU bond rules
Financial Times
Asset managers have won a reprieve from stringent proposed trading rules designed to prevent a repeat of the financial crisis, and will now redouble their efforts to convince European regulators to water the proposals down. Last week, the European Commission, the EU’s executive arm, rejected the work carried out by Europe’s financial watchdog on transparency in fixed income trading.

Dimon’s Timing Looks Savvier by the Day as Equities Rebound
Even to hardened market veterans, the wild ride in stocks this year has been gut-wrenching. Global equities delivered $8.6 trillion of losses through Feb. 11 as the MSCI All-Country World Index tumbled 12 percent. Talk of a global recession and powerless central banks could be heard from Tokyo to London to New York. And then Jamie Dimon appeared. After the close of trading that day, news broke that the chairman and chief executive officer of JPMorgan Chase & Co. spent $26.6 million to buy shares of his New York-based bank.

Banks urged to beef up bonus clawbacks
Financial Times
Wall Street executives are facing further scrutiny of their pay deals as governance crusaders push to beef up bonus “clawback” regimes. Campaigning shareholders want JPMorgan Chase, Bank of America and Citigroup to toughen schemes that put senior bankers on the hook for future losses.

Wall Street’s Pile of Unwanted Treasuries Exposes Market Cracks
The world’s biggest bond dealers are getting saddled with Treasuries they can’t seem to easily get rid of, adding to evidence of cracks in the $13.3 trillion market for U.S. government debt. The 22 primary dealers held more Treasuries last month than any time in the last two years, Federal Reserve Bank of New York data show. While at first glance that may suggest a bullish stance, the surge in holdings is more likely the result of investors including central banks dumping the debt on the firms, said JPMorgan Chase & Co. strategist Jay Barry. Foreign official accounts sold a net $105 billion of the securities in December and January, an unprecedented liquidation, Treasury Department data show.

Repo Failures at Highest Levels Since 2008
Settlement failures in Treasury repurchase transactions in March hit their highest level since 2008, underscoring concerns on Wall Street that trading conditions are apt to deteriorate in even the most-liquid markets under the acute stress evident early this year.

Fed approves Goldman acquisition of GE Capital’s U.S. online deposits
Goldman Sachs Group Inc (GS.N) received permission on Monday to complete its $17 billion acquisition of GE Capital Bank’s U.S. online deposits.
The deal, which was approved by the Federal Reserve, had been pending since August 2015.

Valeant’s Struggles Could Lead It to Crumble
Dealbook – NY Times
Valeant Pharmaceuticals International is running the risk of an Enron or WorldCom endgame.
The struggling drug maker has uncovered accounting impropriety, it said on Monday. It is replacing its chief executive, J. Michael Pearson, but Howard B. Schiller, the company’s former chief financial officer, has refused to quit as a director. The board, the numbers and the strategy are fractured. Add some $30 billion of debt, and Valeant could easily crumble.

America’s Fifth Largest Brokerage Goes Fiduciary
Reformed Broker
When I first started writing about the Fiduciary Standard of care versus the traditional brokerage industry’s Suitability Standard seven years ago, my view was that the Suitability Standard would eventually be dead. My best guess was that a combination of consumer choice and regulatory pressure would bring about a drastic industry change over to the Fiduciary side. To understand why this is so important to America’s retirement investors, read my post at Fortune, The Most Horrendous Lie on Wall Street.

IHS Is Buying Markit in a Business Information Deal Worth $6 Billion
Business research provider IHS IHS 0.37% said it would buy Markit Ltd in an all-stock deal that values the London-based financial data provider at about $5.9 billion.

Central Banks

China central bank to Fed: A little help, please?
Confronted with a plunge in its stock markets last year, China’s central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its play book for dealing with Wall Street’s “Black Monday” crash of 1987.
The request came in a July 27 email from a People’s Bank of China official with a subject line: “Your urgent assistance is greatly appreciated!”

Central Banks Creep Toward Uncomfortable Role: Central Planners
Are central banks heading back to an era of rationing money?
The question may sound daft when policy makers are pumping gushers of cash into several of the world’s major economies. But as the central banks become more desperate to boost inflation and growth, they are starting to break one of the modern tenets of the profession by funneling that cash directly to what they regard as “good” uses.

The Fed Gives Inflation a Hall Pass
The economic surprise of 2016 may be inflation picking up more than most economists expect. The policy surprise of 2016 may be that the Federal Reserve won’t lean against higher prices.

Fed’s Lockhart says rate hike possible at April meeting
The United States may be in line for an interest rate hike as soon as April, Atlanta Fed President Dennis Lockhart said on Monday, another sign that policymakers are comfortable allowing U.S. monetary policy to diverge from other major economies.

Fed’s Lacker says he is confident inflation will return to 2 percent
U.S. inflation is likely to accelerate in coming years and move toward the Federal Reserve’s 2 percent target, Richmond Fed President Jeffrey Lacker said on Monday, flagging upside risks to price growth.
Inflation has been unusually sluggish since the 2007-2009 recession.

PBoC Governor Warns Over Corporate Debt, Encourages Stock Markets Growth
Speaking at the China Development Forum in Beijing on Sunday, the People’s Bank of China’s long-time Governor Zhou Xiaochuan said Chinese companies’ debt levels are too high.
Corporate debt in China now stands at 160% of China’s GDP.


Currency market buzzes over tacit G20 deal
Financial Times
Did last month’s G20 meeting in Shanghai come up with a secret currency accord between the world’s big central banks? That is the chatter in the FX market after a series of policy meetings not short on surprises.

IMF Pressing China to Disclose More Data on Currency Operations
The International Monetary Fund is pressing China to disclose more information about its currency operations based on standards the Chinese central bank had pledged to follow, people familiar with the matter said, as Chinese authorities resort to more-discreet ways to support the yuan.

Will the RBA join the ‘currency war’?
The Sydney Morning Herald
The Aussie dollar flitted just below the US76¢ mark throughout Monday’s trade, beginning a week bereft of top tier economic data amid a market observers’ debate about whether the Reserve Bank of Australia will enter the “currency wars”.

Rift Among True Believers Threatens Bitcoin’s Future
The rift in the Bitcoin community over an arcane line of coding remains as wide as ever despite several concerted efforts to close it, and time may be running out to stave off an existential crisis. For almost a year now, the bitcoin industry has been starkly divided over the question of how to expand the digital currency’s network, and the fight has morphed from a technical issue to a raging political debate that shows no signs of abating, broadly pitting entrepreneurs who have built businesses around bitcoin against the “miners” who maintain the network, with developers split among the two groups.

Australian Treasurer Scott Morrison: “We Won’t be Taxing Digital Currencies”
The CoinTelegraph
The Australian Government announced in its report entitled “Backing Australia’s Fintech” that the current double tax law on digital currencies including Bitcoin is soon to be reformed.

Rev’s Forum: When Currencies Rule the Action, Forget Fundamentals
The Street
After the corrective action the market suffered in January and February, many market players are stunned to see the market right back where it has been so often during the last seven years. Over and over again, we have faced overbought conditions that only become more overbought due to dovish central banks.

Unilever Says It’s `Insane’ If Nigeria’s Currency Policy Remains
It would be “insane” for Nigeria to persist with currency policies that have led to a record spread between the official and black-market exchange rates, according to the local head of Unilever Plc.

Indexes & Index Products

Hedge Funds, Smart Beta And Volatility Timing Are Magically Delicious
Sovereign Wealth Fund Institute
The first three months of 2016 has startled institutional investors and the asset management community. Many name brand hedge funds posted lackluster returns, thus giving less credibility to the name “absolute return”.

Emerging Market ETFs Surge $2.72 Billion, Turn Positive for Year
Investors added $2.72 billion to U.S. exchange-traded funds that buy emerging-market stocks and bonds, the most in almost two years, as inflows turned positive for the first time in 2016.

NSE pitches for new investment products, bullish on ETFs
Business Standard
Pitching for new products to attract more investors to stock markets, leading exchange NSE has said there is a need for tailor-made instruments for different kinds of people and ‘one vanila’ cannot serve all.

Paysafe joins FTSE 250 Index
Provider of payment solutions Paysafe Group Plc (LON:PAYS), formerly known as Optimal Payments, is joining the FTSE 250 Index from the start of trading today.

Eurex expands equity index segment with new quanto futures; Launch of USD-denominated futures on the Euro STOXX 50 index as of 21 March 2016
Eurex, one of the world’s leading derivatives exchanges and part of Deutsche Börse Group, will introduce Euro STOXX 50 quanto futures as of 21 March 2016. The USD-denominated product allows investors to participate in the performance of the index without being subject to currency fluctuations between Euro and US dollar.

New Japan ETF A Standout Among Giants
The Global X Scientific Beta Japan (SCIJ) is a smart-beta take on Japan’s total equity market, and one that’s not even a year old yet. Still, this young—small—fund, with less than $12 million in assets, is delivering an impressive performance relative to the giants in the space.


Germany wants its gold back
The Bundesbank has announced plans to repatriate some of Germany’s gold reserves from abroad. At least half of the country’s gold would be transferred to Frankfurt by 2020, according to Bundesbank President Jens Weidmann.
Weidmann says 366 tons of gold worth EUR11.5 billion have been delivered to Frankfurt so far. “There are now about 1,400 tons or 41.5 percent of our gold reserves here,” the banker said.

Bitgold delivers instant gold-backed currency transactions outside of banking system
International Business Times
Bitgold uses gold as a rail to connect currencies at zero cost, outwith the banking system. In this respect it achieves a similar use case to Bitcoin, the frictionless exchange of value using the internet.

Why You Should Still Hold on to Gold – Market Expert
Despite the pullback in gold prices, one market veteran says it is still not time to cash in your gold bets just yet.
Gold prices fell below the key psychological level of $1,250 an ounce on Monday as the metal saw more profit taking pressure. The move comes after recent gains pushed prices to a 13-month high less than two weeks ago. April Comex gold settled $10.01 lower on the day at $1,244.20 an ounce.

Fear More Important Than Facts in the Gold Market
FX Street
The price of gold is a slave to market sentiment. How people feel about economic conditions, no matter how vague that feeling might be, is reflected in the price of the precious metal. Uncertainty and fear of economic slowdown has seen capital flooding back to gold. Just recently the fear of poor US economic performance saw gold hike from the 1052.00 handle to a high of 1273.00. However, the slightest optimism towards US economic strength flattened out the trend line and now sees gold ranging until another upset changes its course again.


The Three Worst Words of Stock-Market Advice: Trust Your Gut
With U.S. stocks surging this past week and breaking into the black for 2016, remember: What you expect the stock market to do next is shaped largely by what it just did. Earlier this year, when stocks lost 5% in January and were down 10.5% at their worst, individual investors were the most pessimistic they had been since March 2013, according to surveys conducted by the Yale School of Management. And if history is any guide, the mood of investors is already lifting in lockstep with stock prices. The more stocks go up and the faster they rise, the more likely you become to expect more of the same.

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