First Impressions

A Bit of Boca
Next week, the John Lothian Newsletter will be published from our remote headquarters in Boca Raton, Florida as we attend the 40th annual FIA International Futures Industry Conference. In addition to our daily “Boca Bits & Pieces” column, we will be filming a repeat of last year’s hit, our Exchange Leader video series, as well as a new video series on the state of margin and capital requirements. Between video and print interviews and other assorted meetings, at last count there are 41 items on our calendar over two and a half days. And that doesn’t even count the panels, nor the impromptu meetings from the early morning on the exhibit floor to late light at Luna Bar.

Though our dance cards are nearly full, we still have a few bits of time left if you would like to schedule a meeting. Interested parties should send an email to me at

Our team at Boca will include Jim Kharouf, Doug Ashburn, Patrick Lothian, Sarah Rudolph and myself (or “everyone but Jeff Bergstrom“) as we blanket the conference with multi-media coverage.

We will also be live tweeting during the conference, using the #FIABOCA hashtag.

In non-Boca news, just as we were hitting the “send” button this morning it was announced that, as of March 18, Apple will be replacing AT&T in the Dow Jones Industrial Average. The torch, or rather the flashlight app, has been passed.

Quote of the Day

“The global influence on U.S. macro dynamics warrants a start to rate hikes much later than markets currently anticipate. No economy is immune from global influences, not even the U.S.”

Manoj Pradhan of Morgan Stanley in the story, “Morgan Stanley Doubts Yellen Immune From Everyone Else’s Easing”.

Lead Stories

BAML departure fuels talk of SGX switch
Jeremy Grant, FT
Loh Boon Chye, Bank of America Merrill Lynch’s Singapore-based top banker in Southeast Asia, has resigned after saying he wanted to “take a break” before deciding what to do next.

***** The talented Mr. Jeremy Grant has given us something to speculate on as we head to Boca Raton for the FIA International Conference. Last year Singapore was the hot topic. We will see if it stays there considering the impending departure of Magnus Bocker.

The Pigeon King and the Ponzi Scheme That Shook Canada
By Jon Mooallem, NY Times
1. Heavy is the head that wears the crown
The Pigeon King delivered his closing statement to the jury dressed in his only suit. His name was Arlan Galbraith, and he was representing himself. He had abruptly fired his lawyer nearly two years earlier, during the long lead up to the trial, and then ignored the judges who advised him to hire another. He seemed adrift but also supremely confident. One of his former employees, who testified for the prosecution, speculated that he must have watched too much “Law & Order”: “I think he sat down one day and said, ‘Yeah, I can do this.’ “

***** Get ready for a long and interesting read.

Yet Another Financial Rigging Scandal In The City Of London
By Tim Worstall, Forbes
They’re certainly coming thick and fast, aren’t they, accusations and findings of rate and market rigging in the financial markets? We’ve had foreign exchange, precious metals, at least two rigging scandals about Libor and here comes the next one. An investigation into whether the banks rigged the liquidity auctions back at the heart of the financial crisis itself.

How banks may have rigged the Bank of England scheme built to keep them alive; In 2007, the Bank of England introduced a liquidity programme to help the banks. The SFO is now investigating whether this was manipulated
By James Titcomb, The Telegraph
On Thursday September 13, 2007, 13 men and women were called to an emergency meeting at the Bank of England. The situation was delicate: interbank borrowing rates had shot up to a nine-year high, and the day before Northern Rock had applied for a level of support from the Bank of England that had not been seen for more than 30 years.

Why the Strong Jobs Report May Have Caused the Stock Market to Tumble
Joseph Weisenthal – Bloomberg
Before we begin, let’s get something out of the way: You never really know what’s causing the market to move in any given way. At best you can make some educated guesses about the factors that are driving the moves.
Still, it’s interesting today that after a very strong jobs report the stock market is tumbling and interest rates are spiking.
So what might be going on? Why would the stock market fall after good news?

Watchdog’s Hunt Is Short on ‘Wolves’; Finra program hasn’t barred any brokers tied to Stratton Oakmont from ‘Wolf of Wall Street’ fame
By Jean Eaglesham And Rob Barry – WSJ
Christopher Veale started his career as a stockbroker at the notorious boiler room Stratton Oakmont Inc. depicted in the film “The Wolf of Wall Street.” In the 20 years since then, he has worked for 18 firms and racked up 25 red flags on his disciplinary record.

Fed tests point to $500bn risk for banks
Barney Jopson in Washington and Ben McLannahan in New York, FT
The biggest US banks would suffer combined losses of almost $500bn in the event of a financial crisis, according to stress tests carried out by the Federal Reserve, which rules next week on how much capital banks can return to shareholders.

LSE opens LCH door to ICE, Eurex, CME
Futures & Options World
The London Stock Exchange has underlined its commitment to “open access” by opening the door to its largest rivals and hinted again at its imminent futures exchange launch. Speaking after he announced 2014 revenue up a quarter on Thursday, LSE chief Xavier Rolet told FOW: “Our commitment to open access means portfolio margining is open to everyone. ICE, Eurex, CME or any other large exchange can apply to become customers.”

Putting an End to Broker Cockroaching
by Joshua M Brown, The Reformed Broker
In my 2012 book, Backstage Wall Street, I spend about a quarter of my word count talking about the stuff I’d seen at some of the brokerage firms I’d worked at. I even reprinted the scripts they were teaching us, in the hopes that the reader would be better prepared for the next incoming cold call (yes, they still cold call). Anyway, in a Wall Street Journal story today about some of the worst brokers from the…

Central Banks

Morgan Stanley Doubts Yellen Immune From Everyone Else’s Easing
Simon Kennedy – Bloomberg
“It’s not our fault” was the cry of central bankers from Sydney to Warsaw this week.
Monetary policymakers accounting for half of global gross domestic product are bound together in a cycle of weakening inflation and falling currencies. The result: about 22 central banks this year have embraced easing.

Fed’s Fisher says U.S. close to full employment but not there yet
Dallas Federal Reserve Bank president Richard Fisher said on Friday that recent strong job growth had put the U.S. close to full employment but that it was not quite there yet.
Wages remain “tame,” Fisher said to reporters after a speech at the Dallas Chamber of Commerce. His address was largely focused on the Texas economy, but afterwards he said the labor market is clearly tightening.

ECB May Need Lower Rates to Attain QE Target, Standard Bank Says
Lucy Meakin – Bloomberg
The European Central Bank will have to cut its deposit rate further to ensure enough government bonds are eligible for purchase under its sovereign-debt purchase program, according to Standard Bank Plc.

Federal Reserve says big banks could lose $490 billion in another recession
Paul R. La Monica – CNN Money
America’s biggest banks would lose $490 billion — most of that due to bad loans — over the next nine quarters in a worst-case scenario devised by the Federal Reserve.


Britain’s FX & clearing industry saved from mandatory relocation to eurozone as ECB loses court case
Europe’s central bank has lost a court case which would have mandated relocation of firms managing financial trades in euros from London to the Eurozone. With London a strong world financial center, this ruling marks a milestone victory which ensures the continued presence of the electronic trading sector in its de facto home

Inside the Currency Wars
A. Gary Shilling – Bloomberg
Almost all the world’s currencies are dropping against the U.S. dollar. The decline is being driven mostly by governments and central banks bent on cheapening their currencies to gain an advantage in global trade and boost their weak economies.
Since December, 22 major foreign currencies have declined an average of 4.5 percent against the greenback. A cheaper currency makes exports less expensive and thus more attractive to foreign buyers. A devalued currency also drives up import prices, which discourage domestic consumers from purchasing foreign goods.

Solving The Mass Payments Problem
Something as complicated as multi-currency, international mass payments seems impossible to simplify. But that’s been the focus of hyperWALLET over the last several months, says its CEO and President Lisa Shields. Shields recently caught up with MPD CEO Karen Webster to offer her perspective on just how hard (or not so hard) it is to simplify mass payments for businesses and global financial services – and the biggest barrier hyperWALLET eliminates for the customers who need them most.

Swiss central bank’s Feb forex reserves hit new record
The Business Times
Switzerland’s foreign exchange reserves hit a new high in February, but analysts were divided on whether this was due to currency fluctuations or whether the central bank was intervening in the market even after ditching a cap on the Swiss franc.
The Swiss National Bank (SNB) said it held 509.250 billion Swiss francs (US$523.17 billion) in foreign currency at the end of February, compared with a revised 498.463 billion francs held the previous month.

Indexes & Index Products

Miners lose out in S&P rebalance
The West Australian
The quarterly rebalance of S&P Dow Jones indices on the Australian sharemarket has highlighted the sagging fortunes of mining companies in a low commodity price environment.

Eurex TA-25 Index Futures: pricing and hedging the Israeli market during U.S. trading hours
Eurex TA-25 Index Futures offer direct exposure to the Israeli market, both during European and U.S. trading hours. In this article, our Chicago based product specialist Axel Vischer investigates what references for pricing and hedging exist during U.S. hours, when the Israeli home market is closed. In particular he reviews dual-listed stocks as well as ETFs as potential references for pricing Eurex TA-25 Index Futures during U.S. hours. His analysis shows to what extent these products or baskets of these products can be used for valuation purposes, but also indicates what information is missing to obtain a robust pricing picture.

New UBS ETF launched on Xetra; ETF provides access with currency hedging to MSCI Canada index
Deutsche Boerse
Xetra/Börse Frankfurt: A new equity index fund from the UBS Global Asset Management product family has been tradable on Xetra in Deutsche Börse’s XTF segment since Friday.


Gold Prices Post Biggest Drop in More Than a Year
Ira Iosebashvili – WSJ
Gold prices saw their sharpest drop in more than a year Friday, after data showing strong U.S. job growth last month bolstered the case for the Federal Reserve to raise interest rates around the middle of 2015.
Gold for April delivery, the most actively traded contract, fell 2.7% to $1,164.30 a troy ounce on the Comex division of the New York Mercantile Exchange. That was the lowest settlement for the most-active gold contract since Nov. 13, 2014, and the biggest drop for gold prices since December 2013.

Unless you’re Mad Max, gold isn’t an investment for adults
David Kaufman – Financial Post
Investors vary dramatically based on investment horizon, requirements for growth and income, and basic understanding and implementation of risk management.
Having studied investors of every description, from recent grads with massive student loans and young families trying to make ends meet to high-net-worth families protecting significant legacies and institutional investors, there are three basic themes that emerge at the core of portfolio allocation exercises.

North Korean Diplomat Stopped In Bangladesh With $1.4 Million In Gold : The Two-Way : NPR
Scott Neuman – NPR
Customs authorities in Bangladesh would like to know what a top North Korean diplomat was doing with $1.4 million in gold hid in his luggage as he arrived on a flight from Singapore to Dhaka.
“We recovered the gold both in the form of bars and ornaments from Son Young Nam, the First Secretary of the North Korean Embassy in Dhaka,” said Moinul Khan, Director General of the Custom Intelligence department, adding the gold weighed about 27 kg (60 pounds) in total, according to Reuters.

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