First Impressions

Post-Trade Views: Euronext’s Andrew Simpson on Interoperability and Open Access
JohnLothianNews.com

Financial regulators began their overhaul a few years ago with several goals in mind, one of which was to make clearing and trading venues more open and transparent. But can cash securities and derivatives be shoehorned into the same set of rules? Andrew Simpson, head of post-trade services at Euronext, compares the regulatory objectives with the realities of the market.

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Quote of the Day

“We are worried about liquidity. And the question is, do we have enough time before a true liquidity event destabilizes the market?”

Laurence D. Fink, chief executive of BlackRock in the story, “ETF Trading Enhanced Bond Market Liquidity After Gross’ Exit – BlackRock”

Lead Stories

Bank of China targets US investors with Basel III bond
Josh Noble in Hong Kong – Financial Times
Bank of China is set to become the first mainland Chinese lender to sell US dollar bonds directly to US investors, as it begins marketing Basel III-compliant debt to global fund managers.
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ETF Trading Enhanced Bond Market Liquidity After Gross’ Exit – BlackRock
Chris Dieterich – blogs.barrons.com
BlackRock (BLK) said in a position paper last week that bond exchange-traded funds helped “defuse uncertainty and facilitate orderly and stable markets” while billions of dollars poured out of Pacific Investment Management Co. in recent weeks.
jlne.ws/1uvdc1a

Janus chief Dick Weil revels in Bill Gross hire
Stephen Foley in Denver – Financial Times
Dick Weil has fond memories of the 15 years he spent at Pimco, the California-based fund management group, but he is not sure the ties he forged there have survived what he did this summer.
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Warnings from Japan for the eurozone
Martin Wolf – Financial Times
Japan is no longer governed by consensus. This is true at least of its monetary policy. Haruhiko Kuroda, governor of the Bank of Japan, launched still greater “quantitative and qualitative monetary easing” last week, with the backing of only five of the nine members of the Monetary Policy Committee.
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A Recent Surge of Leveraged Loans Rattles Regulators
Peter Eavis – Dealbook – NY Times
As regulators hunt for the next financial bubble, they are homing in on an obscure corner of Wall Street: the debt market where Tom Shannon’s company, a chain of flashy bowling alleys, recently borrowed nearly half a billion dollars.
jlne.ws/1utsrIA

Japan still a long haul despite QE boost
Judith Evans – Financial Times
Asset allocators expect further rises in Japanese equities after the country’s central bank announced it would step up monetary easing, but warn that long-term recovery depends on a tortuous reform process.
jlne.ws/1uvh1DJ

Biggest Wealth Fund to Expand Liquidity to New Markets
Saleha Mohsin – Bloomberg
Norway’s $860 billion sovereign wealth fund, the world’s largest, is expanding its securities lending to new markets where it also plans to provide liquidity as part of a strategy to generate higher returns.
“We already have a security lending program, but we will expand that into more types of specific liquidity commissioning strategies,” Yngve Slyngstad, chief executive officer of the Oslo-based fund, said during a seminar today. “We will come back to the details about that later.”
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Tradeweb Government Bond Report – October 2014
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Central Banks

GOP Senate Takeover Puts Fed on Hot Seat
Victoria McGrane – WSJ
Republicans’ takeover of the U.S. Senate promises increased political turbulence for the Federal Reserve, which has already been under pressure from a GOP-controlled House.
Financial executives say a GOP-led Senate would ratchet up congressional scrutiny of the central bank’s interest-rate policies, as well as its regulatory duties as overseer of the nation’s largest financial firms. Republicans haven’t controlled the Senate since before the 2008 financial crisis and recession, which put a spotlight on the Fed and its powers.
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Exclusive: Central bankers to challenge Draghi on ECB leadership style
Eva Taylor and Paul Taylor – Reuters
National central bankers in the euro area plan to challenge European Central Bank chief Mario Draghi on Wednesday over what they see as his secretive management style and erratic communication and will urge him to act more collegially, ECB sources said.
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Covered Bonds Fall Short in Pimco’s Prophesy for QE: Euro Credit
Eshe Nelson and Lukanyo Mnyanda – Bloomberg
The European Central Bank will relent and buy government debt.
That’s the opinion both of France’s largest bank and the manager of the world’s biggest bond mutual fund. BNP Paribas SA and Pacific Investment Management Co.’s argument is this: There aren’t enough covered bonds and asset-backed securities available to buy for the ECB to achieve its balance sheet goals.
jlne.ws/1zwf1g8

BOJ Governor Defends Bazooka Approach
Tatsuo Ito – WSJ
In his first public speech since the central bank surprised markets with additional easing measures, Bank of Japan Gov. Haruhiko Kuroda stressed the importance of doing whatever it takes to eliminate deflation and said the bank won’t hesitate to act again if needed.
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Currencies

First Derivatives Forex Volumes Have Held Firm despite Difficult Market Conditions in H1 2014
forexmagnates.com
Software and financial services provider, First Derivatives, has just reported interim results for the six months ending August 31, 2014, showing nice gains in the face of headwinds compared to the same period of the previous year.
jlne.ws/10m751E

Indexes & Index Products

U.S. ETFs Climb Toward $2 Trillion in Assets
Ari I. Weinberg – WSJ
It has been clear for a while that exchange-traded funds would eventually break through $2 trillion in assets in the U.S. But it now looks like it will happen much sooner than most observers expected.
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Record Index Options Volume in October Reflects Demand for Risk Management Tools
Matt Moran – www.cboeoptionshub.com
In my discussions with institutional investors I often hear questions and comments about market liquidity and capacity, particularly in times of market volatility. To help answer these questions I often turn to data on contract volume, and I note that much of the volume for index options is related to portfolio or risk management strategies.
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Gold

1,500 Tons of Gold on the Line in Swiss Vote to Buy Back Bullion
Nicholas Larkin and Catherine Bosley – Bloomberg
There are people in Switzerland who resent that the country sold away much of its gold last decade. They may be a splinter group of Swiss politics, but they’re a persistent bunch.
And if they get their way in a referendum this month, these voters will make their presence known to gold traders around the world.
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Plunging Gold Price Has Mining Companies Selling at Loss
Liezel Hill and Kevin Crowley – Bloomberg
The latest decline in the price of gold is saddling higher-cost producers with losses on every ounce mined, and pushing others to the brink of also slipping into the red.
Gold fell to a four-year low of $1,137.10 an ounce today, below production costs for seven of 19 mining companies tracked by Bloomberg Intelligence, including Harmony Gold Mining Co., South Africa’s third-largest producer, and Primero Mining Corp. (P) Two more producers are within $50 of the figure.
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