Lead Stories

Bats Pays $14 Million Settling Claims Markets Obscured Rules
By Sam Mamudi and Annabelle Ju – Bloomberg
Bats Global Markets Inc. is paying a record fine to settle allegations that two stock exchanges it bought last year obfuscated a central part of how their trading system worked.

Transaction-tax plan brings fresh Wall Street battle to Capitol Hill
A top House Democrat said Monday he wants a broad new plan to bolster the middle class to be paid for in part by a fee on financial transactions, a proposal that brings a fresh battle over Wall Street to Capitol Hill.

Big investors say will stick with hard-pressed hedge fund sector
Stephen Foley in New York and Miles Johnson in London, FT
Institutional investors plan to put more money into hedge funds this year in spite of lacklustre investment performance and two of the world’s biggest public pension funds deciding the sector is no longer worth its high fees.

Stricter Dark Pool Rules Said to Be Under Consideration at SEC
By Dave Michaels and Nick Baker, Bloomberg
Even as they’ve captured a bigger slice of U.S. stock trading, dark pools have faced less regulation than the better-known public exchanges. Regulators are taking steps to change that.

Congress Again Clashes Over Financial Regulation
Four-and-a-half years after Democrats in Congress enacted the Dodd-Frank law to stiffen regulation of Wall Street, the two parties are again clashing over government regulation of financial markets. The Republicans who now control Congress want to roll back or overhaul large portions of the law. But Democrats worried about GOP attempts to chip away at Wall Street regulations are increasingly objecting to even minor changes in an effort to put down markers ahead of more bruising battles to come.

S&P Near $1 Billion Mortgage Ratings Settlement With U.S.
Tom Schoenberg and Edvard Pettersson – Bloomberg
Standard & Poor’s is close to a settlement of about $1 billion with the U.S. for allegedly misleading investors about its ratings of mortgage-backed securities before the subprime crisis, a person familiar with the matter said.
The McGraw Hill Financial Inc. (MHFI) unit and the Justice Department may agree to settle the case as early as this quarter, according to the person, who asked not to be identified because the negotiations are confidential.

Lazard’s Antonio Weiss withdraws from Treasury role
Barney Jopson and Gina Chon in Washington and Tom Braithwaite in New York
Senator Elizabeth Warren’s populist wing of the Democratic party has shown its clout by derailing the White House’s attempt to appoint a Lazard banker to a senior US Treasury post.

Central Banks

Yes, the Federal Reserve has enormous power over who is president
Matt O’Brien – The Washington Post
The arc of the political universe is long, but it bends towards monetary policy.
That’s the boring truth that nobody wants to hear. Forget about the gaffes, the horserace, and even the personalities. Elections are about the economy, stupid, and the economy is mostly controlled by monetary policy. That’s why every big ideological turning point—1896, 1920, 1932, 1980, and maybe 2008—has come after a big monetary shock.

Yellen Proves Master of Math Forecasting U.S. Economy
By Jeff Kearns, Bloomberg
Midway through Janet Yellen’s first year as Federal Reserve chair, consumer prices were rising at the fastest pace in 19 months and some Wall

ECB discussions on bond buying far advanced, says Coeure
The European Central Bank is far advanced in discussions about whether to embark on a sovereign bond-buying program and could take a decision at its Jan. 22 meeting on whether to go ahead, a top ECB policymaker said.

Draghi Faces Legal Test on Bond Buys as ECB Readies QE Plan
Stephanie Bodoni – Bloomberg
European Central Bank President Mario Draghi will get a legal readout tomorrow on a predecessor to the quantitative easing plan that he’s set to reveal later this month.
An adviser to the EU Court of Justice will say whether the European Central Bank’s Outright Monetary Transactions program overstepped the law in a non-binding opinion that may signal whether QE must also be reined in.

MetLife could further complicate Fed Reserve’s new role as insurance cop
The Economic Times
The Federal Reserve’s new role as the top US insurance regulator will be in the spotlight this week as MetLife decides whether to challenge tougher oversight by the central bank in court.
The Fed would face months of scrutiny of its fledgling oversight of the sector if MetLife sues regulators over their decision to tag it as a firm that has the potential to destabilize the wider financial system.

How Much Money Does the Federal Reserve Make? (Hint: It’s More Than You Probably Think!)
John Maxfield – The Motley Fool
At the end of last week, the Federal Reserve released a preliminary estimate of its 2014 net income. And by the looks of it, our central bank is doing all right for itself.
According to the press release, the Fed earned a total of $101.5 billion during the 12 months ended Dec. 31. If anyone’s keeping score, that’s 11% higher than 2013.


U.S. stocks and the dollar now ‘most crowded trade in the world’
By Victor Reklaitis, MarketWatch
The right trade, when it becomes too crowded, often turns into the wrong trade, warn strategists at Bank of America Merrill Lynch.

On Retail Forex, Regulators Have Failed To Reach Far Enough
Sharon Brown-Hruska, Forbes
The record fines recently handed down to global banks for alleged manipulation of foreign exchange rates and front running of customer trades may seem like par after similar allegations for LIBOR and other benchmark rates. One might conclude it’s just another story about Wall Street excess and regulatory failures observed during the financial crisis. However, since these allegations are coming after regulators implemented the key provisions of Dodd-Frank, they probably won’t be the last shoes to drop.

Who Carries Around Wads of $100s? A Pickpocket’s Guide
By Ben Steverman, Bloomberg
Quick, how much cash is in your wallet? If you’re like the average American, barely enough for a couple of movie tickets: The median consumer carries just $22. A handful of people roll bigger. Roughly one in five people carry more than $100. One in twenty carry a pickpocket’s dream?$100 bills?according to a new study by Claire Greene and Scott Schuh of the Federal Reserve Bank of Boston. They were trying to shed light on some of the biggest mysteries about U.S. currency: Where is it all? And why do certain people carry so much more than everyone else?

Indexes & Index Products

CBOE Begins Disseminating Volatility Index Values on Three of CME Group’s FX Options Contracts: Dollar/Euro, Dollar/Bp and Dollar/Yen
Press Release – CBOE
The Chicago Board Options Exchange (CBOE) announced today that it began disseminating values for three new volatility indexes that CBOE calculates using the prices of CME Dollar/Euro, Dollar/British Pound and Dollar/Japanese Yen futures options.
The CBOE/CME FX Euro Volatility IndexSM (ticker: EUVIX), the CBOE/CME FX British Pound Volatility IndexSM (ticker: BPVIX) and the CBOE/CME FX Yen Volatility IndexSM (ticker: JYVIX) are the first benchmarks to track the volatility of foreign exchange (FX) futures options. The underlying options are the most liquid FX options traded at the CME, and in 2014, accounted for a combined 80 percent of the over 15 million total currency options traded at CME.

London Stock Exchange Expands International Stock Indices with New Turkish Recruit
Forex Magnates
Trading venues in the UK and Turkey have signed a new partnership which provides greater collaboration between the two nations. UK-based London Stock Exchange Group (LSEG) reported that it has signed a partnership agreement with Turkish financial trading exchange, Borsa Istanbul, covering derivatives and index products. The move supports both regions vision of being globally recognised hubs for financial services.

You are not supposed to beat the index!—commentary
Jerry Lynch – CNBC
I read a lot of articles on investments, returns and how most people do not beat the index in their portfolio. Let me set the record straight. The question of “did your portfolios beat the index last year” is a trick question. An index is not a portfolio and if you are beating the index (let’s say the Nasdaq or S&P) they you are probably doing something very wrong! Let me explain.


Jim Rogers claims Russian ‘consultant’ tried to extort him
By James Covert, NY Post
This might be the worst investment Jim Rogers ever made. The globetrotting tycoon, known for his spiffy bow ties as well as his investing acumen, ?has accused a San Diego woman of attempted extortion in a business deal gone bad, The Post has learned. In civil court papers filed last week, Rogers alleges that Laura Alexis, “a self-professed ‘media consultant’ of Russian descent,” threatened his health and reputation as she demanded that he fork over “large sums of money.”

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