First Impressions

Deutsche Boerse Looking Onward and Outward
By Jim Kharouf
Deutsche Boerse’s plans go well beyond clearing, IT and trading. Here’s a look at the exchange, following a 2-day informational meeting with members of the Deutsche Boerse team in Frankfurt last week.

Think big.

Deutsche Boerse, and its subsidiaries Eurex, Clearstream and Eurex Clearing and its market data and services division (which together represent 93 percent of its revenues) are looking for new and innovative ways to drive growth in the new global regulatory structure.

In other words, this isn’t just about trading volume anymore.

In Deutsche Boerse’s view, the recipe for success hinges largely on this – leveraging its clearing houses – Clearstream and Eurex Clearing – to provide a global banking and custodial services to customers. And one thinks “Gee, that sounds like a bank.” And you’d be correct. What makes Deutsche Boerse’s strategy interesting is that its clearing houses are technically and officially registered banks, and are looking to act like banks that also offer clearing services.

For the rest of the story, visit the John Lothian blog at

Quote of the Day

“They’ve blown it. The focus is exclusively on deficit, on debt, on keeping inflation under control. They’ve ignored the threat of deflation and recession.”

Nariman Behravesh, chief economist in Lexington, Massachusetts, for consultants IHS Inc. in the story, “How Sweden Joined Central Banking’s Hall of Shame”.

Lead Stories

Bond trading platforms raise stakes
Tracy Alloway and Michael Mackenzie in New York – Financial Times
The battle of the electronic bond trading platforms is set to intensify as Tradeweb rolls out its new offering to a wider range of market participants on Wednesday.

Europe’s banks are too feeble to spur growth
Martin Wolf – Financial Times
Will the asset quality review and stress tests conducted by the European Central Bank and the European Banking Authority mark a turning point in the eurozone’s crisis? Up to a point. They are an improvement on what has gone before. But they are not a complete fix for the banking sector, still less for the economy’s wider problems.

How Sweden Joined Central Banking’s Hall of Shame
James Hertling and Jennifer Ryan – Bloomberg
European policy makers have been their own worst enemy in the fight to avoid recession and deflation.
Swedish central bankers’ decision to cut the benchmark interest rate to zero was the latest evidence that moving too fast to remove emergency stimulus is a risky business.
“They’ve blown it,” Nariman Behravesh, chief economist in Lexington, Massachusetts, for consultants IHS Inc., said, referring to policy makers in Europe. “The focus is exclusively on deficit, on debt, on keeping inflation under control. They’ve ignored the threat of deflation and recession.”

[Video] What’s Next for Bond Investors?
Paul Vigna – MoneyBeat – WSJ
Reports of the bond bull’s demise have been greatly exaggerated, but that doesn’t mean the bull is running around healthy and strong. With rates near historic lows, and the Fed set to raise them at some point next year, bond investors are going to have to do some real preparing for the next phase of the bond market.

Q3 2014: Bonds Quarterly Statistics – The Latest Issue Of The “Bonds Quarterly Statistics” Report Looks At The Performance Of SIX Swiss Exchange’s Bonds Segment In Q3 2014

Central Banks

Fed Decision Day Guide: FOMC Seen Focusing on Dangers of Low Inflation
Christopher Condon and Steve Matthews – Bloomberg
Here’s what to look for when the Federal Open Market Committee releases its policy statement at 2 p.m. today in Washington. Federal Reserve officials won’t provide new economic projections, and Chair Janet Yellen isn’t scheduled to give a post-meeting press conference.
— With the FOMC poised to halt bond purchases, ending its third round of so-called quantitative easing, policy makers may want to underscore they are troubled by falling inflation and price expectations.

Where Does the Fed Go After QE3 Goes Away?
Paul Vigna – MoneyBeat – WSJ
The Federal Reserve is bringing its big bond-buying stimulus program, popularly dubbed QE3, to a close this month. Everybody knows that. But what nobody knows, is what the Fed does next.

Rates to Zero. What Does Sweden’s Riksbank Do Now?
Tommy Stubbington – MoneyBeat – WSJ
Will Sweden’s central bank be forced to put a lid on its currency? That may seem like an odd question to ask when the krona has just plunged to a four-year low against the euro and the dollar. But a growing chorus of analysts is tipping the Riksbank to follow central banks in Switzerland and the Czech Republic by intervening in markets to stop its currency growing too strong.

Now that that’s over…
Matthew C Klein – Financial Times
Mario Draghi probably wasn’t expecting that his July 2012 comment that “the ECB is ready to do whatever it takes to preserve the euro” would coincide with the start of a relentless drop in bank lending to nonfinancial businesses far worse than what occurred during the first wave of the recession:

Tradeweb enters us corporates fracas with new platform
Electronic fixed-income trading venue Tradeweb has officially launched its US corporate bonds marketplace for both round- and odd-lot institutional trading, after about a year of development and several months of beta testing.

Comments On The Federal Reserve’s Ending Of Its Quantitative Easing Programme, Professor Philip Booth, Cass Business School

Bank Of England: Monetary Policy One Year On – Speech By Sir Jon Cunliffe, Deputy Governor Financial Stability, Member Of The Monetary Policy Committee, Member Of The Financial Policy Committee And Member Of The Prudential Regulation Authority Board


China signs currency swap deal with Russia
Simon Osborne – The Trade
China’s central bank, the People’s Bank of China, has signed a currency swap agreement worth RMB 150 billion (US$ 24.4 billion) with Russia’s central bank. The agreement lasts for three years and is extendable.

Brazilian real troubles far from over
David Wigan – Euromoney Magazine
The decline of the Brazilian real to a nine-year low this week seemed to mark a nadir for a currency buffeted by economic and political concerns. Analysts say, though, that things could get worse before they get better.

CME rule hurts FX broker business, say participants
CME enrages brokers, who claim their once-profitable business in transitory FX EFRPs has vanished, despite the launch of a product to help offset the changes

Former S.E.C. Chairman to Advise Two Prominent Bitcoin Companies
Sydney Ember – Dealbook – NY Times
Since it was introduced more than five years ago, Bitcoin has been viewed as a way to operate outside the realm of the existing financial system and the laws that govern it. But more recently, Bitcoin companies have been luring the financial establishment into their ranks.

Indexes & Index Products

Russia ETF Swells as Valuations Lure Bargain Hunters
Elena Popina and Jackie Klauberg – Bloomberg
Investors are piling into the biggest exchange-traded fund tracking Russian equities at a record pace as the cheapest valuations in emerging markets and easing tension in Ukraine spur bets stocks will rebound.


Markets Nervous Ahead of Swiss Gold Vote – WSJ
Chiara Albanese And Ese Erheriene – WSJ
Gold and currencies markets are starting to show their first nerves ahead of a referendum in Switzerland that could potentially force the country’s central bank to buy thousands of metric tons of gold and never sell it, complicating its so far credible policies to hold down the franc.
A ‘yes’ result in the so-called “Save Our Swiss Gold” vote Nov. 30 wouldn’t be the end of the matter, with the controversial measure facing several hurdles before it could ever be passed into law.

The worst possible case for the worst possible idea, the gold standard
Matt O’Brien – The Washington Post
When it comes to crackpot economic ideas, the gold standard is, well, the gold standard.
It’s a barbarous relic that has nothing to recommend it today. Pegging the dollar to the price of gold, you see, is just a doomsday device for turning recessions into depressions. That’s because, as Paul Krugman points out, inflation-adjusted gold prices tend to go up when inflation-adjusted interest rates go down, and vice versa.

Russia Buys Most Gold for Reserves Since Financial Crisis of ’98
Nicholas Larkin – Bloomberg
Russia boosted gold reserves by the most since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.
The country expanded its stockpile, the world’s fifth-biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves, which overtook those of Switzerland and China this year, almost tripled since the end of 2005 and are at the highest since at least 1993, the data show.

Any gold rally will fail as sentiment deteriorates
Mark Hulbert – MarketWatch
Sentiment conditions continue to be unfavorable for gold.
In fact, they’ve gotten worse over the three weeks since I last devoted a column to gold-market sentiment. And sentiment was already unfavorable then.
As a result, any attempt by gold to rally is unlikely to be sustainable.

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