First Impressions

Exchange CEO Series – World View: Nasdaq OMX’s Bob Greifeld looks at regulation, tech resiliency and partners

Nasdaq OMX, like every exchange, is trying to navigate the new regulatory landscape. But Bob Greifeld, CEO of Nasdaq OMX, said there are more opportunities to be had, beyond the new rules.

John Lothian News sat down at the 2014 FIA Boca Conference with six exchange CEOs to talk about their views on four main topics: competition, regulation, growth and technology. Here’s what Greifeld, CEO of Nasdaq OMX, had to say about each.

Greifeld, like other exchange CEOs, believes that regulation is the key driver of competition and change in the financial industry, globally today.

“If you think about the evolving nature of the markets, you have to start first and foremost with the regulation,” he told Jim Kharouf, editor-in-chief of John Lothian News. “We are a creature of the regulatory environment.”

Watch the video »

Quote of the Day

“The very real growth takes place in [the second quarter], so don’t worry.”

Li Xiaopeng, head of CIC’s supervisory board on China’s Q2 growth prospects in the Wall Street Journal’s “New China Stimulus Might Not Help, Economist Says.”

Lead Stories

China’s struggle for a new economy
Martin Wolf –
What are the prospects for the Chinese economy? Few, if any, economic questions can be more important. I have just attended this year’s China Development Forum in Beijing, which brings western business leaders and scholars together with senior Chinese policy makers and academics, with this question very much in my mind.

**JK – Key stat: In many key industries, output is already below 75 percent of capacity.

New China Stimulus Might Not Help, Economist Says
Fiona Law – MoneyBeat – WSJ
A billion-dollar question: Is China on course to roll out more stimulus measures? It’s only a matter of time, analysts say.

**JK – Where have we heard this before?

Central bank steps in to calm China bank run
Simon Rabinovitch in Shanghai –
Hundreds of depositors have raced to pull their cash from a small rural bank in eastern China, forcing local officials to take emergency measures to calm the panic after the bank run began to spread.

**JK – Cracks in the Chinese financial wall.

UBS taps ex-Citadel exec Kolinsky for market making unit-sources
John McCrank – Reuters
UBS AG is expected to hire former Citadel LLC executive Andy Kolinsky to run sales for its U.S. market-making unit out of Chicago, according to four sources familiar with the matter.

Thomson Reuters to trial randomization on FX matching platform
Joel Clark – Euromoney magazine
A new concept of holding orders to tackle latency arbitrage will be trialled for pauses of at least three milliseconds on USD/MXN trades on Thomson Reuters Matching, just weeks after rival EBS completed the roll-out of its latency floor.

*JK – Random acts of latency.

Citi Teams with Deltix on Integrated Algo-Trading Solution for FX
Ivy Schmerken – Wall Street & Technology
CitiFX TradeStream is partnering with Deltix to provide an integrated algo-trading solution hosted in the Equinix NY 4 data center, allowing traders to backtest their strategies against real-time streaming data.

Pimco sees Brazil valuations ‘attractive’ in fixed income
Fixed-income instruments in Brazil are trading currently at attractive prices for investors with a long-term focus, a senior fund manager at Pacific Investment Management Co said on Tuesday, a fact validated by a spike in investment inflows for the asset class so far this year.

Bonds are security blanket for investors
Richard Madigan –
Investor patience has been tested this year. While that impatience has translated into higher asset class volatility, it is important to separate the noise coming from event risk, disparate macroeconomic data and fundamentals.

Icelanders can now each claim $400 worth of Auroracoin, the country’s new digital currency
The Verge
At midnight this morning in Iceland, digital currency fell from the sky. The developer behind Auroracoin, a digital currency designed exclusively for Iceland, has made $125 million worth of coins redeemable by Iceland’s 330,000-or so citizens. That’s about 31.8 Auroracoins, or roughly $380 per person, according to the price established by markets for digital currencies before the free distribution (the value has since dropped).

**JK – From the country that brought you its own complete banking collapse.

Central Banks

BOE Basks In Britain’s Goldilocks Economy
Alen Mattich – MoneyBeat – WSJ
After suffering years of high inflation and low or no growth, the Bank of England gets to bask in falling inflation and rising growth–the best of all possible worlds as a character in Voltaire’s novel Candide put it.

China Plans Change to Opening-Price Mechanism of Money Rates
The People’s Bank of China plans to change the way it compiles the opening prices of benchmark money-market rates to help prevent manipulation, according to two people with knowledge of the matter.

Bullard Says Fed Hasn’t Discussed Date to End QE
Morwenna Coniam and Steve Matthews – Bloomberg
Federal Reserve Bank of St. Louis President James Bullard said policy makers haven’t committed to a specific month to end bond purchases even as it would take a significant shift in the outlook to alter the path of tapering.

Editor’s letter: All eyes on the US Federal Reserve taper
Richard Jory –
In the real world, it takes a lot to convince investors that a country that makes a habit of annexing part of another’s territory is a reliable target for their hard-earned dollars. There was a time when such action would throw the emerging markets into an extraordinary panic, with investors from all walks divesting themselves as quickly as possibly.

Not foregone conclusion Fed will adopt U.S. repo facility: Plosser
The U.S. Federal Reserve’s committee of policy-setters has not yet decided to fully embrace a new test facility for so-called reverse repurchase agreements as a tool for conducting monetary policy in the future, Philadelphia Fed President Charles Plosser said on Tuesday.

Fed’s Bullard says U.S. jobless rate expected to fall below six percent this year
The U.S. unemployment rate will fall below 6 percent by the end of this year, a Federal Reserve official said on Wednesday, offering a bullish view on the country’s economy after central bank comments sent shock waves through financial markets last week.

Low rates can’t continue indefinitely, RBA reminds banks
The Australian
THE Reserve Bank of Australia has again warned banks not to relax lending standards as house prices rose on the back of monetary easing, reminding them that the increase in prices would not last forever.


Forex markets get wise to big talk
Jamie Chisholm –
“All mouth and no trousers” (abrev. Amant) is a British accusation directed at those who fail to back up big talk with appropriate action. The forex market seems to be getting wise to the Amants of late.

**JK – Aussie dollar can’t walk the talk.

Electronic Trades Rise to 74% of Currency Market, Greenwich Says
Andrea Wong – Bloomberg
Almost three quarters of global currencies trading volume was executed through electronic systems last year, according to Greenwich Associates.
Electronic trading rose to 74 percent of global volume in the $5.3 trillion-per-day foreign-exchange market in 2013, from 71 percent the year before, the Stamford, Connecticut-based research company said.

Latin America FX: a tale of two currencies
Simon Watkins – Euromoney magazine
Latin American commodity-linked exchange rates are increasingly driven by individual domestic macro issues, especially inflation/deflation, than external factors, say analysts.

Venezuela forex changes help but may not cure economy
Investors see Venezuela’s new free-floating foreign exchange system as an important step toward improving the country’s stretched finances, but economists question whether it can provide enough dollars to kick-start the economy.

Banks split ruble forwards books on Russia sanctions fears
Lukas Becker –
Fears that sanctions on Russia could prevent settlement of ruble-denominated trades have revealed hidden risks in bank portfolios, where deliverable and non-deliverable forwards (NDFs) have often been traded as a single book. With end-users switching en masse to NDFs in recent weeks, the prices of the two have diverged, forcing banks to separate them.

BitBeat: IRS Calls Bitcoin ‘Property,’ Not Currency
MoneyBeat – WSJ
The answer is: property. One of the biggest questions surrounding bitcoin got its first answer on Tuesday, from the powerful Internal Revenue Service, which declared that for tax purposes the digital currency is “property,” like any other capital asset, and not currency.

Mt. Gox says working with police in missing bitcoin probe
In the first confirmation of a criminal investigation at Mt. Gox, the failed Tokyo-based bitcoin exchange said on Wednesday it was working with the police “with regard to the disappearance” of bitcoins worth some $490 million at current prices.

Yuan could create seismic shift in markets, Philip Lowe says
Elizabeth Redman | The Australian
THE internationalisation of the renminbi could be as transformative for global capital markets as the opening up of China’s borders was for the global trading system, Reserve Bank of Australia Deputy Governor Philip Lowe says.

Macro Horizons: After ECB Signals, Stars Are Aligning For Stronger Dollar
MoneyBeat – WSJ
Contrasts in monetary policy signals around the world are accentuating a future rebalancing of monetary conditions that will favor the dollar.

Indexes & Index Products

NASDAQ Global Index Family Now Available Through RIMES Benchmark Data Service
The NASDAQ OMX Group, Inc., a market leading provider of innovative, transparent indexes, announced that the NASDAQ Global Index Family, comprised of nearly 9,000 global securities with a combined $41.8 trillion float-adjusted market capitalization, is now available on the award-winning RIMES Benchmark Data Service

SEC mistaken to assume ETNs are retail products, say critics
Yakob Peterseil –
The SEC’s Office of Capital Markets Trends finally made good on its promise to write to banks over concerns about exchange-traded notes in February, but some say asking them to tailor disclosure to retail investors shows a fundamental misunderstanding of this $22 billion market.

Green indexes: a sustainable future?
Vita Millers –
Solactive’s Green Bond Index raises the possibility of structured products offering ‘green capital guarantees’. But how convincing are the credentials of the benchmarks tracking the green and clean energy sectors?

EDHEC-Risk’s Annual European ETF Survey Highlights ETF Investors’ Positive Outlook
EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2013, a comprehensive survey of 207 European ETF investors. The survey was conducted as part of the Amundi ETF & Indexing research chair at EDHEC-Risk Institute on “Core-Satellite and ETF Investment.”


Gold Trades Above Five-Week Low as Ukraine, Rates Weighed
Nicholas Larkin and Phoebe Sedgman – Bloomberg
Gold traded above a five-week low in New York as investors weighed the crisis over Ukraine against the outlook for higher U.S. interest rates.

Iraq in big government gold purchase
Xan Rice –
Iraq said it bought 36 tonnes of gold in March – worth about $1.5bn at current prices – in one of the largest open-market purchases by a government since 2011. The Central Bank of Iraq published a statement on its website on Tuesday saying the bullion was intended to help “reinforce stability of monetary policy and the [Iraqi] dinar”.


European Leveraged Loans Regaining Ground Versus High-Yield Bonds For M&A Financing, Says S&P Capital IQ Leveraged Commentary And Data
European Leveraged Finance Market Set To Undergo A Shift As Sponsors Veer Back Towards Loans To Finance Buyouts – Appearance Of Covenant-Lite Loans Attractive For Buyouts

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