Nils-Robert Persson, Cinnober Financial Technology – How to Manage a Challenge
“You should be prepared to walk on thin ice. It’s not dangerous if you know what you are doing.”
Thirty years ago, Nils-Robert Persson left a job at communications software giant Ericsson to join the financial technology space, where he has been ever since. Back then, when one made a trade, it was a cumbersome process that involved many hands over several hours, and bank settlement took three to five days. Now, that same trade can be placed on a fifth-generation Ericsson smartphone and be matched in 100 microseconds… and bank settlement still takes three to five days.
Persson says he was not wrong to leave Ericsson, just thirty years too early. The center of the tech world has shifted to the financial sector, and as executive chairman of Cinnober, he is now in the right place. He says you do not have to be at a startup to be entrepreneurial in your thinking, but it often requires you to navigate on thin ice.
Quote of the Day
“Both the nature of [British banks’] business and regulatory design has positioned them as the first line of defence against money laundering, terrorism funding, and an expanding array of other illicit activities. Speaking to those who dedicate their careers to tackling financial crime reveals genuine fears about the ability of banks to continue to perform this function in the future, however.”
Chrisol Correia, LexisNexis Risk Solutions’ anti-money laundering director, in the story, “Banks’ crime fighters want to quit their jobs”
Debt Issuance Poised for Record Year
Maxwell Murphy – WSJ
Nonfinancial U.S. companies issued $685 billion in debt during the first 10 months of the year, just $1.5 billion off the full-year record set in 2012, according to Fitch Ratings.
Total U.S. nonfinancial corporate debt hit $4 trillion in the third quarter, Fitch said, up 13% from a year earlier. Nearly two-thirds of that debt was issued in 2012 or later, and just $220 billion is scheduled to mature through the end of next year.
Investment banks’ revenue set to decline again in 2015
Anjuli Davies – Reuters
Revenue at the world’s 10 largest investment banks is on course to decline again in 2015 by two percent to $148 billion compared to a year ago, although a strong showing in equities will limit the fall, a survey on Tuesday showed.
Here’s How Much Bond Markets Have Hurt the World’s Biggest Banks
Bradley Keoun – TheStreet
Bond-trading revenue at the world’s 10 largest investment banks tumbled 18% in the third quarter, a new report shows, as jitters over growth in China and Brazil coupled with rising energy-industry defaults to drag down corporate-debt prices.
Exchanges and interdealer brokers reshape to face fragmenting market
Philip Stafford – Financial Times
As regulation clamps down on trading in financial markets, the operators of the world’s financial plumbing are reshaping themselves to capitalise on the fragmentation of the industry.
In recent weeks the world’s largest exchanges and interdealer brokers have concluded a wave of asset swaps, realignments and consolidation, and broken into new markets or buried old rivalries.
Thanks, but no thanks: Investment banks cull clients
Steve Slater – Reuters
That at least is the message coming out from investment banks, who say they want to cut the number of clients they have because a lot of them aren’t profitable.
At many investment banks the top 100 clients can account for 40 percent of revenues and the top 1,000 may contribute more than 80 percent of income, leaving thousands of smaller customers who contribute little revenue but suck up resources and capital.
Equities headcount overtakes fixed income for first time in five years according to Coalition
James Rundle – Financial News
Equities headcount at the 10 largest investment banks globally has surpassed that in their fixed income units for the first time since 2010, underlining strategic shifts to boost stock trading divisions, according to new Coalition figures.
Myth of the Endangered Market Maker
Lisa Abramowicz – Bloomberg
There’s a popular idea circulating on Wall Street that trading desks no longer have any money to help clients trade and that’s why it’s becoming more difficult to maneuver in the $8 trillion U.S. corporate-bond market.
The concept is rooted in recent Federal Reserve data showing dealers with a net short position in corporate bonds at the end of October, which leads people to think they have no inventory with which to trade. The development set off alarms among market participants and followers. But the data, while striking, is not a true portrayal of the health of the market.
New players break into credit derivatives
Joe Rennison – Financial Times
New entrants are breaking into the dealer-dominated credit derivatives market as trading increasingly occurs on electronic platforms.
Eagle Seven, a proprietary trading firm in Chicago, confirmed it began quoting prices on cleared index credit default swaps last week. Verition, a New York-based hedge fund and Stifel Nicolaus, a new bank entrant to CDS markets, have also been making inroads, according to people familiar with the matter.
Merchants of Debt
Lisa Abramowicz – Bloomberg
Big problems get a whole lot bigger when big debt is involved.
The prime example is energy companies, many of which borrowed record amounts of cash during the recent commodity boom only to run into trouble as soon as oil prices headed south. But another important one can be found in overly leveraged U.S. retailers, which are struggling in the face of a structural shift in consumers’ spending habits.
Greece and Eurozone Creditors in Deal to Unlock $13 Billion
Niki Kitsantonis – NY Times
Greece and its international creditors said on Tuesday that they had reached agreement on the country’s next round of economic changes, a deal that is meant to unlock as much as 12 billion euros, or about $13 billion, in loan money.
Athens had initially hoped the money would be dispensed after the Greek Parliament passed a package of economic measures last month.
Banks’ crime fighters want to quit their jobs
Tim Wallace – The Telegraph
Banks could face an exodus of crime-fighting staff, as most compliance officers – who are responsible for making sure banks obey the law – want to quit their jobs.
Exclusive: After market crash, China mulls single ‘super-regulator’ – sources
Engen Tham and Benjamin Kang Lim – Reuters
China is considering bringing together its banking, insurance and securities regulators into a single super-commission, sources told Reuters, following the summer’s stock market crash that was blamed in part on poor inter-agency coordination.
Goldman CFO Defends Investing and Lending Businesses
Justin Baer – WSJ
Goldman Sachs Group Inc.’s finance chief sought to shed light on the Wall Street firm’s investing and lending activities, a sprawling portfolio that has drawn occasional scrutiny from shareholders for its volatile and opaque results.
CFTC chair Massad ups pressure on leverage ratio
Cian Burke – Futures & Options World
Timothy Massad, chairman of the US Commodity Futures Trading Commission (CFTC), has warned US banking regulators they need to act quickly to alter bank leverage ratio or risk causing long-term damage to the US clearing industry.
U.S. close to finalizing rules on banker bonus pay: OCC
U.S. regulators are hoping to finalize rules for banker bonuses in the “near term,” said Molly Scherf, deputy controller for large banks at the Office of the Comptroller of the Currency.
Andrew Tyrie says UK banks must be broken up if ‘ring-fencing’ fails
UK regulators must not give in to “special pleading” from the biggest banks and should go ahead and split them up if a reform aimed at protecting their deposit-taking retail arms from their riskier businesses is circumvented, a senior UK lawmaker said on Monday. Andrew Tyrie, chairman of parliament’s treasury committee, said banks must get on with implementing the Vickers reform which requires banks HSBC, Barclays, Lloyds and RBS to ring-fence the capital of their retail banks by 2019.
Former ICAP broker Darrell Read denies helping rig Libor
Lindsay Fortado – Financial Times
A former ICAP broker accused of helping rig Libor told a London court on Tuesday he would never have asked one of his clients to help another client fix the benchmark rate because he would have lost their business.
EBRD: Foreign Banks’ Funding To Emerging Europe Increased For The First Time Since 2011
The fall in foreign banks’ funding to countries in eastern Europe may be bottoming out. A new report from the Vienna Initiative committee released today shows that foreign bank funding to central, eastern and south-eastern Europe (CESEE) countries, excluding Russia and Turkey, rose in the second quarter of 2015 for the first time since 2011.
Citigroup Equity-Trading Chief Russell Leaves to Join Client
Katia Porzecanski – Bloomberg
Citigroup Inc. equity-trading head Kevin Russell left to become chief investment officer for an “important client” of the firm, according to a memo sent to the bank’s staff.
Japan’s Endless Struggle to Spark Inflation
Noah Smith – Bloomberg
Why does Japan need inflation? Usually, economists think of inflation as a bad thing — at best, they see it as an acceptable byproduct of efforts to stimulate economic growth. Mainstream theory says that when you have idle resources — empty offices, unemployed people sitting at home wishing they had jobs — you can use monetary and/or fiscal policy to stimulate the economy, putting those workers into those offices. Inflation, the theory says, will be a natural consequence of the stimulus.
SEC Commissioner Blasts Conflict Minerals, Pay Ratio Rules
Emily Chasan – WSJ
The U.S. corporate disclosure regime “has been hijacked” by social activists, Securities and Exchange Commissioner Michael Piwowar charged on Monday, citing recent mandates from Congress that focus more on thwarting social problems than assisting investors.
“Our disclosure regime is supposed to serve investors, not special interests,” Mr. Piwowar said in comments to a Financial Executives International conference in New York.
Fed faces the risk of waiting too long
Sam Fleming – Financial Times
When Eric Rosengren, the Boston Federal Reserve president, flagged up the growing number of cranes dotted across his city’s skyline last week, he was hinting at a persistent worry that has run alongside the central bank’s ultra-low interest-rate policy.
Central Bankers Can Stop Whining Now
Rich Miller – Financial Times
U.S., euro zone, Japan budget moves seen supporting growth
Monetary policies are no longer the only game in town
For much of the past few years, central bankers have lamented how they were left on their own to prop up economic growth.
Yellen: Proposed Fed law would be ‘grave mistake’
Reem Nasr – CNBC
Federal Reserve Chair Janet Yellen said she strongly opposes a legislative Fed reform act in a letter addressed to House Speaker Paul Ryan and Minority Leader Nancy Pelosi.
In the letter sent on Monday, Yellen called the proposed law a “grave mistake,” that would undermine Fed policy and the greater U.S. economy.
What the Latest Inflation Numbers Mean for the Fed
Paul Vigna – WSJ
With a month’s gap between now and the next meeting of the Federal Reserve’s rate-setting committee, traders are taking every incoming piece of information, and plugging it into their own personal Fed calculators, trying to come up their own determinations for what will push the Fed to raise rates next month.
The Goods on Inflation and the Fed
Justin Lahart – WSJ
Services prices are rising, but goods prices are falling, hurting retailers and manufacturers and making the Federal Reserve’s job more difficult
Wall Street Is Running the World’s Central Banks
Simon Kennedy – Bloomberg
Wall Street is again leading to the corridors of central banks.
From Minneapolis to Paris, investors and financiers are increasingly being hired to help set monetary policy less than a decade since the banking crisis roiled the world economy and chilled their public-sector employment prospects.
Academic studies of historical voting records at central banks suggest the new trend may mean an increased bias towards tighter monetary policy.
U.S. Economy in a Snapshot
New York Fed
U.S. Economy in a Snapshot is a monthly presentation designed to give you a quick and accessible look at developments in the economy.
Fed-Ready Currency Traders Calm About December After Stormy 2015
Rachel Evans and Lananh Nguyen – Bloomberg
Currency traders are giving the Federal Reserve a green light for its first interest-rate increase in almost a decade.
After a year of surprises that saw exchange-rate volatility climb to its highest since 2013, measures of future price swings have fallen back below the 10-year average, a sign the market is sanguine about tighter central bank policy. The euro fluctuated in the narrowest range last week versus the dollar in more than three months.
Barclays faces another heavy forex fine
Gina Chon, Martin Arnold and Kadhim Shubber – Financial Times
Barclays is set to pay at least another $100m to resolve allegations it abused foreign exchange markets through its electronic trading platform by next month, presenting an early test for the bank’s incoming chief Jes Staley.
Why the IMF’s Nod to China’s Yuan Matters
Koon How Heng – Barron’s
IMF issues positive statement in support of CNY On 13 November, IMF Managing Director Christine Lagarde issued a very positive statement with regard to China’s push to add the CNY to the IMF’s Special Drawing Rights (SDR) basket. The statement noted that IMF staff has assessed that the CNY now meets the requirements of a “freely usable” currency. In addition, the statement noted that “Chinese authorities have addressed all remaining operational issues identified” in an initial staff analysis in July. The statement concluded with Lagarde declaring that “I support the staff’s findings … I will chair a meeting of the board to consider the issue on 30 November.” More significantly, the US Treasury has also added that the USA will review the IMF’s findings and “intends to support the RMB’s inclusion into the SDR basket provided that it meets the IMF’s criteria.”
Finland Finally Considers Something Sensible: Leaving The Euro and The Eurozone
Tim Worstall – Forbes
Sadly, Finland has not in fact decided to do that sensible thing yet, leaving the euro, but they are at least beginning to talk about it. Under the rules in that country if enough people sign a petition then an issue will be debated in the Parliament. This has now happened on this issue and thus the debate there will be. And the correct answer to the debate is that the country should leave. It’s not in extremis so it’s not the same case that Greece could have made for leaving: but that also means that leaving would be a great deal less chaotic than if Greece had tried it. But the effects of being in are pernicious upon the economy and so therefore it should be out: as is my opinion for everyone.
Dollar bulls target further gains
Roger Blitz and Paul McClean – Financial Times
The dollar pushed towards this year’s peak on Tuesday, prompting analysts to entertain the prospect of further strength as the divergence between US and eurozone interest rates and monetary policy dominates the currency market.
Euro to Dollar Forecast: Parity by Year-End 2016 say Credit Suisse
Will Peters – PoundSterling Live
Swiss investment bank Credit Suisse are so confident of the US dollar’s ability to push the euro lower they have made the short EURUSD one of their trades of 2016.
JPMorgan Issues Statement On “JPM Coin” / “Morgan Dollars” Scam
Leon Pick – Finance Magnates
JPMorgan Chase (NYSE:JPM) has disavowed any connection with an apparently China-based digital currency scam that uses the bank’s branding.
Indexes & Index Products
Harvard, Other Top Schools Boosted Emerging-Market ETF Stakes
Mary Romano – Bloomberg
Harvard University and other top schools increased stakes in the third quarter in a Vanguard Group Inc. emerging market exchange-traded fund that lost 19 percent amid a rout in developing-nation assets.
Massive ETF Bets Mount on December Rate Hike
Tom Lydon – ETF Trends
As the Federal Reserve contemplates a December interest rate hike, investors can turn to inverse Treasury bond exchange traded funds to lower a fixed-income portfolio’s overall duration and hedge against rising rates.
New Sector and Specialty Bid-Ask Spread Indexes (BASI) reveal different trading costs for different market segments
David Krein – MarketAxess Research Blog
With the ongoing market-wide focus on liquidity, we’re launching 8 new BASI indexes today. Collectively called the Sector BASI and Specialty BASI, they’re designed to help investors more thoroughly understand their potential trading opportunities and costs.
The 4 new Sector BASIs capture the top four most active U.S. high-grade corporate bond sectors according to BondTicker and TRACE. The 4 new Specialty BASIs capture critical institutional credit market segments. In fact, these new indexes confirm our thesis that different segments of the U.S. high-grade market have different trading costs.
BlackRock Seeks Approval for Nontransparent ETFs
Leslie Josephs – WSJ
BlackRock Inc. is seeking approval for an untested kind of exchange-traded product as competition among providers heats up.
World’s first Indian fixed income ETF launched on Xetra; Deutsche Börse welcomes ZyFin as new ETF issuer
Deutsche Börse Cash Market: The world’s first Indian fixed income ETF has been listed on Xetra and the Börse Frankfurt venue on Tuesday. The LAM Sun Global ZyFin India Sovereign Enterprise Bond ETF (ISIN IE00BYZ5HD97), jointly issued by ZyFin Holdings Pte. Limited and Sun Global Investments Limited, tracks the performance of the ZyFin India Sovereign Owned Enterprise Bond Index. It also is Europe’s first physically replicating ETF to track the Indian bond market.
MSCI Seal Of Approval To Boost Baidu, Alibaba
Investors who previously looked enviously at Chinese Internet stocks but were too afraid to buy due to their volatility have new reason for confidence, with word that one of the world’s top index compilers will include the country’s top names in some of its indexes. The move by MSCI has been long overdue, and comes just months after the global index compiler disappointed China boosters by declining to allow Shanghai- and Shenzhen-listed A-shares into its emerging markets indexes.
Gold Gets Double Whammy on Weak Inflation, Rising Fed Rate Bets
Joe Deaux – Bloomberg
Gold investors have more to worry about than the prospect of higher U.S. interest rates.
The metal, traditionally used as a hedge against rising consumer prices, is getting a one-two punch as weak inflation indicators compound the impact of speculation that the Federal Reserve will soon tighten monetary policy. Higher rates curb gold’s appeal because it doesn’t pay interest or give dividends, unlike competing assets.
Funds bail on gold miners in Q3 as bullion prices tumble
Marcy Nicholson – Reuters
Soros Fund Management LLC sold its stakes in two gold miners while hedge fund Paulson & Co cut its stake in another as bullion prices fell to 5-1/2-year lows, filings with the U.S. Securities and Exchange Commission showed on Monday.
Gold’s Outlook Isn’t Shiny
Ese Erheriene – WSJ
The price of gold will hover at around $1,100 a troy ounce through next year, according to a poll of investment banks, with interest-rate increases and overall bearish sentiment keeping downward pressure on the metal.
Paulson Maintains Gold Stake as Prices Touch Five-Year Low
Joe Deaux – Bloomberg
Billionaire hedge fund manager John Paulson stuck with his holding in the biggest exchange-traded product backed by gold, looking past slumping prices for the metal.
‘Chicagonomics’ and ‘Economics Rules’
David Leonhardt – NY Times
He believed that government had a crucial role to play in a well-functioning economy. It should finance and run good schools, as well as build roads, bridges and parks, he argued. It should tax alcohol, sugar and tobacco, all of which impose costs on society. It should regulate businesses to protect workers. And it should tax the rich — who suffer from “indolence and vanity” — to help the poor.