First Impressions

2016 Exchange CEO Series: SGX’s Boon Chye Expanding With New Products, New Platform in 2016

Loh Boon Chye took over the Singapore Exchange CEO post in July 2015 with a focus on growing the overall business in derivatives, clearing and equities. But he faces headwinds across the asset classes as China’s economy slows. Boon Chye, however, believes the exchange is well positioned to move forward in 2016.

SGX has made a name for itself by introducing equity index futures with the Nikkei 225 futures, among others. The exchange now is broadening its China product suite with the introduction of a series of equity derivatives based on MSCI indexes including the MSCI China Free Index. The new product follows the FTSE China A50 futures contract, which ranked 18th among global futures exchange in 2015, and traded 95.8 million contracts last year, up 131 percent from 41.3 million contracts a year earlier, according to the Futures Industry Association annual survey. Watch the video »


A Word From Gary Katz of ISE On Autism Speaks
At this year’s Options Industry Conference, attendees will be participating in a 5K charity event to benefit Autism Speaks, a charity near and dear to my heart. I have pledged to match all individual donations, dollar for dollar. I invite you to support this event either by participating or donating (any donation amount will be appreciated).

**Apologies for the bad link last week on this charity drive. Gary topped $35k over the weekend.

Quote of the Day

“He’s trying to swing way above the weight of the Minneapolis Fed. He didn’t come from California just to rub elbows with ranchers in Helena.”

Dick Bove, an analyst with Rafferty Capital Markets in the story, “Kashkari takes on Wall Street from farm-rich Fed region”

Lead Stories

After a Disastrous Year, These Bond Traders Become World-Beaters
Susanne Walker Barton – Bloomberg
Loomis Sayles is tops among total return funds with 5.3% gain; Russell, Eaton Vance also recover from dismal ’15 to lead pack
At least for one quarter, Scott Service and his colleagues at Loomis Sayles & Co. can call themselves world-beaters.

Global investment banking fees fall 29 percent in first-quarter, worst since 2009
Global investment banking fees fell 29 percent in the first quarter of 2016 from a year earlier as market volatility put a brake on dealmaking and equity and debt capital markets activity, Thomson Reuters data published on Monday showed.
Global fees for services ranging from merger and acquisitions advisory services to capital markets underwriting reached $16.2 billion by the end of March, the slowest first quarter for fees since 2009.

Valeant Is a Reminder of the Peril of Outsize Executive Pay
NY Times
There is no shortage of reasons for the spectacular rise and fall of Valeant Pharmaceuticals International.
The firm’s strategy of hugely increasing the price of certain drugs eventually met stiff resistance from Congress. Its stock has fallen about 90 percent since August as investors began to learn of accounting problems. The plunge in the stock also means Valeant can’t easily acquire other drug makers — a main source of growth.

World figures deny wrongdoing as ‘Panama Papers’ reveal offshore wealth
Governments across the world began investigating possible financial wrongdoing by the rich and powerful on Monday after a leak of four decades of documents from a Panamanian law firm that specialized in setting up offshore companies.
The “Panama Papers” revealed financial arrangements of global politicians and public figures including friends of Russian President Vladimir Putin, relatives of the prime ministers of Britain, Iceland and Pakistan, and the president of Ukraine.

LSE chief dismisses American suitor as ‘slash and burn interloper’
James Quinn – The Telegraph
The boss of the London Stock Exchange has dismissed the owner of the New York Stock Exchange as a “slash and burn” organisation which would throw parts of the British bourse “in the bin”.

Deutsche Boerse clearing plan eases banks’ capital worries
The exchange operator’s Eurex unit will let big European investors, such as insurers and pension funds, have a direct relationship with its Clearing House from this summer. By doing so it has found a new way for the world’s largest banks to minimize the impact of capital requirements put in place after the financial crisis.

Lagarde dismisses claim that Greece is being pushed to default
Jim Brunsden in Brussels and Kerin Hope in Andros – FT
Christine Lagarde, head of the International Monetary Fund, has hit back at Greece over claims that the IMF is seeking to push the country towards default, describing the idea as “nonsense”.

Top JPMorgan Treasuries Trader’s Exit Said to Draw SEC Inquiry
Hugh Son, Matt Robinson – Bloomberg
Wall Street regulators are examining alleged policy breaches that prompted JPMorgan Chase & Co.’s U.S. head of government-bond trading and another employee to leave the firm this year, according to a person briefed on the matter.

U.S. top court rejects Wells Fargo challenge to $203 million class action judgment
The U.S. Supreme Court on Monday rejected Wells Fargo & Co’s appeal of a $203 million judgment that it was ordered to pay to resolve a class action lawsuit accusing it of imposing excessive overdraft fees.

Central Banks

Kashkari takes on Wall Street from farm-rich Fed region
From his seat atop the Fed’s smallest bank, in a region known for fracking, farming and ranching, Neel Kashkari wants to make sure he’s heard well beyond the northern plains.
Since becoming president of the Federal Reserve Bank of Minneapolis this year, the 42-year-old Kashkari has gone on a media blitz, visiting nine major media outlets in two days and creating a Twitter hashtag to promote his view that the biggest U.S. banks should break up.

Europe’s Central Banks Begin Boosting Price Transparency for QE
France is planning to join the Netherlands in taking steps toward greater transparency in the European Central Bank’s 80 billion euros-a-month ($91 billion) quantitative-easing program, according to a person with direct knowledge of the plans.

Wisdom wanes for ‘don’t fight the Fed’
Roger Blitz and Robin Wigglesworth – FT
For generations, “Don’t fight the Fed” was a mantra beaten into market neophytes by Wall Street’s grizzled veterans. Now the tables seem to have turned.

Fed gives green light on banks’ US muni bond holdings
Joe Rennison in New York – FT
US regulators have bowed to pressure from the financial industry and allowed banks to use high-quality debt issued by US municipalities to meet new safety standards, easing regional treasurers’ fears that banks would be dissuaded from buying their bonds.

The Most Important Central-Bank Petri Dish on Earth
After the financial crisis, Sweden offered the world’s central bankers a fascinating case study of the effects of an early rate rise—a study so powerful that Janet Yellen, chairwoman of the U.S. Federal Reserve, cited it a year ago as an example of the dangers to the economy of a premature hike.

At Least One Number in Europe Is Going in the Right Direction
The European Central Bank has pulled out all the stops to turn the eurozone economy around. One number is moving in its favor—for now.
It isn’t inflation, which was minus 0.1% in March. ECB executive board member Peter Praet Monday said again that the central bank would continue to act “forcefully” to boost inflation in the eurozone. Nor is it the euro, which on a trade-weighted basis has risen 2.9% so far this year, potentially hampering the ECB by depressing imported inflation.


CME Group Appoints Paul Houston as Global Head of FX
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the appointment of Paul Houston as Executive Director, Global Head of FX.

The Syrian Pound’s Black Market Moves are a Futures Contract on Bashar Al Assad
It’s difficult to tell how tight Syrian President Bashar al-Assad’s grip on power really is. Want a clue? Check the market.

The Swiss franc may face another jolt
Chris Newlands – FT
Little more than a year ago, while European Central Bank president Mario Draghi was busy fulfilling his promise to do “whatever it takes” to revitalise the eurozone economy, the Swiss National Bank was doing whatever it could to protect its own.

New fronts open up in rekindled currency wars
Madison Marriage – FT
In 2010 Guido Mantega, then Brazil’s finance minister, accused the United States and fellow powerful economies of deliberately weakening their currencies in order to take a greater slice of global trade — what he called a “currency war”.

Indexes & Index Products

FTSE Russell launches China A-H 50 Index
Money Management
Global index provider, FTSE Russell, will launch a new index representing the 50 largest companies listed of the Chinese and Hong Kong stock exchanges. The FTSE China A-H 50 Index has been licenced by Deutsche Bank for exchange traded funds (ETFs) listed on the London Stock Exchange and the Deutsche Borse AG.

Swedroe: Indexes Top Europe Managers
Since 2002, S&P Dow Jones Indices has published their S&P Indices Versus Active (SPIVA) Europe Scorecard, which compares the performance of actively managed equity funds to their appropriate index benchmark. The year-end 2015 scorecard is the first to provide 10-year data. While not surprising to those familiar with the U.S. scorecard, the results should be depressing for investors who believe that active strategies are likely to outperform.

Who’s Really Using Smart Beta Funds
There’s no doubt that smart beta has captured investors’ hearts and minds. Last year, smart-beta ETFs accrued an astounding $52 billion in fresh net assets—or roughly 30% of all inflows into U.S. ETFs, according to FactSet. And in a recent survey of financial advisors, 99% said they planned to maintain or increase their smart-beta ETF exposure in 2016. But when it comes to asset flows, sometimes popularity can be an illusion. So we decided to take a closer look at who’s using smart-beta funds – and why.


Gold Rush by Russia Makes Up for Billions Lost in Currency Rout
Here’s why Governor Elvira Nabiullina is in no haste to resume foreign-currency purchases after an eight-month pause: gold’s biggest quarterly surge since 1986 has all but erased losses the Bank of Russia suffered by mounting a rescue of the ruble more than a year ago.

Gold settles at monthly low on hawkish Fed hint
Gold fell on Monday, ending at its lowest level in over a month after a Federal Reserve official suggested that an earlier-than-expected interest rate hike is likely.

Hedge funds aren’t wavering on gold price rally
Equities, yields, oil, the dollar and gold were all in pull-back mode on Monday as the metal failed to capitalize on renewed worries about US and global economic growth.
Traders in gold futures in New York pushed gold for delivery in June, the most active contract, to a week low of $1,215.70 an ounce in early afternoon dealings.

Central Banks are Buying Gold!
So far, 2016 has been a good year for gold investors. The last few months have given renewed hope for the gold bulls.
2015 was a different story. There were certain moments that looked promising, but overall it marked a continuation of the bear market in metals that began somewhere around 2011.

Panama Papers: The DRC’s Gold Standard
Times Live
The law was hailed as the first step toward ending the trade of so-called “blood minerals” in the Democratic Republic of Congo (DRC).
Section 1502 of the Dodd-Frank Act does not require divestment from potential conflict areas, but it does compel companies to disclose the origins of gold and the 3Ts (tin, tantalum and tungsten).
The reputational risk of being identified financing “blood minerals” was supposed to be enough to sway multinationals into extensive due diligence. But the process has only led to new strategies of deniability, especially in the gold industry, and has created opportunities for banks and refineries to wash clean the histories of conflict minerals.


When Feelings of Comfort Trump Spreadsheet Math
NY Times
Truth is a pretty rare thing in personal finance. More often than not, what we call truth is simply a state of mind or an opinion. Even when the math points at what seems to obvious truth, feelings can get in the way.

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