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.”

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“Even though concerns about a near-term destabilizing market event appear to be abating, it is gratifying to see that this has apparently not translated into complacency and that the industry is becoming more diligent about protecting itself from such occurrences.”

Michael Leibrock, DTCC Chief Systemic Risk Officer in the story, “DTCC Annual Systemic Risk Barometer Measures Levels of Concern about Systemic Risk in Financial Services Industry”.

Lead Stories

DTCC Annual Systemic Risk Barometer Measures Levels of Concern about Systemic Risk in Financial Services Industry
Press Release
Despite an apparent ease in fears of a systemic risk event happening in the next 12 months, a recent survey conducted by The Depository Trust & Clearing Corporation (DTCC) revealed that a vast majority of financial firms have increased spending on systemic risk mitigation.

***JK – Top risks from the survey are: new regs, cyber security, significant business continuity event, disruption or failure of a key participant, major compliance or governance event.

European Trading of US Listed Equity Options ‘Shifting Demand in a Changing Landscape’
OIC – Tabb Group
This new report profiles recent trends in European order flow. A thorough revision of TABB’s comprehensive 2011 study, with much new material. European demand for US listed equity options remains strong, with a competitive market structure, deep liquidity and transparency continuing to attract European customers. Also evident is the growing sophistication of European investors, shown by solid growth in directional, premium generation and volatility strategies.

***JK – Report estimates that 9 percent of US equity options volumes come from European-based investors.

China agrees to London renminbi clearing bank
Philip Stafford and Delphine Strauss –
The UK has stepped up its efforts to attract Chinese investment by agreeing with Beijing to the creation of a renminbi clearing bank in London. The Bank of England and the People’s Bank of China (PBoC) are to sign an agreement on renminbi clearing and settlement in the UK capital on Monday.

***JK – London in the lead but others close behind and its a long race.

ECB Faces Uncharted Waters With Negative Deposit Rate
The European Central Bank would be moving into largely uncharted territory, with potentially serious effects on the financial system and currency markets, if it goes ahead with the increasingly popular idea of setting a negative rate on bank deposits—essentially forcing banks to pay for the privilege of parking their money at the ECB.

***JK – So will this lead to more lending or just a cost to banks?

UBS suspends six more forex traders
Daniel Schäfer in London –
UBS has suspended six more foreign exchange traders across the globe, as the Swiss bank’s internal probe into alleged rigging of crucial currency benchmarks gains further traction. The bank suspended three traders in New York, two in Zurich and one in Singapore, two people close to the situation said.

***JK – Police detectives in the movies slam down their badges after being suspended. What does a suspended FX trader do?

S&P wants to split up $5 billion U.S. ratings lawsuit
Standard & Poor’s asked a federal judge to split up the U.S. government’s $5 billion civil fraud lawsuit accusing it of lying about its credit ratings, saying it would be unfair to have to defend against a case of such “unmanageable scope” all at once.

***JK – I think of “unimaginable scope” when I think of ratings agencies and the financial collapse

China’s Shadow Banking Malaise
With the United States economy still struggling to regain full employment, the European economy becalmed in the aftermath of a serious sovereign debt crisis and many emerging markets looking increasingly vulnerable, global macroeconomic attention has become increasingly focused on China. Will China’s economy slow down, and would such a development carry serious financial fallout, even some sort of crisis?

***JK – Stats of the day: The “International Monetary Fund reports total financial sector financing outstanding (i.e., credit of all kind) rose to nearly 200 percent of gross domestic product at the end of the first quarter of 2013, from 125 percent of G.D.P. That is a $13 trillion increase in bank loans, bonds and various nonbank financing.”

Coco bond feeding frenzy sends yields tumbling
Christopher Thompson –
More and more Europeans banks are serving up the red meat of “coco” bonds to yield starved investors, initiating a feeding frenzy that has sent yields tumbling. But some analysts suggest the market would soon hit a floor.

Central Banks

Fed Stresses Over Foreign Banks
MoneyBeat – WSJ
The Federal Reserve began flexing its muscle as the de facto global financial regulator on Wednesday, rejecting the capital plans for the U.S. units of three foreign banks.

Fed has not discussed when to end QE, Bullard says: Bloomberg TV
Federal Reserve policymakers have not discussed the exact timing for wrapping up their bond-buying stimulus, a top Fed official said on Wednesday in comments that suggested quantitative easing could end any time from October to January.

China Interbank Lending Rates Jump
MoneyBeat – WSJ
Interest rates in China’s interbank money market shot up on Thursday, after the central bank stepped up its withdrawal of liquidity as part of continued efforts to rein in reckless lending.

ECB Promotes Stimulus Measures Even as Recovery Lessens Need
Paul Gordon – Bloomberg
European Central Bank officials are promoting tools to fight deflation just as the region’s recovery makes it less likely they’ll need them.

Russia ready to support banks with liquidity – cbank governor
Russia’s central bank is ready to take special measures to support banking sector liquidity but sees no need to do so yet, Central Bank Governor Elvira Nabiullina said on Thursday.


All Signs Point to a Stronger Dollar, Except the Dollar Itself
Michael J. Casey – MoneyBeat – WSJ
It’s hard to imagine a clearer set of signals for a stronger dollar than those of the past month. Yet the greenback’s charts look… meh.

If Bitcoin Isn’t a Currency, Can You Use It Like One?
Paul Vigna – MoneyBeat – WSJ
The Internal Revenue Service’s decision to treat bitcoin like property rather than currency clears up a few questions, and certainly will help some investors who need to finish their taxes by the April 15 deadline. But it leaves other questions up in the air, none bigger than than this: If bitcoin is not a currency, can it be used as one?

***JK – We’re still going to put Bitcoin stories in our currencies section anyway, just because we can. And we don’t have a property section.

Bitcoin Tax Ruling
Adam Levitin – Credit Slips
The IRS has spoken:  Bitcoins are property, not currency.  This was hardly a surprise, but it has some important implication that tells us a lot about what it takes to make a currency work.

RMB volatility slows corporate hedging activity
Justin Lee –
The depreciation in the RMB against the USD over the past two months engineered by the People’s Bank of China (PBoC) has dampened demand from corporate clients to hedge RMB exposures, say dealers.

Euro, peripheral bond yields fall on ECB easing debate
The euro fell on Thursday and peripheral European government bond yields hit their lowest levels in years as speculation grew that the European Central Bank may ease monetary policy soon.

An advertisement for deposit insurance in China
David Keohane | FT Alphaville
One way to avoid a bank run… That’s apparently a bank in China’s eastern city of Yancheng putting its renminbi blocks in the window in an attempt to “calm depositors queueing at bank branches for a third consecutive day following rumours they had run out of cash.”

Standard Chartered FX trader Gardiner resigns – source
A senior currency dealer at Standard Chartered, who was put on leave last year as regulators investigated allegations of global currency market rigging, has resigned from the bank, a source familiar with the matter said on Wednesday.

Rupee hits 8-month high
Business Standard
The rupee continued to gain against the dollar, touching an eight-month high on Wednesday, owing to strong foreign fund flows. However, the gains were capped, as the Reserve Bank of India (RBI) was said to have bought dollars to boost foreign exchange reserves.


Japan buyers rush to snap up gold as tax rise looms
Ben McLannahan in Tokyo –
Japan’s imminent tax increase is hastening a rush for gold ingots as investors seek short-term profits in a market buoyed by rising inflation.

Gold Imports by India Seen Rebounding by Billionaire Jeweler
Swansy Afonso – Bloomberg
Gold imports by India, the second-biggest consumer, will rebound in the second half as a new government may ease trade curbs while festivals and weddings spur demand, said billionaire jeweler T.S. Kalyanaraman.


European bets help Delaware team grab top Lipper award
Bets on financial companies and Europe’s beat-up economy helped maintain a decade-long winning streak at the Delaware Extended Duration Bond Fund rolling in 2013.

Banks battle for share of burgeoning Asia repo market
Viren Vaghela –
Basel III is changing the shape of the global repo markets but in Asia banks are sensing an opportunity. Why are Asia’s markets such an attractive proposition for repo?

High-yield bonds fall out of favour with buyout firms
Alec Macfarlane – Financial News
The popularity of financing private equity deals with high-yield bonds is waning, according to new research, as sponsors veer back towards loans and into covenant-lite structures to finance buyouts.

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