First Impressions

Brendan Bradley, chief innovation officer, Eurex – The New World of Finance
JohnLothianNews.com

“We are the wheels of industry. You wouldn’t actually have the rest of these businesses operating if it wasn’t for the fact that the finance world still greases all of the wheels making all these businesses come around.”

Brendan Bradley, chief innovation officer of Eurex, compares the financial world to the tech industry, and discusses the connection between companies like Google and Goldman Sachs. Bradley says that while the appeal for young people to work for a financial organization may not seem as high as working for a tech firm, it is actually the financial industry that helps tie other industries together. Bradley also discusses market structure, mention how OTC is generally seen as being negative while CCP is seen as being positive. Finally, Bradley concludes with the future of market infrastructure, comparing Bitcoin to T2S, as well as discussing the possibility of more crypto-currencies appearing in the future.

Watch the video »

Quote of the Day

“While we’re still reviewing the Fed’s proposal, we are well capitalized and intend to meet their requirements and time frames while continuing to deliver strong returns for our shareholders.”

Andrew Gray, a JPMorgan spokesman in the story, “With New Capital Rule, Fed Nudges Big Banks to Shrink”.

Lead Stories

Eurex Euribor Fee Waiver Heats Up Euro-Fixed Income Battle
John Lothian – John Lothian News
The battle for the Euribor heated up yesterday with Eurex announcing via member circular a fee waiver for its Euribor contract. With ICE the dominant player in Euribor and NLX attempting to build a foothold, Eurex’s latest move appears to attempt to take advantage of a changing structural landscape.
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Bloomberg looks to rewrite the news
Shannon Bond in New York, FT
Within weeks of leaving New York’s City Hall for the final time as mayor last New Year’s eve, Michael Bloomberg was back to work at Bloomberg LP, occupying a desk on the fifth floor of his financial data empire’s sleek Manhattan headquarters and attending editorial meetings.
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Congress reaches deal for $1.1 trillion U.S. spending bill
David Lawder – Reuters
Congressional negotiators unveiled a $1.1 trillion U.S. spending bill that aims to avoid a government shutdown at midnight on Thursday and punts an immigration showdown between Republicans and President Barack Obama until February.
As the funding deadline loomed, Republicans successfully negotiated a number of policy provisions into the measure, including easing of regulations ranging from the environment to financial derivatives trading.
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Worst Greek Stock Slump Since 1987 Proves Bears Right: Options
Sofia Horta e Costa – Bloomberg
Investors began giving up on Greek stocks even before the latest rout.
A U.S. exchange-traded fund tracking the nation?s equities has had a record streak of redemptions, losing money for four straight months. The wagers proved well-timed: the benchmark ASE Index plunged the most since 1987 yesterday after Prime Minister Antonis Samaras opened the door for the ascent of an anti-austerity party in Greek politics. It dropped another 1.1 percent to 893.13 at 12:29 p.m. in Athens.
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Russian Firms Lost Billions on Derivatives, Interfax Says
Lyubov Pronina and Natasha Doff – Bloomberg
Russian companies lost tens of billions of rubles on foreign-exchange derivatives amid a rout in the ruble, Interfax reported, citing Sergey Moiseev, the head of financial stability at the central bank.
Companies were forced to close out the contracts after the central bank’s move to a free-floating currency exposed them to the world’s highest currency volatility amid a slump in oil prices, Moiseev said, according to Interfax. Most of the transactions were terminated ahead of schedule, triggering penalties, or were restructured, the report said.
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Ian McCafferty: four reasons why interest rates must rise now
Szu Ping Chan – The Telegraph
Raising interest rates now will help to “support and sustain” Britain’s recovery while ensuring prices rise smoothly in the future, according to a Bank of England policymaker.
Ian McCafferty said Britain’s “remarkable” recovery over the past 18 months suggested that pay growth was at a “turning point”, and that a sustained increase in wages was within sight.
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Deutsche Bank Said to Cut Up to 10 London Credit Traders
Alastair Marsh, Nicholas Comfort and Stephanie Ruhle – Bloomberg
Deutsche Bank AG (DBK) cut or moved as many as 10 traders of credit-default swaps in London and related indexes as it trims that part of its fixed-income business amid new regulations, said people with knowledge of the matter.
Josh Farber and Melvyn Merran, who traded credit-derivatives indexes, and credit-swaps traders Colin Webb, Dray Simpson and Fionn O?Leary were let go, according to the people, who asked not to be identified because they?re not authorized to speak publicly. Another three to five swaps traders either had their positions cut or were moved to other jobs as the bank eliminated at least 20 positions across its markets business, the people said.
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BGC Extends Tender Offer To Acquire GFI Group
Press Release via MarketWatch
BGC Partners, Inc. BGCP, -0.77% (“BGC Partners,” or “BGC”), a leading global brokerage company primarily servicing the financial and real estate markets, today announced that it has extended the expiration date of its tender offer to acquire all of the outstanding shares of GFI Group Inc. GFIG, -0.18% (“GFI Group” or “GFI”) it does not currently own for $5.25 per share in cash.
The tender offer is now scheduled to expire at 5:00 pm New York City time on January 6, 2015, unless extended. The tender offer was previously scheduled to expire at 5:00 pm New York City Time, on December 9, 2014.
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Hedge Fund Manager Finds Stalking Lions With Camera Harder Than Tracking Markets
By Stephanie Baker, Bloomberg
A black-and-white photograph of a charging rhinoceros dominates one wall of David Yarrow’s $230 million hedge-fund firm, Clareville Capital Partners LLP, in London.
jlne.ws/1yyrlwm

Central Banks

With New Capital Rule, Fed Nudges Big Banks to Shrink
Peter Eavis – NY Times
The Federal Reserve, fearing complacency six years after the financial crisis, moved on Tuesday to preserve the efforts that have strengthened large banks.
The Fed proposed a rule that would increase capital requirements for the nation’s eight largest banks, including JPMorgan Chase and Goldman Sachs. By increasing the requirements, the Fed aims to make large banks more resilient to shocks. A bank with higher capital depends less on borrowed money, which may cease to be available in times of stress.
jlne.ws/12NSf5p

Pimco Favoring Linkers Shows Investor Faith in ECB
Anchalee Worrachate – Bloomberg
Investors in bonds tied to consumer prices are keeping faith in Mario Draghi to revive inflation in the euro area.
As the region’s governments prepare to sell an estimated record amount of index-linked debt, Pacific Investment Management Co. and Natixis Asset Management (CDCERSI) expect the European Central Bank will reverse a slowdown in price growth that tends to dim the securities’ allure. The difference between one- and 10-year inflation expectations, as measured by consumer-price swaps, widened to the most in five years this week, suggesting traders are anticipating an increase in the cost of living.
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Russia’s Central Bank Is Meeting On Thursday — And It Only Has Terrible Options
Myles Udland – Business Insider
Russia’s central bank is set to meet on Thursday, and it only has bad options.
Here’s a quick overview of the problem facing Russian central bank Governor Elvira Nabiullina.
In a note ahead of the report, Nicholas Spiro of Spiro Sovereign Strategy sums up the problem as follows:
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Currencies

The 5 Most Important Virtual Currencies Other Than Bitcoin
Prableen Bajpai – Investopedia
Bitcoin introduced a decentralized currency system based on a peer-to-peer network where currency is not issued per se; instead it is mined with advanced computers by cracking difficult math-based equations. Bitcoin can be called the trendsetter, as its success has spurred the launch of many other virtual currencies (there are more than 150 cryptocurrencies). The currencies inspired by Bitcoin are collectively called altcoins and have tried to present themselves as improvised and modified versions of Bitcoin. These currencies are easier to mine, but involve greater risk in terms of lesser liquidity, acceptance and value retention.
jlne.ws/12NTLVf

UAE to activate China currency swap soon: Official
Emirates 24/7
The central banks of the UAE and China aim to activate their 35 billion yuan ($5.7 billion; Dh21 billion) currency swap agreement soon, a senior UAE Central Bank official said on Tuesday.
The agreement, designed to facilitate two-way trade and investment, was originally signed in January 2012, permitting the central banks to swap their currencies if needed.
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China’s central bank fights with traders over yuan
Anjani Trivedi – MarketWatch
A battle in China’s currency markets has emerged in recent days with traders pushing the yuan weaker while the central bank has been attempting to guide the tightly-controlled foreign-exchange rate stronger.
That tension was on show Wednesday when the yuan opened 1.1% weaker from where the central bank fixed the morning reference rate, the biggest drop since June.
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HSBC dismisses head of FX trading for EMEA -source
Patrick Graham and Jamie McGeever – Reuters
British bank HSBC has dismissed its head of foreign exchange trading for Europe, Middle East and Africa, Stuart Scott, a source with knowledge of the decision said on Wednesday.
“He has gone,” the source said, adding that the move was broadly in the context of a global investigation into manipulation of currency markets which saw HSBC and five other banks fined a total of $4.3 billion last month.
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Indexes & Index Products

CBOE to offer options on MSCI indexes
Saqib Iqbal Ahmed – Reuters
CBOE Holdings Inc (CBOE.O), which runs the largest U.S. stock-options market, said on Wednesday it has entered a licensing deal with stock market indexes provider MSCI Inc (MSCI.N) which would allow the CBOE to offer options on six MSCI indexes.
Under the agreement, the CBOE plans to offer options trading in the MSCI EAFE Index .dMIEA00000PUS, and the MSCI Emerging Markets Index .dMIEF00000PUS, in the first quarter of 2015, subject to regulatory approval, it said in a statement.
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Emerging Stocks Fall to Eight-Month Low as Commodities Decline
Zahra Hankir and Nguyen Kieu Giang – Bloomberg
Emerging-market stocks fell to the lowest level in eight months as a drop in commodity prices weighed on raw-material producers and technology shares declined. Russia’s ruble fell for a third day.
The MSCI Emerging Markets Index lost 0.7 percent to 958.67. The ruble depreciated 1.5 percent versus the dollar before the Russian central bank meets to decide whether to raise interest rates to halt the currency’s slump. Saudi Arabia’s benchmark Tadawul All Share Index slumped 2.5 percent as Brent fell below $65 a barrel for the first time since 2009. The Ibovespa retreated for a third day.
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Gold

Investors tapped to fund gold fraud film
Ben Bland in Jakarta, FT
Two of the world’s toughest mining tycoons battle it out with a star geologist, a chancer and a dictator’s children for control of one of the world’s largest gold discoveries in the heart of the Indonesian jungle, until it is exposed as a huge fraud. The true story of Canadian company Bre-X Minerals, which collapsed in 1997 after attaining a market capitalisation of $6bn, reads like a movie script and the producer of hit film Home Alone is trying to raise $18m from mining investors to put it on the silver screen.
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Yamana’s Brio Gold spin-off a small but sensible move
Peter Koven – Financial Post
One of the big trends in the mining industry these days is to spin off non-core and underperforming assets to try to realize some value from them. Yamana Gold Inc. is the latest company to go down this path, announcing a plan on Wednesday to transfer three non-core Brazilian mines into a new company called Brio Gold Inc.
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Gold struggles to build on recent rally
Sue Change – Shawn Langlois – MarketWatch
Gold retreated on Wednesday as investors took profits following a strong run-up in the previous session in response to a global equities meltdown.
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