First Impressions

Donald Wilson, CEO of DRW Trading Group – Reminiscences (and Prognostications) of a Futures Operator

“My focus was on combining the disciplines of trading and risk management with quantitative research and computer science.”

Donald Wilson, CEO of DRW Trading Group, gives his story of how he found his way into the financial industry, starting with his realization that he enjoyed mathematics and then discovering how to connect it with trading currency futures. Having no connections to the financial industry, Wilson was persistent in sending his resume out to firms until finally landing a job where he started by observing traders on the trading floor. Wilson also discusses DRW Trading Group, giving a brief history of the firm and its growth throughout the years, as well as giving insight on what he thinks the future holds for the financial industry. While regulatory change may seem to have created a burden on the industry, Wilson believes that there are still plenty of opportunities that can be created from new rule changes.

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Quote of the Day

“The rally is all about the dovish Fed. The Fed cites global risks but right now it’s the risks to Europe that are the center of the globe.”

Peter Chatwell, a fixed-income strategist at Credit Agricole SA in the story, “Euro-Area Yields Decline to Record Lows on Fed Rate Bets”.

Lead Stories

Europe’s High-Yield Corporate Bonds Lose Their Attraction
Ben Edwards – WSJ
Europe’s high-yield corporate bonds, having been in keen demand for the past couple of years, are falling out of favor.

Euro-Area Yields Decline to Record Lows on Fed Rate Bets
Lucy Meakin – Bloomberg
Borrowing costs across the euro area dropped to record lows amid speculation sluggish global growth will prompt the Federal Reserve to keep interest rates near zero for longer than previously forecast.
Yields on 10-year government bonds from Spain to Finland, including German securities, fell to all-time lows after minutes of U.S. policy makers’ most recent meeting said a slowdown and a stronger dollar posed potential risks to the outlook for the world’s largest economy. A gauge of inflation expectations in the euro area dropped to the least on record yesterday after the International Monetary Fund cut its growth forecasts on Oct. 7.

China landmark bond default heads towards bailout
Gabriel Wildau in Shanghai – Financial Times
A state-owned bad-loan bank has agreed to bail out China’s first domestic bond default, in a move that could reinforce the assumption that even risky credit enjoys an implicit government guarantee.

U.K. Hires Banks for World’s Debut Non-Chinese Bond in Yuan
Lyubov Pronina – Bloomberg
The U.K. has picked banks to sell its first yuan-denominated bonds as it seeks to develop Europe’s offshore trading center for the currency.
Bank of China Ltd., HSBC Holdings Plc and Standard Chartered Plc will organize the benchmark-sized sale of securities and hold an investor presentation on Oct. 13 in London, the Treasury said in an e-mailed statement today.

Solid Demand For Irish 10-Year Bond
Emese Bartha – WSJ
Ireland attracted solid demand for its reopening of a 10-year government bond at an auction Thursday, as it continued to benefit from record low financing costs less than a year after its exit from a three-year international bailout.

Central Banks

New York Fed Needed a Culture Change, Columbia Professor Says – Real Time Economics
Jon Hilsenrath – WSJ
In 2009, Columbia University professor David Beim was asked by the Federal Reserve Bank of New York to conduct a confidential study of its supervision of banks. He found a culture among the staffers which he believed left them too deferential to superiors and unwilling to take a stand on looming threats to the financial system.

Federal Reserve Minutes Lean Dovish on Stronger Dollar Concerns
Andrea Tse – The Street
The Federal Reserve minutes from the September meeting presented what the markets interpreted as the perfect not-too-hot, not-too-cold Goldilocks scenario. “They turned down their growth forecasts for global growth, particularly Europe, and that kind of opened the door to say there’s a chance that growth over there gets so weak that it may temper our growth a little bit,” explained Rob Stein, CEO of Astor Investment Management. “And there’s a risk that we get to this rate rising thing way too soon.”

Fed prepping new policy guidance based on economy, not timelines
Michael Flaherty and Jonathan Spicer – Reuters
The debate within the Federal Reserve over how to telegraph a rise in interest rates heated up last month, with several officials concerned about misleading investors and pushing for a more data-dependent approach, according to minutes from its last policy meeting.

BOE Leaves Interest Rate at 0.5% as EU Economy Falters
Jennifer Ryan – Bloomberg
The Bank of England kept its key interest rate at a record low as the euro-area economy stumbled and domestic growth showed signs of losing momentum.
The recent deterioration is lending weight to Governor Mark Carney’s argument that more time is needed to shore up the recovery. While the nine-member Monetary Policy Committee split on the need for an increase at the last two meetings, the majority voted to hold the key rate at 0.5 percent today.

Draghi Policies Blunted in Berlin as German Protests Grow
Jana Randow – Bloomberg
Mario Draghi’s policy tools are being blunted in Berlin.
The European Central Bank president has stopped short of large-scale sovereign-bond purchases as efforts to mollify Germany’s political elite do little to silence criticism of his ever-more expansionary measures. Support for anti-euro groups such as Alternative for Germany has risen and the ECB’s latest plan to buy assets sparked an outcry within all major parties.

Wall Street is nervous Fed will mess up the tightening
Matthew C Klein – Financial Times


Lira in the eye of the storm
Solomon Teague – Euromoney Magazine
Turkey’s embattled investors can be forgiven feeling defensive, with economic challenges closing in on them from every side – from the Middle East crisis and strengthening dollar to the stubborn current-account deficit.

Break in Nikkei/yen correlation drives hedge fund activity
Viren Vaghela –
Nikkei lag to recent yen depreciation attracts hedge funds back to Japan using forex contingent options

Russia Moves Ruble Band in Biggest Intervention Since March
Vladimir Kuznetsov – Bloomberg
Russia’s central bank shifted the ruble’s trading band the most since the incursion into Ukraine started as it burns through almost $2 billion of reserves to stem the world’s worst depreciation since June.
The monetary authority sold $442 million on Oct. 7, data on its website show today. That excludes any interventions yesterday as the ruble slid 0.5 percent versus the target dollar-euro basket. The bank said it moved the upper band by 20 kopeks to 44.85 yesterday, a level the currency has since crossed to trade at 44.9126 by 4:09 p.m. in Moscow today. The ruble closed at 40 per dollar for the first time yesterday.

Bitcoin has burst, but could still revolutionise banking
John Authers – Financial Times
The bitcoin bubble has burst. This was wholly predictable, and the market fallout is now dramatic. In the past two months alone the cryptocurrency’s price in dollars has fallen about 44 per cent, according to Having peaked last year at about $1,150, it was this week trading just below $330.

Indexes & Index Products

Market Posts Year’s Strongest Gains
Associated Press – NY Times
Wall Street indexes surged on Wednesday, posting their best day of the year and erasing a steep loss from the day before.
Investors were encouraged that the Federal Reserve wants to keep interest rates very low for the time being.
“There’s a lot of pressure on the Fed right now, so this was a big vote of confidence from investors,” said J. J. Kinahan, chief strategist at TD Ameritrade.

Euronext To Refresh Product Offering By Listing 12 New ComStage ETFs
Euronext is pleased to announce that it is expanding its ETF offering by listing 12 new ComStage ETFs on the Lisbon market.


Why A Gold Standard Does Not Imply Price Stability
Jon Hartley – Forbes
Last week, Alan Greenspan penned an interesting article in Foreign Affairs that praised China’s recent conversion of some of its $4 trillion foreign exchange reserves into gold bullion and gave the gold standard some further adulation in a world where there is relatively little today from mainstream economists.
This marks the first time the gold standard has been seriously discussed by a senior U.S. policymaker (former or present) since 2012, when two GOP presidential candidates, Newt Gingrich and Ron Paul, along with former Congressman Lewis Lehrman and Grant’s Interest Rate Observer founder James Grant, called for a commission to consider readopting the gold standard.

Fed minutes blow bullish wind beneath gold prices
Shawn Langlois – MarketWatch
Gold prices caught an updraft on Thursday from Federal Reserve minutes that showed central bankers are having some reservations about the strength of the greenback.

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