First Impressions

World Of Opportunity Chicago 2014: Ben Van Vliet (Promo)

JohnLothianNews.com

Our MarketsWiki World of Opportunity Summer Intern Education Series in Chicago is quickly approaching. Ben Van Vliet, assistant professor at the Illinois Institute of Technology, will be discussing the organizational structure of High Frequency Trading as well as what key components help give traders a competitive advantage.
For more information on the event and how to register, click here.

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Revved Up: CME Europe’s Knottenbelt Says Currencies Just The Beginning

JohnLothianNews.com

CME Europe launched in March with an eye on currencies. William Knottenbelt, head of European business operations for CME Group and the CEO of CME Europe, says that the exchange has a core group of seven clearing members with more on the way and its currency products are positioned well for the market. And that, he says, is just the beginning for the European exchange.

“We’re starting now to see the volume beginning to come into the market,” Knottenbelt told JLN at the IDX conference in London. “As we get more and more clearing members and execution members coming on board, we’re getting a good flow of business and we just see that building.”

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Quote of the Day

“The unsustainable nature of the federal tax and spending policies specified in current law presents lawmakers and the public with difficult choices. Unless substantial changes are made to the major health-care programs and Social Security, spending for those programs will equal a much larger percentage of GDP in the future than it has in the past.”

CBO in a report in the story, “Federal Debt to Reach 106% of Economy in 2039, CBO Says“.

Lead Stories

Federal Debt to Reach 106% of Economy in 2039, CBO Says
Bloomberg
The U.S. debt is expected to rise to 106 percent of the economy in 2039 from 74 percent this year, the Congressional Budget Office said.
To put federal finances on a sustainable path, Congress must boost revenue, cut spending on benefit programs or combine the approaches, CBO said in its long-term budget outlook released today.
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***DA: I have seen my future and it involves working until I am 80.

Bond Giant Pimco and Founder Bill Gross Struggle to Heal Strains; Tensions Persist Six Months After Abrupt Resignation of Previous CEO
By Gregory Zuckerman and Kirsten Grind
NEWPORT BEACH, Calif.—In early June, before hundreds of employees at Pacific Investment Management Co.’s new 21-story headquarters here, Chief Executive Douglas Hodge spoke effusively about Bill Gross’s enduring passion for investing.
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***DA: The beginning of the downfall was when Gross shaved his mustache in 2008, leaving El-Erian as the head of the mustache department.

Here’s What Rick Santelli’s Latest CNBC Rant Is Really About
Pat Regnier – Money
Risk Santelli’s crazy-eyes routine on CNBC today, complete with theatrical camera walk-off as he shouted “Hasta la vista!”, is certainly something to see. But, um, what was Santelli actually arguing about? And what point was he trying to make?
If you don’t watch CNBC regularly, you may find even its normal trader banter difficult to decode. But Santelli gets worked up in a lather so quickly that some backstory needs filling in. Here’s the full 12-minute exchange and, below that, our best shot at translating the passion of Santelli:
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***DA: It was a setup, staged by the CNBC brass, who had just seen the latest Nielsen ratings.

Hedge Funds Turn to Raves, Madoff Claims on Distress Scarcity
Kelly Bit – Bloomberg
Hedge funds investing in distressed securities should be finding little to feast on with U.S. company defaults at a six-year low. They’re still trouncing most peers within the $2.7 trillion industry.
Distressed funds have climbed 7 percent this year, compared with 2.5 percent for managers across strategies, according to data compiled by Bloomberg. Firms including Paulson & Co., Mudrick Capital Management LP and Maglan Capital LP have approached or exceeded returns of 10 percent.
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Don’t Bet Your Sporran on a Scottish Stock Market
By Alen Mattich, WSJ
As Scotland builds up to its mid-September vote on whether it should become independent, plenty of attention has focused on how its economy might fare outside of the United Kingdom. The latest comes in the form of an analysis of what a Scottish stock market would look like, produced by a pair of economists from the London Business School and Walbrook Economics, a consultancy.
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***DA: Sub-penny pricing, no doubt.

Barclays Dark Pool Volume Fell 37% in Week of Lawsuit
By Michael J. Moore, Bloomberg
Barclays Plc (BARC) saw a 37 percent decline in the number of U.S. shares that traded in its dark pool during the week that it was sued by New York for allegedly lying to customers of that venue.
jlne.ws/1mGclpJ

New dawn as non-bank enters interdealer order book
IFR
Dodd-Frank’s intention to move over-the-counter swaps into an exchange-like format has taken another step towards reality, as one US firm has become the first non-bank to execute interest rate swaps within an interdealer broker’s anonymous order book platform.
jlne.ws/1rdAmXZ

Goldman’s Earnings and Revenue Rise, Beating Expectations; Investors Closely Watch Results From FICC Trading Business
By Saabira Chaudhuri, WSJ
Goldman Sachs Group Inc. said second-quarter net income rose 5.5% on strength of its investment banking and investing and lending arms.
jlne.ws/UaIA4U

Trading Doldrums Won’t Sink Morgan Stanley, Goldman Sachs
By John Carney, WSJ
The wind may have come out of Wall Street’s trading sails, but that doesn’t mean Morgan Stanley and Goldman Sachs Group Inc. are stuck treading water.
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Central Banks

Yellen Says Continued Easing Needed Amid Job-Market Slack
Jeff Kearns and Matthew Boesler – Bloomberg
Federal Reserve Chair Janet Yellen told lawmakers the central bank must press on with monetary stimulus as “significant slack” remains in labor markets and inflation is still below the Fed’s goal.
“A high degree of monetary policy accommodation remains appropriate,” Yellen said today in semi-annual testimony to the Senate Banking Committee. “Although the economy continues to improve, the recovery is not yet complete.”
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***DA: Translation: we are monitoring U-6, which is still rather elevated.

BOJ Keeps View Inflation to Accelerate Toward 2% Target
Toru Fujioka and Masahiro Hidaka – Bloomberg
Governor Haruhiko Kuroda signaled confidence in the Bank of Japan’s bid to drive inflation to 2 percent as the central bank maintained unprecedented stimulus.
The BOJ stuck with its goal to increase the monetary base by 60 trillion yen to 70 trillion yen ($690 billion) per year, it said in a statement today, as forecast by all 34 economists surveyed by Bloomberg News. Consumer prices excluding fresh food will rise 1.9 percent in the year starting April 2015, the median estimates of board members showed, matching its forecast three months ago.
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***DA: I see diminishing marginal returns to adding stimulus.

RPT-GRAPHIC-Emerging central banks rebuild hard currency reserves
Sujata Rao and Vincent Flasseur – Reuters
Hard currency reserves across emerging markets excluding China have surged by around $100 billion from levels at the end of 2013 as central banks exploit this year’s buoyant investment inflows to refill their depleted coffers.
With an eye on the day when U.S. interest rates eventually start to rise, policymakers in emerging economies are actively buying dollars. They see them as a bulwark against the kind of selloff that ravaged their markets last year due to signs that the U.S. bond-buying programme could soon be wound down.
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Currencies

FSB Weighs Wider Window for Foreign-Exchange Benchmarks
Jim Brunsden and Ben Moshinsky – Bloomberg
Global regulators published details of their plans to overhaul foreign-exchange benchmarks in response to allegations traders colluded to manipulate rates in the $5.3 trillion-a-day currency market.
The Financial Stability Board proposed changing how the most popular rates, from WM/Reuters, are calculated by extending the length of the one-minute windows in which the benchmark is based, and requiring firms install systems to address potential conflicts of interest with clients. The Basel, Switzerland-based FSB set an Aug. 12 deadline for comments on the plan.
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Traiana expands CreditLink initiative with kill switch support for single dealer platforms
ICAP
London, 15 July 2014 – Traiana, the leading provider of pre-trade risk and post-trade processing solutions, announces today that it has extended the scope of its CreditLink service to include a kill switch capability for single dealer platforms in foreign exchange (FX) trading. Citi’s platform, Velocity, is the first single dealer platform to enhance its connectivity with CreditLink to support this new capability.
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EBS Direct grows month-on-month since launch in November 2013; ANZ became the 14th liquidity provider on the platform in June
EBS
London and New York, 15 July 2014 – EBS, ICAP’s market-leading electronic FX business, announces today that EBS Direct has averaged month-on-month growth in average daily volumes of 70% since launching in November 2013. EBS Direct now has 458 liquidity consumers in 35 countries committed to using the service, with 176 active users. New functionality and further currency pairs have also been added to the platform since launch, adding to the demand for this product.
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Indexes & Index Products

JPMorgan Releases First U.S. Index to Measure CLO Returns
Kristen Haunss – Bloomberg
JPMorgan Chase & Co. (JPM) has created the first U.S. index of its type to measure returns of collateralized loan obligations, which are on pace for a record year of issuance.
The CLOIE gauge will be available for use today, according to Gloria Kim, the head of global index research at the bank in New York. The measure will allow users to track the price and total return of CLOs and their debt portions, according to the bank.
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***DA: Welcome to 2007.

Head of S&P Capital IQ Departs; Lou Eccleston Leaving to Pursue Other Opportunities, According to Memo
By Timothy W. Martin
Lou Eccleston, who led the fast-growing S&P Capital IQ division at McGraw Hill Financial Inc. departed Monday to pursue other opportunities, according to an internal company memo.
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Why Heavy Distribution Days On Big Indexes Can Stop A Market Rally
Vincent Mao – Investor’s Business Daily
Contrary to popular belief, calling market tops isn’t a fool’s game. Given the right tools, you can tell when the market’s uptrend will likely end.
Rallies in major indexes such as the Nasdaq and the S&P 500 don’t go on forever. Whether it’s due to plain old profit-taking or a catastrophic economic event such as the 2007-2009 Great Recession, the stock market does go through some rough patches from time to time.
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***DA: This looks like a job for Captain Obvious.

Empire State manufacturing index rises to 4-year high in July By Investing.com
Investing.com
The New York Federal Reserve’s index of manufacturing conditions improved at the fastest rate since April 2010 in July, official data showed on Tuesday.
In a report, the Federal Reserve Bank of New York said that its general business conditions index increased to 25.6 this month from a reading of 19.3 in June. Analysts had expected the index to decline to 17.0 in July.
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How Well Do You Know Your Indexes?
Adam Zoll – Morningstar
Question: I want to build a portfolio using only index funds, but I have trouble keeping them all straight. Can you explain which indexes do what?
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Gold

Autilla goes live with innovative marketplace for precious metals trading
Cinnober
Cinnober’s TESS Connect & Go solution enabled short time to market
The global precious metals marketplace, Autilla Ltd., today announced that it is now live with their new electronic trading platform, powered by Cinnober Financial Technology. The migration of the over-the-counter (OTC) broking of precious metals onto a proven electronic trading platform enables Autilla to provide banks with a highly flexible and compliant trading system. This innovative initiative, which is available to wholesale participants in the London Bullion Market Association (LBMA), is enabled by Cinnober’s TESS Connect & Go.
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Gold Has Biggest Loss of 2014 as Portugal Concerns Ease
Luzi Ann Javier – BloombergBusinessweek
Gold futures posted the biggest decline in almost seven months as Portuguese banking concerns eased and equities gained, diminishing demand for haven assets.
Portuguese 10-year government bonds were set for the biggest two-day advance in a month on speculation that Portugal would contain financial woes at one of its banking groups. The Standard & Poor’s 500 Index added as much as 0.6 percent after Citigroup Inc. reported profit that topped analysts’ estimates.
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Miscellaneous

Chinese Bitcoin Firm Joins Atlas ATS in Bid for Mt. Gox Assets
Bloomberg
BitOcean, a Chinese bitcoin startup, joined with New York-based exchange platform Atlas ATS Inc. to bid for the assets of Mt. Gox, the exchange platform that filed for bankruptcy in Japan earlier this year.
BitOcean and Atlas will invest $1 million worth of bitcoins to start an exchange platform in Japan by August, Nan Xiaoning, the Beijing-based founder and chief executive officer of BitOcean, said in an interview today.
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