First Impressions

Steve Brodsky, CEO, Spot Trading – My LIFFE: Markets Then and Now

“I know this is the most dynamic industry out there…the creative renewal in this industry is like no other.”

During a time when LIFFE was battling for the Bund futures contract, Steve Brodsky, CEO of Spot Trading, remembered sitting in a meeting with Deutsche Börse and talking about how electronic trading was going to become a game changer for the marketplace. Those in the meeting proceeded to laugh. Today, electronic trading has become dominant in the financial industry, and the way futures contracts were traded changed significantly. Brodsky highlights the rise of electronic trading, from its unsure beginnings to today’s world, where high frequency trading has caught the attention of the financial industry and media. Brodsky also discusses the effects of regulation and gives his prediction of what the market structure of the future may look like.

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Quote of the Day

Jackson Hole and the ECB’s decisions were supportive of the inflation market, but then it just corrected lower – there was no follow-through. I don’t think the ECB will be pleased with the latest moves.

Khrishnamoorthy Sooben, a Barclays strategist, in the FT story “Dip in inflation expectations blow to ECB”

Lead Stories

Fed’s rate guidance on chopping block, new exit plan nears
Ann Saphir and Michael Flaherty – Reuters
The U.S. Federal Reserve is facing perhaps its most pivotal meeting of the year next week, as it debates a potential overhaul of its guidance on interest rates and seeks to nail down a plan for exiting its extraordinarily easy monetary policy.

***DA: Pivotal? I would say “biblical,” as in a camel passing through the eye of a needle.

Currency Markets Start Jumping After Months of Calm
Anjani Trivedi and Ira Iosebashvili – WSJ
After months of calm, currency markets have sprung back to life, as investors scramble to take advantage of the divergent paths taken by major central banks.

***DA: The green shoots anticipating an end to global ZIRP?

The ECB’s Plan is Shaking Up the Sleepiest Bonds
Ben Edwards – MoneyBeat – WSJ
Europe’s oldest and arguably safest bond market has got some investors hot under the collar. Last week, the European Central Bank said it plans to buy covered bonds – debt backed by a pool of loans, such as mortgages – as part of a wider asset-purchase program to jump-start the region’s flatlining economy.

***DA: A form of legal front-running.

Threadneedle bond manager Stevens exits to take career break
Dan Jones – Investment Week
Threadneedle’s Richard Stevens is to leave the firm at the end of the month, handing over his trio of government bond funds to other members of his team, Investment Week can reveal.

Salmond Dismisses Executive Warnings Over Scottish Vote
Robert Hutton and Rodney Jefferson – Bloomberg
Scottish nationalist leader Alex Salmond sought fresh impetus for his independence campaign by accusing his opponents of colluding with executives to scaremonger over the risks of breaking from the U.K.
At an event in Edinburgh for international media today that often resembled a rally more than a press conference, Salmond suggested negative comments by oil company BP Plc (BP/) and life insurer Standard Life Plc (SL/) were a “recycling” of older statements with a political timing. He also called for an inquiry into how news of Royal Bank of Scotland Group Plc’s plan to move some operations to England, should there be a Yes vote, had been leaked.

U.S. Gets Unexpected Bounty From Slow Growth Abroad
Rich Miller – Bloomberg
The world’s pain is America’s gain.
Weak economic growth in Europe and the rest of the world is leading to lower energy prices and interest rates in the U.S. Gasoline prices nationwide have dropped 24 cents per gallon since the start of June on ample oil supplies worldwide. The yield on 10-year U.S. Treasury notes, meanwhile, was 2.54 percent yesterday compared with 3.03 percent at the start of the year, dragged down by falling rates in Europe.

Argentina’s Congress passes debt restructuring law
Argentina’s Congress gave final approval on Thursday to a law proposing to restructure the country’s debt to skirt a U.S. court ruling that forced it into its second default in 12 years.

***DA: Why was this the last alternative, only considered after all others, including jurisdictional bait-and-switch, failed to pan out?

Central Banks

Dip in inflation expectations blow to ECB
Ralph Atkins in London – Financial Times
The European Central Bank’s attempts to boost eurozone inflation have been dealt a blow by a steep fall this week in financial markets’ expectations for long-term price trends.

Homeward Bound? ECB Paper Finds Some Regional Bias at Fed
Brian Blackstone – MoneyBeat – WSJ
A pair of European Central Bank economists looked across the Atlantic to raise an interesting question for central bank officials and watchers: Are Federal Reserve district bank presidents influenced by conditions in their local economies rather than by trends in the U.S. as a whole?

Slacking to stand still
Cardiff Garcia – Financial Times
Our favourite passage of Janet Yellen’s speech at Jackson Hole this year wasn’t actually in the text. It was in a footnote. Specifically, footnote 7: “For convenience, the analysis here is presented as if cyclical factors and structural factors can be neatly delineated. In reality, the line between the two may be indistinct.”


ParFX adds HFT firms as part of new prime service
Anish Puaar – Financial News
An FX market launched by the interdealer broker Tradition and major investment banks, has opened its doors to high frequency traders for the first time.

European banks stop clearing Korean won swaps at KRX
Viren Vaghela –
Doubts over European recognition of KRX’s over-the-counter derivatives clearing house and the robustness of its risk management procedures are forcing European banks to reduce trading of Korean won interest rate swaps or move to non-standard products.

Sterling falls further as Cameron pleads for ‘no’ vote
Laura Dew – Investment Week
Sterling fell further this morning as political leaders headed to Scotland to encourage a ‘no’ vote.

Israel Ready to Get Tougher on Shekel
Chiara Albanese – MoneyBeat – WSJ
Israel’s shekel has fallen hard over the last month, but analysts still reckon central bank might be ready to get tougher on the currency.

Probed Former Citigroup FX Trader Lands Job
Chiara Albanese – WSJ
Rohan Ramchandani, the first trader to be fired in connection with a global investigation into possible manipulation of foreign exchange markets, has landed a new job, making him the latest in a series of controversy-hit traders to resurface in new roles.

Bitcoin company Coinbase to launch eurozone consumer service
Richard Waters in San Francisco – Financial Times
One of the most ambitious US Bitcoin companies plans to launch a consumer service across a large part of the eurozone on Thursday, as use of the cyber-currency starts to spread.

Krona takes currency wooden spoon
Jamie Chisholm – Financial Times
Which of the major developed economy currencies has struggled most so far in 2014? The Abenomics-pressured yen? The euro, battered by Mario Draghi’s moves to do “whatever it takes” to bolster the bloc’s sickly economy?

Indexes & Index Products

Currency Hedged ETFs Are Back In Play
The recent weakness in the euro and yen currencies, along with subsequent strength in the U.S. dollar index, has put currency hedged ETFs back in the center of investors’ radar screens.

Results Announced for 2014 Dow Jones Sustainability Indices Review
S&P Dow Jones Indices, one of the world’s leading providers of financial market indices, and RobecoSAM, the investment specialist focused exclusively on Sustainability Investing, today announced the results of the annual Dow Jones Sustainability Indices (“DJSI”) review. This year marks the 15 year anniversary of the DJSI.

Ferri: Why Peter Lynch Was Wrong
Legendary Fidelity Magellan fund manager Peter Lynch wrote “buy what you know” in his classic book, One Up on Wall Street. The basic principle is simple: You’re more likely to be successful in the market if you buy what you’re familiar with. Peter Lynch was wrong; or at least he wasn’t quite right.

How is a stock market index built, what’s in them and why do I keep seeing more crop up?
The Daily Mail – This is Money
While the majority of readers will be familiar with the FTSE 100, a benchmark charting the performance of some of the largest companies listed on London Stock Exchange, you may not be aware that FTSE Group actually produces over 100,000 indices measuring the performance of assets from around the world.


TOCOM Platinum Futures Open Interest Exceeds 100,000 Contracts
Open interest for the Platinum futures standard contract reached 100,277 lots at TOCOM today. It is the first time since January 8, 2008 that the open interest goes beyond 100,000 contracts. (It was 101,042 contracts that day.)

CME to Launch Hong Kong Gold Futures Contract This Year
Biman Mukherji – WSJ
CME Group Inc. said Thursday it plans to introduce a gold futures contract in Hong Kong this year with the aim of tapping Asian demand for trading in the precious metal.
Each contract will be for one kilogram of gold that will be physically delivered in Hong Kong.

September is the time to buy gold, history suggests
The Telegraph
For those who like to follow investment trends there is a new one that is growing in popularity – buying gold in September.
Over the past 20 years, as the chart below shows, the gold price tends to shine in September. On average bullion has delivered returns of over 3pc, which is by far the best performing month for the precious metal.

***DA: According to my gold trader friends, history suggests the best time to buy gold is any day with a “y” in it.

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