First Impressions

‘Spoofing,’ a New Crime With a Catchy Name
Peter J. Henning – Dealbook – NY Times
Giving a crime a catchy moniker is a good way to get attention when prosecutors pursue a new form of misconduct. There is, for instance, a type of money laundering called “smurfing,” named for the cute blue cartoon characters, that involves runners for a drug organization making small cash deposits at various banks to avoid the currency transaction reporting rules.

Quote of the Day

“It’s actually massive but because it’s taken so long, people have forgotten a bit – it’s the first update we’ve had in that will include everything that’s happened in the last 11 years. It’s a really positive update and it’s much more objective. The downside is that it’s hugely more complex. With greater objectivity comes the cost of less understanding.”

Edmund Parker, partner and global co-head derivatives & structured products at Mayer Brown in the story, “Financial crisis overhaul for credit swaps”.

Lead Stories

Financial crisis overhaul for credit swaps
Philip Stafford – Financial Times
The credit derivatives market was adjusting on Monday to its biggest overhaul in more than a decade following the introduction of new definitions to incorporate events from the financial crisis.

Global Banks Face 25% Loss-Absorbency Rule in FSB Plan
Jim Brunsden – Bloomberg
The largest global banks will have to hold more capital and liabilities than previously reported that can automatically be written off in a crisis — as much as a quarter of risk-weighted assets — as regulators take on lenders deemed too big to fail.
The Financial Stability Board is developing minimum standards that will limit the double-counting of capital banks use to meet existing international rules, according to an FSB working document sent for comment to Group of 20 governments and obtained by Bloomberg News.

Goldman Asset Management, Pimco See Treasuries Falling at QE End
Kristine Aquino and Eshe Nelson – Bloomberg
Goldman Sachs Asset Management and Pacific Investment Management Co. say Treasuries are poised to fall as the Federal Reserve approaches the end of its bond-buying stimulus program.
The completion of the Fed’s quantitative easing plan may add interest-rate risk to U.S. debt, paving the way for possible declines in Treasuries, said Philip Moffitt, head of fixed income for Asia and the Pacific at Goldman Sachs Asset in Sydney. Investors will demand a concession to buy longer-dated debt as the Fed withdraws from a market where it bought 41 percent of this year’s gross issuance of Treasuries due in more than 20 years, Pimco said in a report.

UK regulators approve Bondcube trading platform
The Financial Conduct Authority confirmed Monday it has approved corporate bond trading platform Bondcube as a crossing network ahead of the service’s launch in Europe next month.

Government debt and monetary policy
Matthew C Klein – Financial Times
A new paper by several Harvard economists, including former Treasury Secretary Larry Summers, argues that a little more than a third of the impact of the Fed’s asset purchase programmes was “offset” by the Treasury’s decision to lengthen the maturity of its outstanding bonds:

IMF recommends overhaul of sovereign bonds
Elaine Moore – Financial Times
The International Monetary Fund has recommended substantial changes in the way governments write their bonds, after the protracted fight between Argentina and its “holdout investors” raised fears over the viability of future debt restructurings.

What the rest of the world can learn from Aussie banks
Matthew C Klein – Financial Times
Buried in the Reserve Bank of Australia’s most recent Financial Stability Review is a discussion of how Australian banks have heroically managed their costs over the past two decades.

Argentina Bondholders Unnerved as Kicillof Amasses Power
Daniel Cancel – Bloomberg
Economy Minister Axel Kicillof spent eight months repairing Argentina’s ties with international markets, only to have the nation default in July when he refused to compromise with creditors to resolve its unpaid debts.
Now, he’s taking a decidedly different tack.

Ex-Deutsche Bank CEO nominated as Bank of Cyprus chairman
Former Deutsche Bank CEO Josef Ackermann has been nominated as chairman of Bank of Cyprus , its U.S. based investors Wilbur Ross and Tyrus Capital said on Monday.

Central Banks

How two became three: the BoJ’s struggles with forward guidance
Ben McLannahan – Financial Times
When governor Haruhiko Kuroda stood up in April 2013 to set out a bold new regime of monetary easing at the Bank of Japan, the executive summary seemed obvious: it’s all about the number two.

ECB should focus on CDS spreads, not inflation
Marcello Minenna –
The markets measure eurozone break-up risk by analysing European sovereign CDS spreads. Marcello Minenna argues European monetary policy-makers should therefore make spread control their key goal

U.S. Fed’s Dudley says would be ‘delighted’ to raise rates in 2015
An influential Federal Reserve policymaker said he would be “delighted” to raise interest rates some time next year since it would be a sign of economic success, but for now a “very accommodative monetary policy” is still needed.

One in Six Americans Thinks Alan Greenspan Still Runs the Federal Reserve – Real Time Economics
Ben Leubsdorf – WSJ
A sizable portion of the U.S. public thinks Alan Greenspan, who retired as Federal Reserve chairman in 2006, still runs the central bank. A near-majority has no idea who occupies one of the most powerful positions in the global economy.That’s according to a Pew Research Center poll conducted Sept. 25-28. The survey of 1,002 adults had a 3.6 percentage-point margin of error.


U.S. Clearing Rules Eyed for Some Currency Derivative Contracts
Silla Brush – Bloomberg
Foreign-exchange traders, already subject to a global probe over alleged manipulation, may face U.S. restrictions on derivatives contracts for some currencies.
Commodity Futures Trading Commission members and staff are weighing whether to require that contracts for non-deliverable forwards be guaranteed at clearinghouses that accept collateral from buyers and sellers. The regulation would apply the clearing rule to contracts for a dozen currencies, including China’s yuan, South Korea’s won and Brazil’s real.

Russian Central Bank Props Up Ruble
Andrey Ostroukh – WSJ
The Bank of Russia moved once again Tuesday to shore up the troubled ruble, spending as much as $1.75 billion over the last three trading sessions in the heaviest interventions since mid-March.
The ruble has been hitting fresh lows almost daily since the beginning of October. Sliding oil prices have hit Russia’s economy hard given the country’s dependence on oil and gas exports. And at the same time, sanctions imposed by Western countries over the Ukraine crisis have limited the ability of Russian banks and companies to borrow abroad.

The Rand and the New Man at South Africa’s Central Bank
Chiara Albanese and Josie Cox – MoneyBeat – WSJ
The South African rand has been on the up all day. Is this the market’s way of welcoming Lesetja Kganyago into his newly announced role as head of the country’s central bank? Yes and no.

Rouble traders play the waiting game
Solomon Teague – Euromoney Magazine
It has been another torrid month for the rouble, but the possibility of tensions with Ukraine abating in the near term and a package of monetary reforms next year offer hope for more trading opportunities.

Cantor Targets Expansion into FX Market Making
Profit & Loss
Cantor Fitzgerald is targeting mid-market clients as it seeks to build out its footprint in FX and expand into the electronic market making business

Consultants fear mis-selling as forex brokers discover new options
Fiona Maxwell –
Foreign exchange brokers – which execute spot and forward currency trades with smaller businesses – are now also offering options-based structures to clients in the UK. Consultants say the trades they have seen are complex and worry about the potential for mis-selling.

BitBeat: Bitcoin Finds Willing Buyers, Even With Prices Plunging
MoneyBeat – WSJ
Despite bitcoin’s relentless price plummet, startups in the cryptocurrency trading world continue to say that high-net-worth individuals and financial professionals are itching to trade it but can’t do so because current infrastructure doesn’t allow them to accumulate large exposures.

Blockchain Is Latest Bitcoin Start-Up to Lure Big Investment
Sydney Ember – Dealbook – NY Times
The bets that Silicon Valley is placing on Bitcoin are getting bigger. Even though concerns remain about the digital currency’s staying power, Bitcoin start-ups are attracting more dollars from well-known venture capitalists.

Indexes & Index Products

VIX Spot Index Now Includes S&P 500 Weekly Options (Part 2)
Matt Moran –
Today CBOE is beginning its calculations of the spot value of the CBOE Volatility Index® (VIX®) using S&P 500® Index (SPX) options with weekly and standard 3rd Friday expirations that more closely bracket the 30-day target timeframe. While this change is not expected to have a dramatic impact on the spot VIX Index, the change is a more precise enhancement to the VIX as the premier 30-day measure of the expected volatility of the S&P 500 Index.

Flows Into European ETFs Reverse Course
Juliet Samuel – MoneyBeat – WSJ
The eurozone’s woes aren’t showing any signs of an imminent fix – and its problems are showing up in the fund flows. European exchange-traded funds saw a whole year’s worth of growth come to an end last month, according to figures from Lyxor, the continent’s third biggest ETF provider.


Greenspan Lets His Hair Down; Talks Up Gold
Brian Domitrovic – Forbes
Former Federal Reserve chair Alan Greenspan published a mighty interesting article in Foreign Affairs last week. He said that China could be thinking of increasing its gold stocks in a big way. Perhaps, Greenspan implied, the Chinese even have a thought of making their currency, the RMB, convertible in gold.
The episodic article went on to discuss how strange it is that the big fiat-country countries, from the United States on, maintain their multi-hundred-billion-dollar gold stocks. They never want to sell, for all the trashing of gold-as-money from the wonks, economists, and serious statesmen.

Gold market sentiment takes a big turn for the worse
Mark Hulbert – MarketWatch
Gold’s $20 plunge on Friday was accompanied by a big increase in bullishness among gold timers.
That’s just the opposite of what you would expect, since the normal pattern is for gold timers’ bullishness to rise and fall in lockstep with the market.
It’s a bad sign that this normal pattern has been broken, according to contrarian analysis. It suggests that there isn’t yet absolute bearishness that marks a significant bottom.

Seasonal demand unlikely to help gold amid strong dollar
Sri Jegarajah – CNBC
Gold’s drop to 15-month lows may be timely for Asian buyers, but even an army of discount-hungry Indian matriarchs won’t be enough to arrest the precious metal’s slide in the fourth quarter amid the onslaught of the resurgent dollar, a CNBC survey of strategists and traders showed.
Almost two-thirds of respondents said gold has scope to fall further in the final quarter pressured by a surging U.S. dollar, while 35 percent believe the selling is overdone and prices will recover towards year-end as Asian physical demand returns

Traders See More Losses for Gold ETF as Dollar Rallies
Callie Bost and Eric Lam – Bloomberg
The metal has tumbled 13 percent since mid-March and traders are increasing bets that further declines are coming.

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