First Impressions

World Of Opportunity Chicago 2014: Tim McDermott (Promo)

Our MarketsWiki World of Opportunity Summer Intern Education Series in Chicago is quickly approaching. Tim McDermott, CEO of Nadex, will be discussing his career path in the financial industry and how his experiences have helped shape his career today.
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

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

“There is recognition that clients are driving the needs of asset managers to move in a certain direction but the industry itself needs to evolve to be able to deliver that kind of product set.”

Andrew Wilson, Head of Asset Manager Solutions UK at State Street in the story, “Global fund managers face multi-asset skills shortage”.

Lead Stories

Global fund managers face multi-asset skills shortage
By Olivia Hardy and Yousra Elbagir, Reuters
Global fund management firms are struggling with a skills shortage as the industry moves towards multi-asset investing in an attempt to improve returns, a study showed on Monday.
With stock markets struggling to match the stellar gains of 2013, bond markets looking overpriced and emerging markets offering only patchy value, many investors are looking for flexibility in their investments.

***DA: In other words, there is global demand for putting the diversification at the fund level, rather than at the broker or wealth manager level.

Dark pool probe builds pressure on Barclays boss
By Steve Slater, Reuters
* NY lawsuit alleges Barclays equities dark pool deceived some customers
* Barclays is conducting its own investigation into the allegations
* Barclays boss has vowed to close areas where misconduct is found
* The equities business is an area he had planned to keep
Barclays boss Antony Jenkins faces one of the biggest tests of his leadership this month when he decides whether the bank, Britain’s third largest, should fight accusations it deceived and defrauded customers in the United States.

***DA: The decision will likely rest on whether they still have a “without admitting or denying guilt” option.

Traders Flood U.S. With $3.4 Trillion of Bond-Auction Demand
Daniel Kruger and Cordell Eddings – Bloomberg
The intensifying debate over when the Federal Reserve raises interest rates is little more than a sideshow when it comes to the ability of the U.S. to borrow.
For all the concern fixed-income assets will tumble once the central bank boosts rates, the Treasury Department still managed to get investors to submit $3.4 trillion of bids for the $1.12 trillion of notes and bonds sold this year, according to data compiled by Bloomberg. That represents a bid-to-cover ratio of 3.06, the second-highest on record and up from 2.88 in all of last year.

The Existential Crisis of the Nickel Broker-Dealer
by Joshua M Brown , The Reformed Broker
Bank of New York Mellon’s Brian Shea made some surprisingly candid comments to the Pershing correspondent broker-dealers present at a conference this summer. The gist of his talk seems to have been that models need to change and choices about what services to provide and to whom need to be decided. Before the disruption comes to make these choices for them.

Grumbling foreign banks bend to US rules
Financiers may grumble that the United States is acting like an imperial power in punishing foreign banks for dealings far beyond U.S. territory, but in the end they are more likely to bow to Washington than kick against its dollar muscle.

***DA: Can’t just take your ball and go home.

Bundesbank concerned by U.S. penalties for European banks
The Bundesbank is concerned by penalties European banks are paying the United States to settle investigations into sanctions violations involving Sudan, Iran and Cuba, Spiegel magazine reported, quoting an official at the German central bank.

***DA: With friends like these…

Individuals Pile Into Stocks as Pros Say Bull Is Spent
Lu Wang – Bloomberg
Main Street and Wall Street are moving in opposite directions.
Individual investors are plowing money back into the U.S. stock market just as professional strategists say gains for this year are over. About $100 billion has been added to equity mutual funds and exchange-traded funds in the past year, 10 times more than the previous 12 months, according to data compiled by Bloomberg and the Investment Company Institute.

***DA: The bull apparently has a final run to make, as it suckers in the last of the dumb money.

What central banks should do to deal with bubbles
Financial Times
The world has conducted two controlled experiments on how to fight financial bubbles in the past decade. Both failed.
The first was to ignore the bubble and to mop up later. The idea seemed plausible to a lot of people. But it was based on the false premise that the costs of mopping up would be bearable.

***DA: How about central banks adopt their own Hippocratic Oath? First, do no harm.

Central Banks

Federal Reserve May Revamp Benchmark Rate Calculation
Matthew Boesler and Michael McKee – Bloomberg
The Federal Reserve is considering changing the way it calculates its main policy interest rate by including a broader range of transactions, said Dennis Lockhart, president of the Atlanta Fed.
The federal funds rate, currently calculated on the basis of brokered trades of overnight loans of reserves between banks, would also include direct trades, Lockhart said in an interview with Bloomberg News. Adding eurodollar transactions is also a “possibility,” he said.

***DA: A rate based on actual transactions in the deepest pools of liquidity? What a novel concept.

Fed’s Plosser: Federal Reserve Must Prepare Markets for Rate Increases
Michael S. Derby – WSJ
Federal Reserve Bank of Philadelphia President Charles Plosser said Friday that the U.S. central bank needs to start preparing markets for increases in short-term interest rates that may come sooner than many currently expect.
“We need to adjust the language in our statement to reflect that the economy really is better that it was, and that the necessity of having zero interest rates for a long time to come seems to me to be perhaps a risky or unnecessary step at this point,” Mr. Plosser said in an interview with The Wall Street Journal.

***DA: Whatever. Basing one’s trading decisions on the language used by the Fed is a fool’s errand.

Draghi Seen Delivering $1 Trillion to Banks in ECB Offer
Alessandro Speciale and Andre Tartar – Bloomberg
Mario Draghi’s newest stimulus tool will hand banks more than 700 billion euros ($950 billion) of cheap funding, economists say.
The European Central Bank president’s targeted lending program for banks will boost credit for the real economy as planned, and at the same time help keep the financial system flush with cash, according to the Bloomberg Monthly Survey of 45 economists. Draghi may address the topic today when he testifies at the European Parliament in Strasbourg for the first time since elections in May.

***DA: Because such programs have worked well thus far?

One in Three Economists See 2014 BOE Rate Increase
Jennifer Ryan and Andre Tartar – Bloomberg
Expectations the Bank of England will begin increasing interest rates in 2014 surged over the past month after Governor Mark Carney cautioned that investors were underestimating the risk, according to a Bloomberg survey.
Thirty-four percent of economists say the BOE will raise the benchmark rate from a record-low 0.5 percent by December, up from 12 percent in early June, the survey of 50 economists shows. The poll also finds half predict the first increase will come in the first quarter of 2015, compared with 43 percent.

Stronger Economy (More Than Federal Policy) Will Spur Business Loans, Federal Reserve Presidents Say
Cheryl Conner – Forbes
Federal policy will not be the gating factor that hastens the pace of small business loans in 2014-2015 according to Federal Reserve President Charles Evans, of Chicago’s Federal Reserve Bank. It is the strengthening economy that will pave the way for stronger lending in 2014 and 2015, Evans said. Dennis Lockhart, President of the Federal Reserve Bank of Atlanta agrees.

China’s Central Bank Investigates Report of a Bank’s Money Laundering
Didi Kirsten Tatlow – NY Times
China’s central bank is investigating a report by state television that a major Chinese bank is helping clients transfer large amounts of money overseas in a program that violates currency controls, Xinhua, the state-run news agency, said Friday.
The station, China Central Television, or CCTV, caused a scandal when it broadcast a program on Wednesday accusing the Bank of China of money laundering on a large scale.

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.


U.S. prosecutors offer junior UK traders immunity in forex probe: FT
Prosecutors from the U.S. Department of Justice are offering immunity deals to junior traders in London as they continue to investigate the alleged rigging of foreign exchange rates by banks and senior traders, the Financial Times reported, citing sources.

***DA: There’s always a bigger fish.

Delayed payments system stalls yuan’s global ambitions
South China Morning Post
Roll-out of CIPS network won’t be ready before 2016 due to technical glitches and policy snags

Dead Cross Signals Downside for Dollar-Yen: Technical Analysis
Candice Zachariahs and Hiroko Komiya – Bloomberg
The dollar is unlikely to recoup its biggest weekly drop versus the yen in three months after the pair’s 50-day moving average fell below the 200-day measure in what IG Group Holdings Plc called a dead-cross pattern.
The U.S. currency declined 0.7 percent last week, closing below the upper line of what’s known as the Ichimoku cloud and signaling the end of a bullish period that began in November 2012 on the chart. Its 14-day relative strength index is below 50, indicating upward momentum is not strengthening, said Junichi Ishikawa, a Tokyo-based analyst at IG Group. The 50-day moving average at 101.88 was below the 200-day level of 101.91 today, a pattern unseen since 2012, data compiled by Bloomberg show.


DGCX Crosses Five Million Contracts in the first half of 2014
Precious metal contracts grow 7% in H1
Gold futures grow 21% in June
Dubai Gold and Commodities Exchange (DGCX) crossed five million contracts in the first half of the year. The Exchange ended H1 2014 having registered more than 5.75 million contracts, with a value of over $172 billion.

CME, Thomson Reuters win battle to replace century-old silver benchmark
By Clara Denina and Jan Harvey, Reuters
CME Group and Thomson Reuters will operate an electronic silver benchmark when the 117-year-old “fix” is disbanded in August, in a move widely seen preceding sweeping reforms of precious metals price-setting.

***DA: Two entities that know a thing or two about price discovery.

CME Group Statement
CME Group
LONDON, July 11, 2014 /PRNewswire/ — CME Group, today released the following statement regarding the London Bullion Market Association’s London Silver Price Market Consultation: “We are honoured to have been appointed by the OTC silver market participants and the London Bullion Markets Association to provide an electronic solution that will transform the London OTC silver spot price,” said William Knottenbelt, Senior Managing Director, EMEA (Europe, Middle East, Africa) for CME Group. “CME Group’s transparent, transaction-based OTC auction platform, combined with Thomson Reuters’ independent Benchmark Administration services will deliver a strong London footprint, a deep understanding of the silver markets, and a fully IOSCO-compliant, FCA-regulated solution to the London bullion marketplace. As an industry leader in precious metals price discovery, we understand how important the silver spot benchmark is to the physical metals industry, and we look forward to continuing to engage with key metals industry stakeholders to deliver our new solution on August 15th.”


Can’t Get a Job From an Algorithm, or So It Seems as Hot Resumes Go Nowhere Fast
Craig Torres and Ilan Kolet – Bloomberg
One morning last month, a group of job seekers gathered in a cool basement meeting room under a Washington condominium to hear a talk and share stories.
The mid-career professionals included an intelligence analyst, an engineer and a woman who had run her own legal practice. They were frustrated with their inability to breach a nameless, faceless online-search process that seemed insensitive to their accomplishments and impossibly discriminating.

***DA: Not what you know, it is who you know. Same as always. An insider can put you in the front of the line even in an online search.

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