First Impressions

Better Volatility: Scott Nations and ISE Look to Launch a Better Volatility Contract

There is a regular drum beat in the financial services arena about a “new asset class” or the “next asset class,” many of which really aren’t actually new. In recent years, volatility has checked most, if not all, of the boxes for a new asset class. The space has been dominated by the CBOE Volatility Index, better known as the VIX or “fear gauge.” But now a new volatility instrument has emerged, the VolDex, which teams Chicago-based options index firm NationsShares with the International Securities Exchange (ISE).

Scott Nations, president and CIO of NationsShares, says his VolDex index, on which the ISE is developing new options and possibly futures contracts, is the next generation volatility index that will address the needs of market users. ISE and his firm are working now to launch new options and futures contracts on the index.

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Quote of the Day

“Investment firms are much more focused on being able to prove they’re getting good execution than ever before. In Treasuries, the market seems ripe for electronic trading.”

Kevin McPartland, head of research for market structure and technology at research firm Greenwich Associates in the story, “Humans Lose to Machines in $500 Billion-a-Day Bond Market”.

Lead Stories

Humans Lose to Machines in $500 Billion-a-Day Bond Market
Lisa Abramowicz – Bloomberg
Human traders are increasingly losing out to machines in the world’s biggest bond market. While investors traditionally negotiated prices for U.S. Treasuries by telephone, they’re increasingly turning to computer-based marketplaces for a range of price quotes from different dealers.

ECB to start asset purchases this month in bid to revive lending
Claire Jones in Naples and Ferdinando Giugliano in London – Financial Times
The European Central Bank said it will start purchasing private sector assets as soon as this month, in an attempt to revive lending in the eurozone and stave off the risk of deflation.

Bond investors demand more from corporate borrowers
Vivianne Rodrigues in New York – Financial Times
Investors are demanding more compensation from corporate borrowers seeking to raise funds in the US as market volatility rises and bond prices start to falter.

‘Bonds are a tale of two cities’ – JPM’s Gartside
Alice Rigby – Investment Week
Nick Gartside, co-manager of the JPM Strategic Bond Fund, has said that a divergence in central bank policies could lead to more diverse returns for fixed income investors in future.

Argentine govt ducks policy questions after new chief named
Argentina’s Cabinet Chief Jorge Capitanich on Thursday ducked questions about the direction of monetary policy after the appointment of a new central bank governor viewed as sympathetic to the government’s interventionist stance.

Fed’s Dudley urges key changes to Libor rate
A broader definition of the benchmark Libor interest rate and a better alternative is needed, an influential U.S. Federal Reserve official said on Thursday, joining the chorus of world regulators calling for changes in the wake of abuse.

Bullard says Fed ‘far behind’ schedule for interest rate hike
Michael Flaherty – Reuters
The Federal Reserve’s third round of bond buying had a better than expected impact on the U.S. labor market, a Fed official said on Thursday, making it all the more necessary for the central bank to move faster with hiking interest rates.

Central Banks

Europe and Japan’s central bankers face toughest challenge yet
Ralph Atkins in London and Ben McLannahan in Tokyo – Financial Times
Extra police were drafted in when the European Central Bank governing council met in Naples, Italy, this week. They provided protection against local anti-austerity demonstrators. But financial markets were also in an angry mood.

Is the New York Fed a Pushover for Big Banks? Dudley Fires Back
Matthew Boesler – Bloomberg
William C. Dudley, president of the Federal Reserve Bank of New York, defended his bank-supervision staff following allegations that they had been too deferential to large financial firms.

As Fed Retreats From Stimulus, Central Banks Overseas Expand Theirs
As the growth of the United States economy outstrips the rest of the developed world, American policy makers are allowing Europe, Japan and even China to seek a little more prosperity — at the expense of Americans.

5 Takeaways From Mario Draghi’s October Presser
European Central Bank President Mario Draghi’s press conference following the latest governing council meeting passed in rather subdued fashion. He made it clear that while the central bank is prepared to launch yet more unconventional policy should the need arise, for now it’s a matter of wait and see how the measures announced in September and June play out in the eurozone economy.

Mario Draghi’s Spoken. Everyone Happy?
Katie Martin – MoneyBeat – WSJ
Is the eurozone feeling any happier after Mario Draghi unveiled the latest thinking on policy at his meeting today in Naples?

Bank of Japan Buys Record 3.5 Trillion Yen in Treasury Bills
Yumi Ikeda and Hidenori Yamanaka – Bloomberg
The Bank of Japan purchased a record 3.5 trillion yen ($32 billion) in treasury bills today as the central bank pushes forward with unprecedented monetary easing to reach its 2 percent inflation target.
The amount exceeded the previous records of 3 trillion yen on Aug. 22 and Aug. 1. The BOJ also scooped up 530 billion yen in government bonds from the market today as part of its 7 trillion yen in monthly debt buying, which has drained the availability of sovereign bills and bonds for investors.


JSE Launches New Range Of African Currency Futures
Today the JSE launched the first currency futures which track the exchange rate between the Rand and select African currencies. The JSE listed three new currency futures contracts which track the exchange rate between the Rand and the Zambian Kwacha, Kenyan Shilling and Nigerian Naira.

FIA’s Sixth SEF Tracker Shows Continued Growth In FX Trading
FIA today published the sixth issue of FIA SEF Tracker, a periodic report on trading activity taking place on swap execution facilities. This issue includes new data from the month of August and shows volume trends and market share for interest rate, credit default and foreign exchange products.

Banks warm up to bitcoin technology
Anna Irrera – Financial News
The financial services industry is changing its stance on the technology behind cryptocurrencies, conceding that it could be a useful tool.

Chart o’ the Day: Where the Dollar “Should” Stop
Joshua M Brown –
There’s really nothing else to talk about other than the US dollar. A convergence of various factors has sent the greenback soaring against the basket all quarter long and it’s had a huge impact on the stock market (not a good one). The higher the US dollar, the worse things get for commodity-related stocks (oil is priced in dollars globally) and the higher the potential for multi-nationals in every other industry to take currency-related hits to their future earnings.

FX non-deliverable forwards land on Europe’s clearing radar
Jon Watkins – The Trade
European regulators have published a consultation paper on the central clearing obligation for foreign exchange non-deliverable forwards (NDFs).

Indexes & Index Products

Stock indexes surge as job market rebounds
Paul Davidson, USA TODAY
Stocks are surging Friday — with the Dow up more than 100 points — after the government’s monthly employment report showed a rebounding jobs market.
As of 10:36 a.m., the Dow, S&P 500 and Nasdaq composite are each up in the 0.7% to 0.9% range.
The labor market rebounded sharply in September as employers added 248,000 jobs, the second largest gain for any month this year.


Gold Prices Fall to Lowest Level This Year
Tatyana Shumsky – WSJ
Gold extended losses on Friday after stronger-than-expected U.S. jobs data intensified concerns about a less accommodative monetary-policy stance from the Federal Reserve.Gold for December delivery, the most actively traded contract, was recently down $22.80, or 1.9%, at $1,192.30 a troy ounce, its lowest price since Dec. 31 on the Comex division of the New York Mercantile Exchange.

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