First Impressions

Pat Kenny, vice president of client relations, CQG – Transition from the floor to electronic trading, where are the opportunities?
JohnLothianNews.com

“Build those relationships because those relationships last forever.”

Dubbed “The Most Interesting Man in the World,” Pat Kenny, vice president of client relations at CQG, discusses his transition as a trader to his current role. After working as a water skiing instructor and bartender, Kenny found himself with an opportunity to become a runner on the floor of the Chicago Board of Trade. From there, Kenny took a position as a phone clerk and took customer orders. Eventually, he found his true passion of being involved with the sales side of the business. His experiences, combined with the network of several individuals helped lead Kenny to his current role at CQG. Kenny’s key message was that it’s not always what you know that may help lead to new opportunities, it’s also a matter of who you know that can help open up new doors and unlock different paths in your career.

Watch the video »

Quote of the Day

“That is humongous. We’re talking about a move you might see over weeks or a month occur in a day. I would not want to be that guy.”

Craig Pirrong, a finance professor at the University of Houston in the story, “‘Humongous’ Treasury Future Surge Suggests Math Error”.

Lead Stories

‘Humongous’ Treasury Future Surge Suggests Math Error
Matthew Leising and John Detrixhe – Bloomberg
It looks like a Treasury futures trader failed to do his or her homework. The price of 30-year Treasury futures expiring in June traded for less than 145 for about two hours yesterday before shooting up to more than 150. The 7.3 percent surge in their price yesterday, on the first day these particular contracts were traded, was unprecedented for 30-year Treasury futures, according to data compiled by Bloomberg.
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Regulators Ramp Up Bond Fund Reviews Due to Volatility
Silla Brush and Lisa Abramowicz – Bloomberg
Surging market volatility is making regulators increasingly concerned that bond funds have loaded up on hard-to-sell assets.
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Traders Sheltering From Europe Bond Selloff in Overhauled Swaps
Abigail Moses – Bloomberg
The overhaul of the $18 trillion credit-default swap market came just in time. As plunging Greek, Italian, Spanish and Portuguese bonds ignite investor concern that Europe’s sovereign debt crisis is returning, traders are seeking protection from turmoil with derivatives.
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Three major nations absent as China launches World Bank rival in Asia
Reuters
Australia, Indonesia and South Korea skipped the launch of a China-backed Asian infrastructure bank on Friday as the United States said it had concerns about the new rival to Western-dominated multilateral lenders.
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Bank Breakup Plan Hits More EU Hurdles as Danes Reject Idea
Peter Levring – Bloomberg
Denmark won’t back a proposal to split Europe’s biggest banks as the region’s first country to enforce bail-in rules questions the value of more regulation.
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Aberdeen’s Russian Bond Trade for 2015 Joined by Goldman
Maria Kolesnikova and Lyubov Pronina – Bloomberg
Aberdeen Asset Management Plc says Russian bonds will rebound in 2015, and is putting money on it.
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Central Banks

Fed’s $4 Trillion Holdings to Boost Growth Beyond End of QE
Jeff Kearns – Bloomberg
Quantitative easing may turn out to be a gift that keeps on giving for the U.S. economy.
As the Federal Reserve prepares to end its third round of bond buying next week, the central bank plans to hang on to the record $4.48 trillion balance sheet it has accumulated since announcing the first round of purchases in November 2008.
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ECB Set to Fail 25 Banks in Review, Draft Document Shows
Patrick Henry – Bloomberg
Twenty-five lenders in the European Central Bank’s euro-area bank health check are set to fail the regulator’s Comprehensive Assessment, according to a draft communique of the final results, seen by Bloomberg News.
One-hundred-and-five banks are shown passing the review, according to the draft statement. Of the lenders that failed, about 10 will still face capital shortfalls they need to plug, according to a person with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly. That figure is likely to change as talks continue before the final results are published Oct. 26, said the person.
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Regional Banks Go Trick-or-Treating at the Fed
Victoria McGrane – MoneyBeat – WSJ
For big U.S. banks there’s nothing as scary as dealing with the ever-increasing regulatory burden. On Halloween, a dozen regional banks will get the chance to argue how the Fed can make the new rules and oversight less frightening.
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Monetary Policy, Asset Prices And Distribution – Speech By Ben Broadbent, Deputy Governor For Monetary Policy, Bank Of England
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Currencies

Beware the Chinese FX reserve fall
Izabella Kaminska – Financial Times
The latest from SocGen’s Albert Edwards features this eye-catching chart. As he notes, the most under-covered Chinese stat of the month is undoubtedly the $100bn decline in China’s Q3 FX reserves, the largest quarterly fall ever:
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Ruble Weakens to Record on S&P Downgrade Concern as Crude Falls
Ksenia Galouchko and Vladimir Kuznetsov – Bloomberg
The ruble fell to a record as oil declined and concern Standard & Poor’s will cut the country’s credit rating to junk curbed appetite for Russian assets.
The ruble weakened beyond 47 versus the Bank of Russia’s target dollar-euro basket for the first time and traded down 0.6 percent at 46.9921 by 6 p.m. in Moscow, after Ksenia Yudaeva, the first deputy central bank governor, told Bloomberg plans to free-float the currency next year remained intact. The Micex Index pared its weekly drop to 0.7 percent.
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Indexes & Index Products

SEC Wants Exchange-Traded Funds to Be Easy to Trade
Matt Levine – Bloomberg
Classically an exchange-traded fund is a derivative: It’s a contract whose value is based on the value of a basket of underlying stocks. (Bonds, whatever.) The contract trades on an exchange — thus the name — and so it has a trading price, but it also has a value that you can calculate.1 You can replicate it by buying the underlying stocks, or hedge it by selling them. So the value of the ETF is very well defined and transparent, and its price should closely reflect that value. That’s nice!
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As ETF M&A heats up, industry wonders who is next
Jessica Toonkel – Reuters
When it comes to expanding in the $1.9 trillion U.S. exchange-traded fund market, which some forecasts say will pass the traditional mutual fund industry in size within 10 years, some companies have concluded it’s better to buy than to build.
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Low-Volatility ETFs Deliver, but See Little New Cash
Chris Dieterich – MoneyBeat – WSJ
So-called low-volatility exchange-traded funds proved their mettle in recently choppy trading. But if any investors noticed, few seem to have plunked new money the funds.
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Gold

The LME Week Dinner: The Most Opulent Metal Update in The Kingdom
MetalMiner
Contrary to the generally depressed view of most participants at last night’s annual London Metal Exchange Dinner, the LME itself and Hong Kong Exchanges and Clearing Ltd’s CEO Charles Li in particular, was in barnstorming mood. In a robust and thankfully concise dinner speech, Mr. Li listed out the progress the LME had made in the 2-and-a-half years since it’s been taken over by HKEx often in the face of doubts from without and within as to whether they would succeed.
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Strong Dollar, Weak China, Puts Gold In Crosshairs
Kenneth Rapoza – Forbes
It’s investing 101: a strong dollar means weak commodities. But if you take the next level coursework, it includes chapters on the China slowdown and emerging market currencies heavily weighted towards commodities. The outcome of a strong dollar and a weaker China might be worse for gold.
A strong dollar will be an obstacle to energy and materials sector stocks, but the direction of China’s economy is likely to be at least as influential, says Barclays Capital economists led by Jim McCormick in London.
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Haunted by Inflation, He Snapped Up Silver at $2, Made a Fortune and Lost It
Bob Ivry – Bloomberg
To Nelson Bunker Hunt, the world was full of enemies. There was inflation. It was running as high as 13 percent in the 1970s, like a thief threatening to steal the family fortune earned by his father, H.L., in the oil fields of East Texas.
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