First Impressions

Boca Bits & Pieces, Clearing Edition
Sarah Rudolph and Doug Ashburn – JLN

One way to tell which topics are “trending up” on the conference circuit is the attendance at the various panels. Aside from the “big ones” – keynote addresses and exchange leader panels, for instance – the one garnering the most attention at this year’s FIA Boca conference was the clearing panel, and for good reason. Central counterparty clearing is the key ingredient of the new global regulatory regime, but this cake is half-baked at this point. Plus, some would say the recipe is in need of a few tweaks.

Here is a quick snapshot of the clearing heads’ collective views on the hottest topic of 2015.

It began with a discussion of the effects of Basel III, which Eurex Clearing’s CEO Thomas Book said had brought about “an irrevocable transformation of the business model.”

He said there were questions about what will be the direct access model for clearing houses in the future.

Read the rest of the column, including the discussion of “skin in the game,” at

Quote of the Day

“Trend-following funds showed their best in 2008, it was the banner year for our industry. As equities fell 50%, our fund was up 20% to 30%. People started to take notice but then, from 2009 until 2013, our industry was broadly flat.”

Manager Graham Robertson in the story, “Why 2014 was another ‘banner year’ for trend-following funds”,

Lead Stories

Judge Refuses to Lift Injunction on Argentine Bond Payments
Dealbook – NY Times
A New York judge at the center of a multiyear battle between Argentina and a group a hedge funds has dug in his heels once again.
On Thursday, Judge Thomas P. Griesa of the Federal District Court in Manhattan rejected an appeal by Citigroup to lift an injunction that prevents the bank from making interest payments to investors holding $2.3 billion of Argentine bonds.

Europe pauses for breath after game-changing week
European equities paused on Friday as they headed for a sixth straight week of gains, fuelled by a slide in the euro as the European Central Bank’s bond-buying plan kept euro zone yields near record lows.
The past week, described by one strategist as a “game-changer”, saw the dollar climb to 12-year highs versus the euro as central bank policies diverged in the euro zone and the United States — the former battling to compress yields further, the latter paving the way for a rate hike.

EU executive warns of Grexit ‘catastrophe’, urges euro solidarity
The European Commission warned of “catastrophe” if Greece has to abandon the euro and its chief executive, Jean-Claude Juncker, urged EU governments to show solidarity as Athens struggles to secure more credit.
A day after German Finance Minister Wolfgang Schaeuble said Greece might stumble out of the euro zone because new, left-wing leaders failed to negotiate new borrowings, Juncker’s economics commissioner said EU hardliners underestimated the risk that this would start a fatal domino collapse of the common currency.

Argentina says to be inflexible with banks despite U.S. court ruling

Norway’s Sovereign-Wealth Fund Reduces Exposure to Europe
Norway’s sovereign-wealth fund, the world’s biggest, reduced its exposure to Europe to below 40% of its value last year, to balance risks and take advantage of growing markets elsewhere—adding that it has been allowed to invest more in China.

An ultra-low interest rate show that could run and run
This week, all eyes have been fixed on the relationship between the euro and the dollar. No wonder. A year ago, the eurozone was running a tighter monetary policy than the US.

Weak Profit Margins Dampen U.S. Producer Inflation
U.S. producer prices fell in February for a fourth straight month, pointing to tame inflation that could argue against an anticipated June interest rate hike from the Federal Reserve.
The Labor Department said on Friday its producer price index for final demand declined 0.5 percent as profit margins in the services sector, especially gasoline stations, were squeezed, and transportation and warehousing costs fell.

Euronext Expands Listed Private Placement Bonds Offer
Euronext, the primary exchange in the euro zone, today announced the launch of Euronext Private Placement Bonds (EPPB). A pan-European initiative, this new product rounds out Euronext’s existing private placement bond range by extending it to Alternext.

Why 2014 was another ‘banner year’ for trend-following funds
Investment Week
After five years languishing at the bottom of performance tables, the trend-following fund MAN AHL Diversity managed to produce a stellar return last year, as asset classes diverged.

EQT and Goldman Sachs Funds Sell Remaining Stake in ISS
Dealbook – NY Times
The Swedish private equity firm EQT Partners and funds advised by Goldman Sachs have sold their remaining stake in the Danish outsourcing company ISS for about $1 billion a decade after acquiring the company.
At the same time, the Kirk Kristiansen family, the owners of the Lego brand, increased their stake in the company and are now the third-largest shareholder behind the Ontario Teachers’ Pension Plan and the investment manager Artisan Partners, ISS said in a news release on Friday.

UBS Chief Executive’s Pay Rose Nearly 5% in 2014
Dealbook – NY Times
Sergio P. Ermotti, the UBS chief executive, saw his compensation increase nearly 5 percent in 2014, despite the Swiss bank’s financial performance for the year being “tempered” by legal and regulatory charges, the lender said on Friday.

With Plan to Join China-Led Bank, Britain Opens Door for Others
NY Times
A surprise decision this week by Britain to join China’s new development bank for Asia, despite opposition from the Obama administration, will almost certainly encourage other American allies to become members, particularly Australia and South Korea, analysts said Friday.

UK’s Financial Conduct Authority: Former Chief Executive Of Stockbroker Fined £450,000 And Banned
Press Release
Sam Kenny, the former chief executive of Gracechurch Investments Limited (Gracechurch), a stockbroking firm that is now dissolved, has been banned from holding a position in the financial services industry and fined £450,000 by the Financial Conduct Authority (FCA/the Authority). Mr Kenny led Gracechurch when it routinely mis-sold small-capitalised stocks through pressure, misrepresentation and unsuitable advice. Mr Kenny used pressure selling techniques himself.

Prosecutors Interview People Tied to Ackman in Probe of Potential Herbalife Manipulation
Federal prosecutors and the Federal Bureau of Investigation are probing potential manipulation of Herbalife Ltd. stock and have interviewed people hired by hedge-fund billionaire William Ackman, who has led a long-running campaign against the nutritional-products company, people familiar with the matter said.

Central Banks

Congress auditing the Federal Reserve is a truly frightening idea
Some conservative lawmakers have been arguing for years that Congress should audit the Federal Reserve and take a more active role overseeing monetary policy. Now that the GOP is in full control of the Capitol, the issue has taken on new urgency—as Fed Chair Janet Yellen learned last month during a combative hearing with senators.
The argument goes that the depth and length of the recent recession, the slow pace of recovery, the Fed’s failure to prevent the crisis in the first place and its unconventional responses all support the view that it needs more oversight. The central bank’s independence, they say, isn’t doing the trick.

BoE tells markets to ‘take heed’ and prepare for potential shocks
The Bank of England told markets on Friday to “take heed” as the “short sharp shocks” seen in markets over recent months could happen more frequently. Chris Salmon, the Bank’s executive director for markets, said two incidents have highlighted how volatility can suddenly increase and liquidity drop.

BoE ignored advice on money markets probe
The Bank of England ignored advice from the UK’s Serious Fraud Office to publicly confirm a criminal investigation into whether emergency auctions at the onset of the financial crisis were rigged, and whether any bank official connived in any manipulation.

Russian Central Bank Cuts Key Interest Rate to Help Economy
NY Times
Russia’s central bank cut its key interest rate on Friday by one percentage point to 14 percent in an attempt to support the economy, which is sliding into a brutal recession.

ECB urges Poland to bring central bank law in line with EU rules
The European Central Bank (ECB) urged Poland on Friday to bring the law governing its central bank in line with European rules protecting central bank independence.
The ECB said an amendment to Polish law currently being debated by the government fails to remove a requirement for the central bank to forward its draft policy assumptions to the government, a provision that violates EU rules.


Currency Drops Don’t Always Usher In Export Booms
In late 1992, the British pound began a precipitous fall that erased nearly a third of its value against the dollar in just six months. The depreciation, sparked in part by a huge speculative bet by George Soros against the pound, helped jolt the U.K. out of recession.

FXCM Repays $12 Million of Jefferies Rescue Package
FXCM Inc. said Thursday that it has repaid $12 million of the $300 million rescue package it received in the wake of January’s volatility in the currency markets when the Swiss National Bank removed its cap on the franc.

EBS turnover bounces back as FX volatility returns
Euromoney magazine
EBS, Icap’s electronic foreign-exchange trading business, has turned the tide on a long period of falling volumes as increased volatility in its core currencies has led to an uptick in trading this year. Average daily spot volume on EBS in February was $94.1 billion, up 13% year-on-year, while January’s average daily volume was $129.6 billion; a 48% rise on January 2014.

Weaker Euro Ripples Around World
The tumbling euro and easy-money policies are boosting optimism in corporate Europe that the long-struggling region might finally begin a sturdy recovery. But Europe’s good fortune is a headache for U.S. corporate competitors that face a squeeze on overseas sales from the rising dollar.

IBM and Federal Reserve Talk Digital Dollars on Blockchain
CryptoCoins News
It was only a matter of time. The ultra-advanced, superior technology of the digital currency Bitcoin and it’s Blockchain public ledger system are in danger of being co-opted. The tacit compliments of the financial establishment for the Bitcoin Blockchain, not Bitcoin the currency, over the past year are starting to be followed with action. IBM, in conjunction with your centralized banking elite, have discussed plans to perpetuate the future of national currencies, like the U.S. Dollar, through their own digital fiat-currency system.

Indexes & Index Products

Another Bulls*** Myth Debunked
The Reformed Broker
“The large cap space is too competitive so active managers do a much better job in small caps, where their skills add value.” You’ve heard that before. A lot. Except it isn’t true. At least not over any length of time that actually matters.

***DA: A plug for index investing.

ICE Futures U.S. Sets Back-to-Back Daily Volume Records in ICE U.S. Dollar Index
Press Release – ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Futures U.S. reported record daily volume in the ICE U.S. Dollar Index (USDX) on March 12, 2015.
Volume in the USDX was 192,589 contracts on March 12, 2015, surpassing the day-before record by 21%. Open interest currently stands at 155,305 contracts.
ICE USDX futures and options trade exclusively on ICE Futures U.S. The ICE USDX futures contract is a leading benchmark for the international value of the U.S. dollar and the world’s most widely-recognized traded currency index. In a single transaction the USDX enables market participants to monitor moves in the value of the U.S. dollar relative to a basket of world currencies, as well as hedge their portfolios against the risk of a move in the dollar.

MSCI faces opposition to China inclusion in key index -sources
Leading global fund managers say China must make bolder market reforms before Chinese-listed shares can be included in key MSCI emerging market benchmark indexes.
Anticipation that MSCI would push ahead with plans to include locally-listed China ‘A’ shares in its Emerging Markets Index, which is tracked by $1.7 trillion of funds, had increased following the November launch of the Hong Kong-Shanghai Stock Connect trading scheme, which has helped open up China’s tightly-controlled capital market.

FTSE Group launches Chinese onshore bond index
FTSE Group will launch its first index tracking China’s onshore bond market on Friday, the latest sign of increasing international appetite to invest in the country’s vast pool of domestic financial assets.

Korea Exchange: Announcement Of The KOSPI 200 Intrinsic Value Index
With effect from Monday, March 16, 2015, the Korea Exchange (KRX) will announce the “KOSPI 200 Intrinsic Value Index” that is weighted by the estimated intrinsic values of corporations excluding some highly-volatile constituents of KOSPI 200.


Gold Rises to Snap Longest Skid in 17 Years on U.S. Rate Outlook
Gold rose, halting the longest slump in 17 years, on speculation that the Federal Reserve will hold off raising U.S. interest rates in June.
U.S. wholesale prices in February unexpectedly dropped for the fourth straight month, reflecting a slump in profit margins among wholesalers and retailers, government data showed Friday. Consumer confidence declined in March to a four-month low, according to a University of Michigan index.

HKFE To Suspend Trading Of Its Gold Futures
Press Release
Hong Kong Futures Exchange Limited, a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), is suspending trading of its Gold Futures after the market close today (Friday).
As of today’s market close, there were no contract months with open interest.
The decision was made after a recent review of the product, in view of a change in the London gold pricing mechanism effective on 20 March 2015.
HKEx will review its precious metals strategy from a group perspective and redesigned gold futures contracts may be added to the HKEx Group’s product list in the future.

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