First Impressions

Tony McCormick Out as CEO of BOX Markets, LLC
By John J. Lothian
The CEO of the BOX Options Exchange has stepped down as the CEO of the business side of the exchange, according to industry sources. Tony McCormick will remain as a consultant to the business side, BOX Markets, LLC, and will remain as CEO of the BOX exchange for the time being. Peter Layton, the chairman of BOX, will become the acting CEO.

BOX is one of 12 U.S. equity options exchanges and has struggled to break out from the competition. In February, BOX held a 2.5 percent market share among the US options exchanges, down from 3.53 percent a year earlier, according to OCC data.
McCormick, a former brokerage executive with Charles Schwab and Harris Bank, has been CEO of BOX since 2009. He had also previously served as a board member of CBOE and OCC

BOX is this year’s host of the OIC conference, set in Miami, Florida May 6-8.


The Life of SCI: John Rapa Looks at the SEC’s Reg SCI

After several high-profile market disturbances, from the 2010 “flash crash” to the Knight Capital algorithmic meltdown in 2012, the SEC considered a new set of rules to tighten up system compliance and integrity. The rules, known collectively as “Reg SCI” became effective in February 2015. John Rapa, president and CEO of Tellefsen & Company and a 30-year veteran consultant to exchange market structure, walks us through the new rules and what they mean for exchanges, dark pools and market participants.

Watch the video »

Quote of the Day

“Conditions are just amazing and that has also tempted many issuers from beyond Europe to crash the funding party at the long end.”

Jean-Marc Mercier, global head of debt capital markets syndicate at HSBC in the story, “Investors Look to Long-Dated Bonds”.

Lead Stories

Meet the New Bond King; Joshua Barrickman is the opposite of Bill Gross. But his Vanguard index fund is poised to become the biggest bond fund
By Kirsten Grind
Vanguard Group’s Joshua Barrickman has one follower on Twitter, has never appeared on business TV shows, and even some of his own investors don’t recognize his name.

Many Blackstone M&A bankers expected to depart ahead of spin off to Taubman
More than half of the 17 senior managing directors working in Blackstone Group LP’s mergers and acquisitions advisory arm may leave as the business is combined with the advisory firm headed by star Wall Street investment banker Paul Taubman, according to people familiar with the matter.
Some of the bankers have decided to move elsewhere or retire, while others have lost out to people doing similar jobs at Taubman’s PJT Capital LP, the sources said.

Jefferies profit falls 90 pct on lower fixed income revenue
Investment bank Jefferies Group LLC, owned by Leucadia National Corp, reported a 90 percent drop in quarterly profit, hurt by lower revenue from its fixed income and investment banking businesses.

Investors Look to Long-Dated Bonds
The European Central Bank’s bond-buying binge is forcing investors into increasingly long-term bets, even on countries that very recently stirred debt-market nerves.
Slovenia, whose debt was labeled as junk by Moody’s Investors Service as recently as 2013, issued bonds maturing in 20 years on Wednesday— its longest on record—offering a slim coupon of just 1.5%.

European Union Moves to Limit Special Tax Deals
NY Times
European Union officials on Wednesday proposed new rules to try to discourage tax-avoidance deals with multinational corporations, which critics say give some countries unfair business advantages.
Some of the bloc’s smaller countries, like Ireland, the Netherlands and Luxembourg, have offered the deals to attract the likes of Apple, Starbucks and Amazon. The companies, in turn, have saved huge sums on their corporate tax bills. But European Union authorities have been trying to curb that practice.

Bond Traders to Yellen: You’re Wrong on Oil’s Impact on Economy
Janet Yellen has dismissed plunging oil values as a fleeting shock to the economy. Bond traders disagree.
The latest slump in oil has investors dumping their junk-rated energy securities and slashing their predictions for inflation. Energy-related high-yield bonds have tumbled 3.4 percent this month and dollar-denominated notes that are hedged against accelerating prices have declined 2.1 percent.

Women-led companies perform three times better than the S&P 500
Pat Wechsler – Fortune
You’ve heard that companies with women executives at the helm tend to perform better than those led by men— and a new study furthers that claim, finding that women CEOs in the Fortune 1000 drive three times the returns as S&P 500 enterprises run predominantly by men.

Fledgling Derivatives Market Hires Ex-DTCC Executive as Chairman
by John Detrixhe, Bloomberg
Former Depository Trust & Clearing Corp. executive Sandy Broderick has joined a fledgling European derivatives exchange as chairman.
Global Markets Exchange Group International appointed Broderick as a non-executive director, according to a statement on Wednesday. He was previously the chief executive officer of DTCC Deriv/SERV, DTCC’s repository for over-the-counter derivatives trades.

BIS warns on risks from big fund groups
Ralph Atkins and Neil Hume in London, FT
Decisions taken by only a few big fund managers could determine how well bond markets function in future crises, researchers at the Bank for International Settlements have warned.

Citigroup cut CEO Corbat’s pay by 10 percent in 2014
Citigroup Inc (C.N) cut its chief executive Michael Corbat’s annual compensation by 10.3 percent in 2014, citing high legal expenses and the company’s failure to win regulatory approval for its capital plan last year.

Central Banks

Protesters and the Police Clash Near E.C.B.’s New Headquarters
NY Times
Protesters set cars on fire and clashed with police officers on Wednesday as they marched toward the European Central Bank’s new headquarters, in a demonstration against austerity and capitalism that took on a markedly more heated tone than past protests.

Investors Raise Alarm Over Liquidity Shortage
Central banks across the world have turned on the money-supply taps, but investors and regulators are increasingly worried about a shortage of liquidity that they say could lead to severe disruption in financial markets.
On Wednesday, the Bank for International Settlements became the latest major authority to sound the alarm, warning that it is becoming harder to trade in bond markets and that the problem could spill over into the real economy. Those comments echo concerns recently aired by the Bank of England, as well as the views of a slew of major bond-market investors and analysts.

Fed to Markets: No More Promises; Move away from explicit interest-rate guidance could unnerve investors used to some measure of clarity
By Jon Hilsenrath, WSJ
The Federal Reserve is about to inject uncertainty back into financial markets after spending years trying to calm investors’ nerves with explicit assurances that interest rates would remain low.

Hedge Funder Dalio Thinks the Fed Can Repeat 1937 All Over Again
by Kelly Bit Bloomberg
Ray Dalio, founder of the world’s largest hedge fund firm, Bridgewater Associates, told investors there’s a risk that the Federal Reserve could create a market rout similar to that of 1937 if it raises interest rates too fast.

The Central Bank of Central Banks Says Keep Calm About Deflation
Bloomberg Business
The central bank for central banks has some advice for policy makers fretting about deflation: Don’t. In a study bound to prove controversial in the corridors of power and academia, economists at the Bank for International Settlements concluded the connection between economic growth and shrinking prices is weak.

Federal Reserve Issues FOMC Statement
Press Release
Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Federal Reserve Board And Federal Open Market Committee Release Economic Projections From The March 17-18 FOMC Meeting
Press Release
The attached table and charts released on Wednesday summarize the economic projections and the target federal funds rate projections made by Federal Reserve Board members and Federal Reserve Bank presidents for the March 17-18 meeting of the Federal Open Market Committee.


Here’s a Look at How the Dollar Is Clobbering Other Currencies Around the World
Everyone knows that the U.S. dollar has been on a tear. Here’s a quick chart of the dollar index that shows how much it has taken off, especially in recent months.

Citigroup, Barclays Close to Settling Forex Lawsuit With Private Investors; Two banks expected to pay as much as a combined $800 million to settle lawsuit
By Christina Rexrode and Chiara Albanese, WSJ
Citigroup Inc. and Barclays PLC are expected to pay as much as $800 million combined to settle a lawsuit with investors who say the banks manipulated foreign-exchange rates, according to people close to the situation.

Citigroup sues ex-Goldman partners’ firm over Swiss franc losses
Citigroup Inc has sued a Connecticut firm founded by two former Goldman Sachs partners for $25 million over losses incurred during the unexpected surge in the Swiss franc in January.
The lawsuit, filed in Manhattan federal court on Friday, accused Tormar Associates LLC of breach of contract for failing to pay the amount of collateral it allegedly owed following a significant loss betting the wrong way on the Swiss franc.

In boon for bitcoin, UK to regulate digital currency exchanges
Britain took a significant step towards becoming a global bitcoin hub on Wednesday as the government announced it would regulate digital currencies for the first time by applying anti-money laundering rules to exchanges.
Already the center of the $5-trillion-a-day market for traditional currencies, the UK is fast emerging as a center for digital currencies too, cementing its place as European’s financial technology, or “FinTech”, capital.

Indexes & Index Products

Fund Manager Ab Nicholas Has Been Beating S&P 500 for 40 Years
Bloomberg Business
Albert Nicholas, who tops our annual ranking of mutual funds, defies those who say stock pickers can’t outrun indexes—or machines.

US small-caps raise dividends at vigorous pace
Smaller US companies focused on the domestic market have initiated and raised dividends at a vigorous pace over the past 15 months, offering yield-hungry investors an alternative to blue-chip companies. These smaller companies currently paying a dividend are now rivalling their larger peers, in a sign that executives are increasingly confident about the US economy.

Your Small-Cap ETF Is Soaring But Could It Be Better?
Like their midcap brethren, small-cap stocks have bounced back in 2015 after a relatively modest showing last year. They’re among the best-performing ETFs of 2015 so far, as ETF performance data shows. The $7.4 billion Shares Russell 2000 Growth is trading near an all-time high. So is its much smaller peer,PowerShares DWA SmallCap Momentum. With $376.8 million in assets, DWAS is up 6.2% year to date. IWO has risen 5.9% so far in 2015.

Not All Bonds Are A Sell, Even High Yield Is Split
ETF Trends
The high-yield bond market, as measured by the S&P U.S. Issued High Yield Corporate Bond Index, had recently been clawing its way up in performance for 2015. January’s mild return of 0.80%, coupled with a February return of 2.25%, was heading in the right direction, but March has been fatal so far. The index has returned -1.01% MTD, bringing its YTD return to 2.03% as of March 13, 2015.


The Way Gold Prices Are Set is Changing Forever
Almost a century of tradition will disappear from the gold market as technology takes over.
Thursday will be the last day that traders at four banks agree by phone twice-daily prices used by miners to central banks to deal and value bullion. Gold will be the last precious metal to drop the London fixings after silver, platinum and palladium made way for electronic auctions last year.

How top gold producers margins are being squeezed
Vladimir Basov,
In 2014, nine out of top 10 gold producers achieved a significant reduction in all-in sustaining production costs, but the average cash margin fell victim to the bearish gold market.
Since the World Gold Council (WGC) published a Guidance on “all-in sustaining costs” (AISC)* in June 2013, which introduced transparent production cost estimation metrics intended to be used commonly by the global gold industry, most of leading publicly-trading gold producing companies successfully adopted WGC recommendations and implemented AISC to their official reports.

Gold Demand in Asia Seen Doubling as ANZ Sees Record Prices
Gold demand in Asia is set to double by 2030 and boost prices to a record as investment and jewelry purchases climb, according to Australia & New Zealand Banking Group Ltd.
Demand from retail and institutional investors will jump to almost 5,000 metric tons a year by 2030 from 2,500 tons, analysts including Warren Hogan and Victor Thianpiriya said in a report. Prices may rise to more than $2,000 an ounce by 2025 and to $2,400 by 2030, they said. The bank says it supplied more than 20 percent of China’s gold imports last year.

Bitcoin And Gold: When Worlds Collide
Very few people understand that once you deposit your money into a bank account, it is no longer your legal property. The deposits may be insured but there’s nothing to prevent the government from confiscating money held within the banking system. The most famous recent example of this was the “bail-in” carried out by the government of Cyprus, where funds were diverted from individual bank accounts to ensure the government didn’t default on its debt.

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