Boca Bits & Pieces
By John J. Lothian
Sunshine. Warmth. Industry Colleagues. We have it all in Boca Raton, FL at the Futures Industry Association International Conference. After a long winter in the U.S. and other venues around the world, many are pleased to be in the sun and warmth of Florida.
Jim, Doug, Patrick, Sarah and I all arrived safely and quickly went to work. Jim conducted an interview with LME CME Garry Jones yesterday as part of our CEO series.
My friends at Women in Listed Derivatives, or WILD, are distributing bright pink sunglasses. I am sporting a pair, which makes me feel downright WILD.
At dinner last night I learned that Gary DeWaal was a journalist for the New York Times when he was in college.
I also learned that Futures Industry Magazine deputy editor Joanne Morrison has an art showing at a DC restaurant for several of paintings. She is a very talented artist.
Finally, the four U.S. clearing houses, CME, ICE, OCC and DTCC submitted a letter yesterday to the Financial Stability Oversight Council, addressed to its chairman and Secretary of the Treasury Jacob Lew. The letter acts as a rebuttal to the January letter by the Clearinghouse Association, a consortium backed by a group of clearing banks. The letter is divided into four issues – transparency, certainty of clearing, collateral safeguards and recovery/wind-down procedures. See the intro to the letter and link below:
Dear Chairman Lew:
The undersigned companies all strongly support prudent risk management and transparency standards for central counterparties (CCPs), given their critical role in mitigating systemic risk. We welcome the opportunity to comment on the recent request by The Clearinghouse Association, an advocacy organization representing not CCPs, but the interests of the largest U.S. commercial banks,that the Financial Stability Oversight Council directly intervene in the ongoing regulatory oversight of CCPs.
The Dodd-Frank Act and comparable international legislation, together with comprehensive new regulatory rulemaking, has transformed many parts of the financial services industry. In particular, the clearing mandate for swaps has had a dramatic impact on all swaps market participants, introduced new asset classes to clearing and broadly expanded regulatory oversight of swaps trading and risk management activities. As market participants assess and accept these changes, they have raised new challenges concerning the ownership, governance and regulatory oversight of CCPs.
Quote of the Day
“If sovereign exposures are in fact subject to default risk, consistency with a risk-focused approach to prudential regulation and supervision requires that this default risk is taken into account. Current prudential regulation of sovereign exposures is inconsistent with the conceptual approach that underlies the existing system of regulation.”
ESRB report in the story, ” Draghi-Backed Report Says Sovereign Debt No More a Risk-Free Bet”.
Russia’s Well for Corporate Bailouts Appears to Be Running Dry
Dealbook – NY Times
Facing Western sanctions and low oil prices, Russian companies are lining up for subsidies from the government. But the demand for bailouts is quickly outstripping the supply of money, raising the prospect of an economic crisis here if the funds run out.
With the economy flailing, the Russian government set up a corporate bailout program last year, tapping one of the country’s sovereign wealth funds. Almost immediately, companies started applying.
Decay of UK investment banking leaves smaller clients exposed
Laura Noonan and Alison Smith, FT
Last week it emerged that state-controlled Royal Bank of Scotland was planning to cut 14,000 of the 18,000 jobs in its investment bank. On the same day, Barclays promised to increase its own cull if performance did not improve
Tea Party Divided by Export-Import Bank
Jonathan Weisman – NY Times
Late last month, William Schubert, the president of a small infrastructure export firm outside Houston, led a group of Texas business leaders to meet with Senator Ted Cruz’s chief of staff.
Their mission: to rid the firebrand Republican senator of his ardent desire to kill the federal Export-Import Bank, which they said would greatly harm the export-driven small businesses that Mr. Cruz of Texas often extols.
The result: failure.
Junk-Bond Protections Hit Lowest Quality on Record, Moody’s Says
Investor protections in new U.S. junk bonds fell to the weakest level in at least four years as risky borrowers are able to dictate terms to yield-starved investors, according to Moody’s Investors Service.
Volatility Creeps Its Way Back Into the Stock Market
MoneyBeat – WSJ
Volatility is back.
After stocks quietly climbed in February, it’s been a rough start to March. The CBOE Volatility Index, often called the stock market’s “fear gauge,” is at its highest level in a month, rising nearly 30% in the last six sessions, including Tuesday.
Draghi-Backed Report Says Sovereign Debt No More a Risk-Free Bet
Government debt can no longer be considered a risk-free asset for banks, and international regulators should consider changing the existing legislation, the European Systemic Risk Board said.
Bond Investors Move Toward Ever-Riskier Debt
By JOSIE COX
Bond investors are showing no inclination to fight the European Central Bank, and are instead marching towards ever riskier debt.
Insider trading plea not valid after major ruling: U.S. prosecutors
BY NATE RAYMOND, Reuters
U.S. prosecutors have concluded that a former Wyoming Retirement System chief investment officer’s insider trading guilty plea is no longer valid following a major appellate ruling limiting the ability of authorities to prosecute insider trading cases.
A New Tool to Investigate Inside Tippers
Dealbook – NY Times
The British philosopher Francis Bacon is attributed with saying that “knowledge is power,” and Wall Street pours enormous resources into obtaining information in the hope that greater knowledge will provide an edge on the market. But recent charges against a corporate officer show that passing along confidential information can be perilous, even if the intent is something other than insider trading.
ESMA Clarifies Its Interest Rate Swaps Clearing Standards
The European Securities and Markets Authority (ESMA) has today published a revised opinion on its draft Regulatory Technical Standard (RTS) on the clearing obligation for Interest Rate Swaps (IRS). ESMA’s draft IRS RTS had originally been sent for endorsement to the European Commission by 1 October 2014. On 29 January 2015, the Commission responded with a corrigendum notification, which informed ESMA of its intention to endorse the draft RTS with amendments.
Greece’s Tense Talks With Its Creditors Escalate to the Next Phase
Greece’s debt negotiations with its international creditors will proceed to the next, more technical level later this week, as a result of an agreement reached on Monday by eurozone finance ministers.
Emerging Markets Lose Their Luster as Crises Mount
Dealbook – NY Times
In Russia, it’s assassinations and war. In Brazil, a corruption scandal may derail the economy. And in Turkey, the president is attacking the country’s senior central banker.
Emerging markets, not long ago seen as a necessary ingredient for the common portfolio, have lately taken on a more toxic quality as messy politics and staggering economies are prompting some investors to reassess their investment rationale.
JPMorgan reshuffle sees four rising stars gain prominence
James Fontanella-Khan and Arash Massoudi, FT
A wind of change has swept through the upper echelons of Wall Street’s main investment banks over the past week. From Goldman Sachs to Morgan Stanley, most have made key appointments to either consolidate their dominance in certain markets or tackle their weaknesses in others
Credit Suisse Says Its Chief Executive Is Stepping Down
JESSICA SILVER-GREENBERG and JENNY ANDERSON, NY Times
Brady W. Dougan is stepping down as chief executive of Credit Suisse, the bank said on Tuesday, ending his tenure as one of the longest-serving chieftains of a global banking powerhouse.
I’m the right person to fix HSBC, says CEO Gulliver
BY STEVE SLATER, Reuters
HSBC (HSBA.L) Chief Executive Stuart Gulliver said he was the right person to run Europe’s biggest bank and fix problems of the past after British lawmakers berated it for allowing “industrial-scale tax avoidance” at its Swiss arm.
The Fed’s Fight to Change the Culture of Wall Street
Conduct is under scrutiny at the largest U.S. banks including Citigroup and Goldman Sachs, which get their annual report cards Wednesday when the Federal Reserve releases results from the second of two phases of this year’s stress tests.
Euro Area Central Bank Buying Crushes Yield Curves
Lucy Meakin and Eshe Nelson – Bloomberg
Euro-area government bonds with longer maturities surged as the region’s central banks bought sovereign debt for a second day, pushing yields closer to those on shorter-dated notes.
That’s flattening so-called the yield curves of debt from Germany to Italy. Euro-system central banks were said to have purchased securities, including German five-year notes with a negative yield, under the European Central Bank’s expanded quantitative-easing plan, according to three people with knowledge of the transactions. Belgian and Italian securities were also acquired, one of the people said. An ECB spokesman declined to comment.
BOE’s Carney Hints at Multiple Banks’ Involvement in Fraud Probe
Mark Carney, the governor of the Bank of England, hinted to lawmakers that a probe into money-markets auctions by the U.K.’s Serious Fraud Office will examine both external traders and central bank officials.
When asked by the House of Lords’ Economic Affairs Committee about the scope of the SFO’s investigation, Carney told them that “the clarity that has been provided is around auctions and there are a variety of participants in auctions.”
Booming jobs report gives Federal Reserve a big headache
New York Post
What will it be like on the day when the Federal Reserve becomes irrelevant?
Like when Janet Yellen — or the next Fed chairman or the one after that — makes an announcement and it gets as much attention as a proclamation from a vice president — of a shoe manufacturer.
Whether you like the Fed or not, the last thing anyone should want is a central bank that’s powerless to control inflation, boost the economy, keep banks in line and use its verbal persuasion on the financial markets.
But that’s where we are headed.
Four Charts That Show the Dollar’s Big Day
As we noted earlier, the U.S. dollar had a big rally today, and it continued throughout the afternoon. The rally is a continuation of a much longer bull trend, and today it coincided with a selloff in risk assets.
Critics blame Erdogan ‘hubris’ for currency weakness
Daniel Dombey in Istanbul, FT
After the Turkish lira had fallen to a series of all-time lows against the dollar, President Recep Tayyip Erdogan was clear on where he felt the blame lay for the currency’s weakness.
Why EM currencies matter to every investor: FX pro
Currencies like the Turkish lira and the Brazilian real may not always be foremost on investors’ minds. But according to Scotiabank’s chief FX strategist, Camilla Sutton, emerging market currencies are sending powerful signals about what the U.S. dollar will do next—and could convey a loud message to the Federal Reserve.
London police raid of Heron Tower forex broker – CityAM and Evening Standard name CWM FX
Two London newspapers, business news oriented CityAM and the London Evening Standard, have named retail forex broker CWM FX as being the mystery financial institution associated with a police raid last week at Heron Tower in London’s financial district.
Indexes & Index Products
BSE revamps indices system
Business Standard News
BSE is all set to launch a new set of indices with the introduction of 16 equity indices representing a higher number of shares as compared to the previous indices family. The new family of indices will be introduced in the second quarter of 2015, said a release from the exchange.
Come April, and BSE will launch the S&P BSE AllCap Index family, which will further be divided into five size-based indices, and ten other sector-based equity indices. Some of these indices will replace the existing indices, the release stated.
Toronto Stock Exchange Celebrates 25 Years Of Listing And Trading Exchange Traded Funds -The World’s First ETF Was Launched On TSX In 1990
2015 marks the 25th anniversary of the creation of the world’s first Exchange Traded Fund (ETF). To celebrate this milestone, as well as the rapid growth of the Canadian and global ETF markets, Atul Tiwari, Managing Director, Vanguard Investments Canada Inc. & Vice Chair, Canadian ETF Association (CETFA), members of CETFA and ETF providers joined Ungad Chadda, Senior Vice President, Toronto Stock Exchange (TSX) to open the market on TSX today.