First Impressions

Settling the LIBOR and FX Settlement Mess
Doug Ashburn, John Lothian News

The rapidly expanding probe into foreign exchange manipulation has certainly given journalists, pundits and regulators something else about which to write, talk and consider rules.

Near as I can tell, though, these financial benchmark foibles are, by and large, not so much about rooting out pervasive evils so much as moving the inner workings out of legacy structures and into the modern world.

Read more here: http://jlne.ws/1iAFL2g

Quote of the Day

“Despite the fact that most SEC employees are often told that they may take an hour for lunch, technically, we are only entitled to thirty minutes.”

~Greg Gilman, president of the union, in an e-mail sent to SEC workers last week.  From the story, “Speedy Lunches Urged at SEC as Union Decries Time-Clock Watching”.

Lead Stories

RBS suspends two forex traders
Alice Ross and Daniel Schäfer – FT.com
Royal Bank of Scotland has suspended two traders in its foreign exchange division according to two people familiar with the situation, in another sign that the global probe by regulators into the suspected manipulation of the currency market is rapidly gaining traction.
http://jlne.ws/16SirrA

Barclays Said to Suspend Chief FX Dealer Ashton Amid Probe
Gavin Finch – Bloomberg
Barclays Plc (BARC) has suspended three currency traders, including a chief dealer in London, amid a probe into potential foreign exchange manipulation, according to a person with knowledge of the decision.
http://jlne.ws/1f8j7i1

JPMorgan Joins Citigroup in Responding to Currency Probes
Dawn Kopecki & Dakin Campbell – Bloomberg
JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C), two of the three largest U.S. banks, said they’re cooperating with various probes into the firms’ foreign-exchange trading businesses.
http://jlne.ws/1f8jlpl

RBS Sees ‘Substantial’ Full-Year Loss, Creates Bad Bank
Gavin Finch & Svenja O’Donnell – Bloomberg
Royal Bank of Scotland Group Plc expects to post a “substantial” full-year loss after transferring 38.3 billion pounds ($61 billion) of its worst loans to an internal bad bank under government pressure.
http://jlne.ws/1f8jLMw

No need to worry about too much easy money
Samuel Brittan – FT.com
Too much state-created money is by definition a bad thing. And so is too little. But how do we know how much is too much and how much too little? The brief dogmatic answer is that we cannot. We can only “suck it and see”.
http://jlne.ws/16Sp3q5
***DA: My sentiments exactly.

Abandon all hope, ye who venture here
Dan McCrum | FT Alphaville
In our descent though the rings of the alternative investment universe, we have found that hedge funds are zombies and David Swensen is a mythic superman. So what then to make of venture capital? The Wizard of Oz revealed, perhaps.
http://jlne.ws/16SirIg
***DA: That’s a lot of sci-fi/fantasy references in one paragraph. “Impressive, it is,” says Yoda.

Expectations for German Generosity Are Misplaced
Vincent Cignarella  – MoneyBeat – WSJ
Europeans expect a lot from Germany and apparently they are not alone. On Wednesday the U.S. Treasury unleashed a scathing criticism toward the nation in its semiannual currency report saying that Germany’s heavily export driven economy has created the massive economic imbalances that plague Europe.
http://jlne.ws/16Sp3Gn

SpooOOOooky European bank capital relief
Joseph Cotterill | FT Alphaville
That’s because it’s ghostly and hard to spot. (And it is All Hallows’ Eve.)
http://jlne.ws/16Sp3Gq
***DA: That is the double-edged sword of the modern era – loose money policies encourage leverage, and capital buffers are deleveraging in nature.

Central Banks

ECB Says Constancio to Lead Panel Choosing Bank-Supervisor Head
Jeff Black – Businessweek
European Central Bank Vice President Vitor Constancio will take charge of selecting the head of Europe’s upcoming common bank supervisory board.
http://jlne.ws/16Sp3Gt

Draghi’s Deflation Risk Complicates Recovery: Euro Credit
Jana Randow & Jeff Black – Bloomberg
Mario Draghi is facing down a deflation threat with few options left to fight it.
Consumer prices in the euro area are rising at the slowest pace in four years, well below the European Central Bank’s target of just under 2 percent. The ECB president has a choice of cutting rates that are already near zero, injecting liquidity that may not boost prices, or ignoring the ECB’s own definition of price stability, according to banks including JPMorgan Chase & Co. and BNP Paribas SA.
http://jlne.ws/19iYgHs

Yuan Cross-Border Trade Settlement Hits 8.6 Trillion
CRI
China’s cross-border trade settlements in its national currency, the yuan or renminbi, totalled 8.6 trillion yuan (1.4 trillion U.S. dollars) by the end of September since the program’s launch in July 2009, a central bank official said on Friday.
http://jlne.ws/16Sp1yu

Brazil FX intervention program has no set end date -central bank
Reuters
The Brazilian central bank’s current intervention program in foreign exchange markets has no set end date, the bank’s director of monetary policy, Aldo Mendes said on Friday.
http://jlne.ws/16Sp3GC

Opaque PBOC Fuels Transparency Call as Rates Swing: China Credit
Bloomberg
China’s tightest credit conditions since a record cash crunch in June are prompting global investors to call for greater transparency from the central bank in the world’s second-largest economy.
http://jlne.ws/1f8jTLU

Currencies

Euro on the ropes after dive in inflation
Reuters
The euro tumbled to a two-week low on Friday after a plunge in euro zone inflation left markets suddenly eyeing the outside chance of a cut in interest rates by the European Central Bank next week.
http://jlne.ws/16Sp1OK

Venezuela Introduces Currency Exchange Rate for Tourists
Corina Pons and Nathan Crooks – Businessweek
Venezuela is introducing an exchange rate for tourists, fueling speculation the government will devalue its currency for the second time in a year. Foreign visitors to the South American country will be able to sell as much as $10,000 a year at an exchange rate to be published on the central bank’s website, according to a decree in the official gazette distributed today.
http://jlne.ws/16Sp1OM

The feel-good factor in structured products: could forex structures benefit?
Richard Jory – Risk.net
Martin Wheatley, head of the UK Financial Conduct Authority, gave a speech in the middle of October without a single criticism of structured products. The US Financial Industry Regulatory Authority has given brokers a nudge but not a smack over the way conflicts of interests should be handled. Even the drama of HM Treasury’s public thoughts on deposit-based products could prove benign. It looks like the anti-depressants may be starting to kick in.
http://jlne.ws/16Sp1ON

Foreign exchange house of the year – HSBC
Risk.net
With products that were both innovative and immensely popular, HSBC played key roles in three of the biggest currency stories of the past 12 months.
http://jlne.ws/16Sp1OO

Ukraine Rating Cut to Greek Level by S&P as Devaluation Seen
Kateryna Choursina – Bloomberg
Ukraine’s debt rating was cut to the same junk level as Greece by Standard & Poor’s, which said the government is struggling to weather a shortage of foreign currency, increasing the likelihood of a hryvnia devaluation.
http://jlne.ws/1f8iS6y

Indexes and Index Products

Moscow Exchange widens ETF slate
Tim Cave – Financial News
The Moscow Exchange is to list six new exchange-traded funds, in the latest in a number of steps taken by the bourse to develop its offering for both domestic and foreign investors.
http://jlne.ws/16SitzE

Index innovation of the year – MSCI
Risk.net
MSCI has taken the lead in transforming academic research into empirical indexes with its range of risk premia benchmarks, which have gathered a total of $31 billion throughout Europe, the Middle East and Africa in structured products and exchange-traded funds (ETFs).
http://jlne.ws/16SitzG

Best in Benelux – BNP Paribas
Yakob Peterseil – Risk.net
This year, BNP Paribas capitalised on the trend for ethical investing, helped bring fixed-income buyers back into equity structures and used its infrastructure know-how to help distributors diversify their credit risk, helping it become Structured Products’ choice as the best bank in the Benelux region for the third consecutive year.
http://jlne.ws/1iAto6y

TSE : About New “JPX JGB Futures Volatility Index” (Tentative Calculation and Publication)
Tokyo Stock Exchange, Inc. (TSE) will start calculating and publishing a new index “JPX JGB Futures Volatility Index”, an index that shows the volatility of 10-year Japanese Government Bond Futures contracts, from November 1, 2013.
http://jlne.ws/16SirYL

Gold

Gold Survey: Lower Gold Prices Forecast For Next Week – Survey Participants
Kitco News
In the Kitco News Gold Survey, out of 34 participants, 19 responded this week. Of these, three see prices up, while 13 see prices down and three see prices sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
http://jlne.ws/1aOYuqe

The informal Rajan
David Keohane | FT Alphaville
“I still find it difficult to imagine a father presenting his favourite daughter with a certificate for a gold-linked exchange traded fund on her big day,” says one senior policy maker. That’s from a long Diwali read on India’s gold obsession by Avantika Chilkoti and James Crabtree which is well worth your time and to which we might add a cheeky few thoughts — it seems the RBI’s attempts to offer alternative to India’s gold-lust says more than a little about the limitations facing the central bank and Rajan.
http://jlne.ws/16Sp1OS

Miscellaneous

AIG Names Cornell, Schreiber to Investment Posts
Zachary Tracer – Bloomberg
American International Group Inc. (AIG) named Brian Schreiber and Geoffrey Cornell deputy chief investment officers as the insurer revamps oversight of its $358.3 billion portfolio.
Schreiber, 48, will oversee specialized asset classes including real estate, private equity and hedge funds, New York-based AIG said yesterday in a statement. Cornell, 42, will manage high-yield and investment-grade corporate bonds and municipal securities. They will report to William Dooley, executive vice president for investments.
http://jlne.ws/1f8jIjL

Speedy Lunches Urged at SEC as Union Decries Time-Clock Watching
Robert Schmidt – Bloomberg
Add the ability to eat quickly to the list of skills needed to work at the U.S. Securities and Exchange Commission.
In a dispute that has sent pangs of resentment — and perhaps hunger — across the agency, the SEC’s union chief has warned workers to keep lunch breaks to a half hour or risk being disciplined as “absent without leave.”
http://jlne.ws/1f8k9dG

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