First Impressions

Jamie Farmer, Managing Director, S&P Dow Jones Indices – Indexing 101

“This is a big industry…but it’s very tight, very interconnected, very close. It’s unbelievable how many people you come in contact with again.”

Jamie Farmer, managing director of S&P Dow Jones Indices, gives a rundown on indices, beginning with the history of indexing and the creation of the Dow Jones industrial average. According to Farmer, the original purpose of indexing was for editorial value. Eventually, it expanded and evolved into what we know as the Dow Jones S&P Indices. Farmer also covers trends along with the growth and expansion of the financial industry. He concludes by discussing the importance of networking and how he was able to progress to his current position by building several relationships throughout his career.

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Quote of the Day

It will take years.

Italian politician Gianni Pitella on the expected lengthy currency transition if Scotland were to leave the U.K, quoted in the Telegraph story “Spanish warn independent Scotland would get euro not pound”

Lead Stories

ICBC sets $650m record for ‘Lion City’ bond issuance
Jeremy Grant in Singapore – Financial Times
Industrial and Commercial Bank of China has issued a total of Rmb4bn ($650m) of renminbi-denominated bonds in Singapore and Taiwan, in the first case of cross-border collaboration between the two offshore markets for the Chinese currency.

***DA: Yesterday I featured a story about London being first out of the gate with RMB bonds, but other financial centers were champing at the bit. I was more right than I thought.

Smaller Firms Taking Corporate Bond Dealing Share From Top Banks
Katy Burne – WSJ
The top five banks dealing in U.S. corporate bonds have lost market share to smaller firms, according to figures from researcher Greenwich Associates, the latest sign of the financial-sector shake-up being driven by tougher rules and bank retrenchment.

***DA: Volcker strike.

European banks feel effects of Fed’s ‘reverse repo’
Tracy Alloway and Michael Mackenzie in New York – Financial Times
The Federal Reserve’s testing of a new liquidity tool has altered a longstanding financing relationship between money market funds and banks.

Euronext Announces RMB Bond Listing By Bank Of China And Signs MOU
Euronext, the primary exchange in the Euro zone, is pleased to welcome the first offshore RMB denominated bond listing by Bank of China(BOC), on its regulated Euronext market. In addition Euronext has today signed a Memorandum of Understanding (MOU) with BOC to develop comprehensive strategic relationships between the two companies.

The Astonishing Story of the Federal Reserve on 9-11
Arliss Bunny –
On the morning of 11 September 2001, when Federal Reserve Vice Chairman Roger W. Ferguson, Jr. arrived at work in his office in the Federal Reserve Bank in Washington, DC, he was alone. I don’t mean there weren’t other people in the building it’s just that it was a busy day and all the other members of the Fed Board of Governors who are normally in Washington were traveling.

Central Banks

Kuroda Assures Businesses BOJ Will Act if Needed
Tatsuo Ito – WSJ
Bank of Japan Gov. Haruhiko Kuroda offered businesses assurance that the central bank won’t hesitate to take fresh easing action if needed to achieve its inflation target and get the economy out of years of deflation.

***DA: Twentieth time’s a charm.

Australia’s Central Bank Holds Off Macroprudency – Real Time Economics
James Glynn – WSJ
Australia’s central bank is worried about surging house prices, but it appears no closer to clamping down further on mortgage lending, unlike its counterparts in countries such as New Zealand, Canada and the U.K.

***DA: Desperate for inflation, but not THAT kind of inflation.

Don’t Follow the Yellen Brick Road — Ahead of the Tape
Pay no attention to the woman behind the curtain. With the Federal Reserve’s rate setters starting a two-day meeting Tuesday, pundits are devoting more energy than usual to guessing Chairwoman Janet Yellen’s intentions. Reliably dovish until now, she may or may not yield ground to a vocal minority of colleagues eager to see monetary stimulus reduced sooner than expected.

***DA: What are we supposed to trade on? Fundamentals?

Draghi’s ABS-Market Revival Set for Boost From Regulators
Jim Brunsden, Rebecca Christie and Ben Moshinsky – Bloomberg
Mario Draghi is trying to rebuild the market for asset-backed securities in Europe. Global regulators are set to lend him a hand.

Bank Of England Quarterly Bulletin 2014 Q3


Spanish warn independent Scotland would get euro not pound
The Telegraph
An independent Scotland would be forced to wait at least five years to join the EU and would then have to sign up to the euro, the Spanish government has warned in a major intervention 48 hours before the referendum that directly contradicts Alex Salmond’s claims.

***DA: The war of words is heating up.

Biggest Banks Said to Overhaul FX Trading After Scandals
Julia Verlaine and Gavin Finch – Bloomberg
The world’s biggest banks are overhauling how they trade currencies to regain the trust of customers and preempt regulators’ efforts to force changes on an industry tarnished by allegations of manipulation.

French PM urges more EU budget flexibility, weaker euro
European nations must use all the flexibility allowed by EU budget rules to ease fiscal tightening, and the euro needs to weaken further to revive growth, French Prime Minister Manuel Valls said on Tuesday.

ECB’s predicament leaves peers mute on currency depreciation
Attempts by the European Central Bank to weaken the euro have the potential to spark a currency war but policymakers across the world are keeping silent, knowing the ECB has scant alternatives to keep its economy afloat.

SNB Cease-Fire on Currency Seen Shaky After ECB Action
Catherine Bosley and Andre Tartar – Bloomberg
The Swiss National Bank’s two-year hiatus on currency interventions might be about to end as its exchange rate stays too close to its ceiling, economists say.

***DA: The 1.20 line in the sand may be redrawn?

Indexes & Index Products

Silver ETF holdings set record high as price drop sparks interest
Frank Tang – Reuters
Holdings at the world’s largest silver-backed exchange-traded funds (ETFs) rose to a record high as a pullback in prices prompted long-term retail investors to increase purchases of the precious metal.

***DA: Scoop up some silver.

S&P Dow Jones Indices and the Lima Stock Exchange Announce Indexing Agreement
Agreement Includes Global Index Licensing, Marketing, Distribution, and Management of all BVL Indices- All BVL Indices to be Co-Branded “S&P” including a new version of the flagship IGBVL index and a new blue chip index soon to be launched- S&P DJI Continues its Expansion in Latin America

Source Looks to Bring Europe ETF Success to the U.S.
ETF Trends
Source, one of the fastest growing ETF providers in Europe, makes its U.S. debut today with the introduction of the Source EURO STOXX 50 ETF (NYSEArca: ESTX). While the Source EURO STOXX 50 ETF will compete with well-established ETFs such as the SPDR EURO STOXX 50 (NYSEArca: FEZ) and the iShares MSCI EMU ETF (NYSEArca: EZU), this is not another run-of-the-mill new ETF launch. It is expected that the Source EURO STOXX 50 ETF will charge just 0.16% per year, making it one of the least expensive Europe ETFs available in the U.S.

***DA: Low expense ratio – I like the sound of that.

Source launches new ETF to track Japan index
International Adviser
The latest product to emerge from the pipeline of exchange traded product provider Source aims to provide exposure to Japan’s stock market.


ICE Futures U.S. Updates Mini Gold Contract
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced updated terms for the mini gold futures and options contracts that are listed and traded on ICE Futures U.S. The change is effective today and reflects customer feedback on size, quality and delivery options for the mini gold products. These contracts were previously listed on Liffe U.S. and were transitioned to ICE Futures U.S. in June.

Hong Kong Gold Bourse Approved to Build Vault in China
Alex Davis – Bloomberg
Hong Kong’s Chinese Gold & Silver Exchange Society was given permission to set up a precious metals vault in Shenzhen, China, becoming the first non-mainland bourse granted onshore commodity warehousing access.

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