First Impressions

Ray Cahnman, chairman, Transmarket Group – Me, Us & You: How Trading Works

“Opportunities today are even greater. Competition, however…is brutal. “

Ray Cahnman, chairman of Transmarket Group, begins his presentation with a list of books, movies and news stories he recommends that give a glimpse into the financial industry. He then discusses how he entered the financial industry and how the opportunities and challenges facing the industry have evolved. Cahnman remembers how trading used to be about the individual trader and how no one wanted to divulge their secrets to success. Today, trading has turned into a team effort, especially with the role technology is playing. Cahnman says that the trading ecosystem now involves programmers and coders as well as traders. However, while there is an influx in new opportunities in the industry, one still needs to stay persistent and embrace competition in order to strive.
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Quote of the Day

“This is absolutely a unique crisis. We are watching the explosion. There is no sector that is immune to the devaluation damages.”

Slava Rabinovich, chief executive officer at Diamond Age Capital Advisers in Moscow in the story, ” Just One Ruble Option Contract Still in the Money After Plunge”.

Lead Stories

Stocks slide as Russia turmoil rattles traders
Jamie Chisholm, Global Markets Commentator, FT
Turmoil in Russia’s financial markets is shattering investor confidence, battering stocks and boosting perceived havens such as the yen, gold and Bunds.

Bill Gross Says Bill Gross Isn’t Even a Little Crazy
by Kirsten Grind and Gregory Zuckerman, WSJ
Remember those outbursts, cool shades and colorful investor letters? Bill Gross was just trying to put the “fun” back in “bond fund.”

A Low-Yield Bond World Everyone Loved to Hate Is Ending in Tears
Lisa Abramowicz – Bloomberg
Remember when everyone in the bond market bemoaned living in a low-volatility, low-yield world?
Those days are ending. Prices are swinging more than they have on average during the past few years and there’s yield to be had if you have the stomach for risk. Junk bonds and emerging-market debt have been tumbling on concern that plummeting oil prices will impede the ability of borrowers to repay their debt.
Yet many don’t seem much happier for it.

Brokers back new boost to bond liquidity
Tracy Alloway in New York, FT
If Wall Street were high school, Ronnie Mateo would be the cool kid with all the right friends in all the right cliques. The former Salomon Brothers and Citibank trader, known for his colourful bespoke suits and outgoing personality, has spent decades building up a little black book of contacts that would make even the most prolific of networkers blush.

Jefferies Debt-Trading Revenue Plunges 73% on Distressed Losses
Elizabeth Dexheimer – Bloomberg
Jefferies Group reported a 73 percent drop in fourth-quarter revenue from fixed-income trading as the firm sustained losses on distressed debt, including Fannie Mae and Freddie Mac securities.
The investment bank, owned by Leucadia National Corp. (LUK), is also exploring alternatives for its Bache commodities business after a goodwill writedown contributed to a $92.4 million loss for the fiscal fourth quarter ended Nov. 30, the New York-based company said today in a statement.

JPMorgan Mortgage Deal Slammed for Not Involving Trustees
Chris Dolmetsch – Bloomberg
JPMorgan Chase & Co. (JPM)’s $4.5 billion settlement with mortgage-bond investors over claims of faulty home loans should be reviewed closely because it was negotiated without the involvement of the securities’ trustees, objectors to the pact told a New York state judge.
The deal resolved claims relating to the underwriting and servicing of loans in more than 300 residential mortgage-backed securitization trusts. It was negotiated by New York-based JPMorgan and a group of 21 institutional investors, including BlackRock Inc. (BLK) and Pacific Investment Management Co., that held more than $24 billion, or 32 percent, of the securities issued by the trusts, according to court papers.

Interest Rates – Farewell, Liquidity Trap
With continued growth and further improvement in labor markets, the Federal Reserve (the Fed) looks likely to begin raising short-term interest rates in 2015, marking an end to the lengthy liquidity trap in the U.S. In our view, government bond markets are unprepared for this outcome at current yield levels. Investors should brace for a year of challenging returns.

Rosneft Denies Role in Ruble’s Rout as Pressure on Sechin Mounts
Elena Mazneva and Ekaterina Shatalova – Bloomberg
The record bond issue by OAO Rosneft last week isn’t connected to the collapse of the ruble, said Igor Sechin, the head of Russia’s largest oil producer and one of President Vladimir Putin’s closest confidantes.
Speculation that the central bank was forced to support the 625 billion-ruble ($9 billion) issue so the company could buy U.S. dollars to pay off loans to western banks is a “provocation,” Sechin told reporters near Moscow as the ruble plunged to a record. “Those interested parties and provocateurs should be dealt with,” he said.

Speed Trader Study Shows Treasuries Hurt When Breaking News Hits
Matthew Leising – Bloomberg
High-frequency trading in the U.S. Treasury market makes it harder for investors to buy and sell bonds when news events cause prices to move, according to the Bank of Canada.
Researchers studied how liquidity changed as algorithmic-trading programs, which are much faster than human beings, reacted to economic indicators including the unemployment rate, home sales and inflation. They examined trades on ICAP Plc (IAP)’s BrokerTec trading system from January 2006 to December 2011, putting their findings in a paper released this month. The $12.3 trillion Treasury market is the world’s largest debt market.

Central Banks

Will cheap oil stop Fed’s wheels turning?
Financial Times
Fear leads to anger. Anger leads to hate. Hate leads to suffering. Small and green he may be, but Yoda spoke truth. The Russian central bank’s demonstration of fear, raising rates from 10.5 to 17 per cent in the middle of the night, had only a brief calming effect before anger and hate became apparent. From peak to trough, the rouble fell 26 per cent, the most since Russia was on the brink of default in 1998.

What will the Fed say about oil prices?
Paul R. La Monica – CNN Money
For months the Federal Reserve has been fixated on jobs, jobs, jobs. Is hiring strong enough in the U.S.? And what about wages? But now there’s another wild card in the mix as the Fed considers when to raise interest rates: oil.
The stock market just suffered its worst week in years along with a dramatic drop in oil prices. So investors and economists are now wondering if the Fed will (or should) discuss what impact lower energy prices may have on its outlook for inflation.

Former WB Chief Barry Meyer Joins Board of Federal Reserve in San Francisco
Former Warner Bros. chairman-CEO Barry Meyer has joined the board of the Federal Reserve Bank in San Francisco.


Just One Ruble Option Contract Still in the Money After Plunge
Ye Xie – Bloomberg
A glimpse into the ruble options market captures just how much the currency’s 52 percent plunge this year has caught traders and investors off guard.
In a market with hundreds of bullish call options worth more than $15 billion combined, only one of them — a $5 million contract expiring a year from now — is still profitable at today’s exchange rate of 67.9 per dollar. Every single other contract is currently worthless because they gave traders the right to buy the ruble at exchange rates that are stronger than today’s levels, according to data compiled by the Depository Trust & Clearing Corp. from clients of U.S. banks.

Russia takes well-trodden path in interest-rate defense of ruble
Chicago Tribune
Since the end of the postwar system of fixed exchange rates more than four decades ago, countries repeatedly have faced crises when their currencies tumble. Russia’s attempt Tuesday to support the ruble through higher interest rates is a standard approach deployed with mixed results in recent decades.

Midnight rate rise spurs turmoil in Russian rouble
Michael Hunter in London and Kathrin Hille in Moscow, FT
Russian currency markets were in turmoil on Tuesday as the rouble tumbled nearly 12 per cent to another record low after Russia’s central bank sharply raised interest rates in an emergency midnight action.

Deutsche Bank Names Arinc Head of Global Foreign Exchange
Cecile Gutscher – Bloomberg
Deutsche Bank AG (DBK) named Ahmet Arinc head of global foreign exchange in the first realignment of the business, a month after Richard Herman took over as head of fixed income and currency markets.
Arinc, who already oversees emerging-markets debt, will manage currencies as part of a combination of the two units, according to an internal memo obtained by Bloomberg News. London-based Arinc replaces Kevin Rodgers, who retired in June after 15 years to focus on what the bank said in April were scholarly interests, including academia and music.

Indexes & Index Products

ICE Futures U.S. Sets Daily Volume Records in Mini MSCI Complex
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that ICE Futures U.S. achieved a daily volume record in the mini MSCI Index futures complex and a daily volume record in the mini MSCI All Country World Index Net Total Return future on December 12, 2014.

Goldman files for a new batch of exchange-traded funds
By Ashley Lau, Reuters
Goldman Sachs Group Inc has filed for a slew of new exchange-traded funds, most of them alternative, another step by the Wall Street bank in its pursuit of the fast-growing, nearly $2 trillion U.S. ETF market.

ETFGI Is Proud To Announce That Deborah Fuhr Received The William F. Sharpe Indexing Lifetime Achievement Award
ETFGI is proud to announce that Deborah Fuhr, Managing Partner & Co-founder of ETFGI, is the 2014 William F. Sharpe Indexing Lifetime Achievement Award winner. She was honored at IMN’s 19th Annual Global Indexing & ETFs conference at the JW Marriott Camelback Resort & Spa in Scottsdale, Arizona on December 8th. This distinguished award recognizes the most accomplished innovators and practitioners in the indexing industry, and was presented by The Journal of Index Investing.


DGCX offers new settlement services based on Cinnober technology
The Dubai Gold & Commodities Exchange (DGCX) and its central counterparty service provider, the Dubai Commodities Clearing Corporation (DCCC), have launched a new settlement service that will enhance trading and cost efficiencies for clearing members. Behind their state-of-the-art EOS platform stands technology supplier Cinnober.

Gold hedging activity remains subdued
Frik Els –
Gold producers limited their hedging during the third quarter according to the latest data about forward selling in the gold mining industry from metals research firm GFMS.
The global producer hedge book contracted in the third quarter by 0.20 million ounces (6 tonnes).

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