First Impressions

25 Years – NIBA’s Schramm and Burke Talk History, Growth and Looking Ahead
JohnLothianNews.com

With the NFA’s creation of Introducing Brokers in 1984, it soon became clear that there was a need for an association for IBs. This newly created group needed a voice and found it with the National Introducing Brokers Association, now celebrating its 25th Anniversary.

“The mission is still of education and very much providing a forum for a voice and a way to get our opinions out,” says Melinda Schramm, the NIBA’s founder and chairman. “But the IB community has changed considerably over the years.”

While IBs are still all around the country, they’re really value added brokers in today’s world.

Schramm partnered with current NIBA President Mike Burke, who said that the early days involved meeting with several FCMs with a concentration on IB business. Burke wanted to reach out to the IBs to help and provide a voice for them when it came to regulations.
Watch the video »

Quote of the Day

“For a few thousand rubles [debt collectors] are almost willing to kill, or at least threaten.”

Boris Voronin, director of The National Association of Professional Collection Agencies, in the story, “Molotovs and Death Threats: Russian Debt Collectors Go Medieval”

Lead Stories

US regulator hits out at new securitisation requirements
Joe Rennison – Financial Times
A senior US regulator has slammed incoming rules that will require managers of bonds backed by mortgages and other loans to retain 5 per cent of the credit risk of new deals, calling for an investigation into the impact the requirements are having on the securitisation industry. Securitisation is a broad term for packaging loans and other collateral into bonds, where slices of the debt with varying degrees of risk are then sold to investors. The more risky “tranches” offer the chance for higher returns.
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Low interest rates spark house price boom across Europe
Tim Wallace – The Telegraph
House prices are rising or stable in all major European economies thanks to ultra-low interest rates, according to a new analysis by Standard & Poor’s. Low rates are being passed on to consumers, allowing home buyers to borrow more money to fund bigger property purchases – in turn pushing up prices.
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‘Too Big to Fail’ Critics Go Too Far on Banks
Greg Ip – WSJ
“Too big to fail” is the postcrisis obsession that refuses to go away. Democratic presidential candidate Bernie Sanders has built his campaign on the claim that big banks are a menace to society and should be broken up. Two weeks ago he found an ally in Neel Kashkari , a Republican who ran George W. Bush’s bailout program and recently became president of the Federal Reserve Bank of Minneapolis. At the root of these concerns is that if any financial institution is so big or important that the government can’t let it collapse, investors will lend to it too cheaply. That de facto subsidy provides an advantage over smaller competitors and encourages management to borrow too much, making it more likely to collapse.
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Liquidnet Europe trebles bond liquidity since launch
John Bakie – The Trade
Liquidnet said it has trebled weekly liquidity on its European fixed income platform since launching it in September last year. The firm’s fixed-income dark pool, which was developed following its acquisition of Vega Chi, aims to bring a similar experience to its existing equities franchise, scraping the buy-side’s blotters to help them match blocks and execute larger trades.
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Schengen collapse will wipe EUR28bn from Europe’s economies
Mehreen Khan – The Telegraph
Europe could see EUR28bn wiped off the value of its economies as it faces the imminent collapse of the Schengen system of open borders, according to a leading investment bank. Up to 0.2pc of the European Union’s GDP could be erased as a result of the spiralling costs of cross-border travel and disruption to internal trade that would return in a post-Schengen Europe, Morgan Stanley warned.
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Earnings Downgrades Turning Into Deluge as First Quarter Craters
Lu Wang – Bloomberg
The pace at which earnings estimates are being cut is getting worse, not better. While bulls cling to predictions that profit growth will resume for Standard & Poor’s 500 Index companies in 2016, analysts just reduced income estimates for the first quarter at a rate that more than doubled the average pace of deterioration in the last five years. Forecasts plunged by 9.6 percentage points in the last three months, with profits now seen dropping the most since the global financial crisis, data compiled by Bloomberg show.
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BofA Sees Big U.S. Corporate-Bond Rally Despite Investor Worry
Finbarr Flynn – Bloomberg
U.S. investment-grade bonds may fall to the cheapest levels in more than seven months this year and fixed-income investors are overly pessimistic about the balance sheets of corporate America, according to Bank of America Corp.
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The Politics of Financial Volatility
Alexander Friedman – Project Syndicate
Twenty-four years ago, in the midst of an ugly US presidential campaign, Bill Clinton’s campaign manager neatly summed up his candidate’s message: “It’s the economy, stupid.” Today, as investors struggle to understand what is driving extreme volatility in the financial markets, there is an equally pithy explanation: It’s the stupid politics. Central bank policies have moved from supporting the markets to potentially destabilizing them. Now markets are turning to structural reform and fiscal policy for assistance. In this light, current price movements should be viewed through the spectrum of geopolitics. And it is not a nice view.
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CFTC Swaps Report Update
Press Release
CFTC’s Weekly Swaps Report has been updated, and is now available.
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Suddenly, the market sees growth—and rate hikes
CNBC
The recent stock rally and mildly encouraging economic data have investors feeling a little braver. In their views on the market, investors are looking for better conditions than what has persisted since mid-2015. As for the ensuing actions the Fed might take on monetary policy, the view is now tilting back toward additional rate action this year.
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Central Banks

Sub-zero central banks may just chase inflation expectations lower
Mike Dolan and John Geddie – Reuters
Hyperactive central banks warn of ‘unmoored’ inflation expectations but may well be weighing the anchor themselves. Skewed by the oil price collapse of the past 20 months, headline inflation rates across Europe and Japan are currently near zero or even falling. Some economists now expect euro zone inflation for 2016 as a whole to be in the red and no longer dismiss the development as temporary monthly blips. Fearful these low inflation rates might distort consumer and business behavior into putting off consumption today and wait for cheaper goods in future, central banks are scrambling to steer expectations back to inflation targets of about 2 percent.
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Free Lunch: Central banks cannot pass the buck
Martin Sandbu – Financial Times
Shoulders to the wheel
When G20 policymakers met last weekend they must have known that they look like they are doing an increasingly poor job. Growth is slowing all over the world, after never having properly broken into a stride in the post-crisis recovery. The characteristics of deflating economies are everywhere to be seen. In the US, the defeatism is reflected in observers’ pleasant surprise that fourth-quarter growth was revised up to a still-glacial annualised pace of 1 per cent.
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Euro zone banks can deal with ultra low rates
Reuters via Euronews
Euro zone banks have dealt well with rock bottom interest rates and their biggest problems are not caused by loose monetary policies, a top European Central Bank official said on Wednesday, paving the way for more policy easing next week.
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Fed’s Dudley warns of fresh risks amid ‘mess’ of global policy co-ordination
Vesna Poljak – Australian Financial Review
The Federal Reserve’s William Dudley has warned that risks to the United States economy are “slightly to the downside”, dampening any enthusiasm for a rate hike in the US this month.
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Central banks: from omnipotence to impotence?
Francesco Papadia and Guntram B. Wolff – Bruegel
Like the price of financial assets, the market assessment of the capacity of central banks to achieve their price stability objective fluctuates between omnipotence and impotence. We do not agree with this binary view of the world and we examine in this post the case of the European Central Bank (ECB). We argue that the ECB still has some instruments left. It should consider moving beyond increasing sovereign debt purchases, which would be ineffective and pose risks. More important is to step up work on structural and fiscal policies.
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Japan PM Abe adviser: G20 statement not a restriction on BOJ
Reuters
The Group of 20’s agreement that monetary policy alone cannot lead to balanced growth does not place any restrictions on the Bank of Japan’s ability to expand its negative interest rate policy, an adviser to Japan’s prime minister said on Wednesday.
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America is telling the Fed that the economy keeps getting better
Akin Oyedele – Business Insider
The Federal Reserve just published its latest Beige Book, which showed that the economy continued to improve across most of America. The release, published eight times a year, contains anecdotes from the Fed’s 12 districts on the economy.
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Central Bankers Admit that Central Banks Have Failed to Fix the Economy
Centre for Research on Globalization
Between 2008 and 2015, central banks pretended that they had fixed the economy. In 2016, they’re starting to admit that they haven’t fixed much of anything.
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Only the IMF can now save Brazil
Ambrose Evans-Pritchard – The Telegraph
Brazil is heading straight into the arms of the International Monetary Fund. The sooner this grim reality is recognized by the country’s leaders, the safer it will be for the world. The interwoven political and economic crisis has gone beyond the point of no return. The government is frozen. The finance ministry has lost the trust of Brazilian investors and global markets in equal measure.
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Charts: It could be years until some major central banks hike rates
Business Insider
In a world where negative interest rates are quickly becoming the norm rather than the exception, it should come as no surprise that expectations for rate hikes in developed economies are fading fast.
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Here’s how to make money off Super Mario Draghi
Matthew Lynn – MarketWatch
Saving the euro. Fixing the bond crisis. Facing down the radicals in Greece, and engineering a modest recovery across much of the periphery of the continent while simultaneously persuading the Germans that printing money didn’t immediately lead to the collapse of civilization.
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Currencies

Japan’s Three Biggest Banks Declare Yen’s Depreciation Is Over
Chikako Mogi and Hiroko Komiya – Bloomberg
Japan’s megabanks are calling time on the yen’s four years of depreciation, a blow to Haruhiko Kuroda’s chances of reviving inflation and growth. Bank of Tokyo-Mitsubishi UFJ Ltd., Sumitomo Mitsui Banking Corp. and Mizuho Bank Ltd. all see the yen ending the year stronger than where it started. And all three have revised up their 2016 forecasts as the yen gained 6.7 percent in the first two months of the year.
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Switch to digital currency could endanger banks, warns Bank of England deputy
Peter Spence – The Telegraph
Switching to a digital version of the pound could hit banks, investment and economic growth, according to one of the Bank of England’s deputy governors. Ben Broadbent, who is responsible for monetary policy at the central bank, warned that the introduction of an electronic version of sterling could “impair” the ability of banks to make loans.
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China Calms Jittery Investors With Yuan Stability, Clear Message
Ye Xie, Sangwon Yoon and Bonnie Cao – Bloomberg
Chinese authorities seem to finally be getting through to investors after months of confusion about the nations’ economic policies helped drive a $9 trillion global equity rout. Recent moves such as ruling out the possibility of a one-off yuan devaluation, a new head of the securities regulator and an increase in the money available for lending appear to be winning back some confidence. Fresh data on Tuesday showing a further slowdown in the world’s second-largest economy barely made a dent in a broad market rally. Until three weeks ago, such a signal probably would have sparked a selloff.
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Yuan given to Russia under currency swap deal
Zhou Xin – South China Morning Post
Beijing has given yuan to cash-strapped Russia in “multiple” deals since October under a bilateral currency swap agreement, mainland China’s central bank said in the first public disclosure of the actual use of funds in the scheme. The People’s Bank of China did not provide the amount used or the exchange rates of the swaps. It said the funds were ultimately used by Russian commercial banks.
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Will Brexit Break the Pound?
Harold James – Project Syndicate
The British government’s recent announcement that a referendum on Britain’s European Union membership will be held on June 23 was quickly followed by a sharp drop in the pound’s value. Exchange rate volatility for the pound is bound to continue until the referendum, and to intensify at moments when a vote for “Brexit” looks more likely. The result may be a self-fulfilling prophecy, in which market and political instability drive British voters to reject the EU – an outcome that would be highly dangerous for them and their European counterparts alike.
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Banks are teaming up to launch a Venmo killer
Ian Kar – Quartz
Big banks are eager to take on PayPal’s Venmo money-transfer app, and they’re banding together in their efforts to do it. At its investor day on Feb. 23, JPMorganChase confirmed that a new, bank-led money-transfer service is scheduled for release later this year. Customers of the banks involved—Chase, Bank of America, Wells Fargo, Capital One, BB&T, PNC, and US Bank—account for 60% of US consumers with mobile apps, Chase said in its presentation.
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Indexes & Index Products

Historic day for ‘phenomenal’ FTSE 100
Lee Wild – Interactive Investor
Finally, investors in the country’s largest companies really do have something to cheer, for after two months of heart-stopping volatility, the FTSE 100 (UKX) has traded at its highest level in 2016. After ending 2015 at 6,242, the blue-chip index started the new year deep in negative territory, losing over 135 points within minutes and triggering what would turn out to be one of the worst starts to a year in living memory.
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Benchmarks and the bully pulpit
Mat Lystra, Sr. – FTSE Russell
Theodore Roosevelt reveled in the power of the Presidency as a persuasive force, calling it the “bully pulpit”. A century later the US Presidency is still arguably the most influential position in the world. But how much influence does the President have over the economy, and in particular, the stock market? There’s a wide body of research that explores those questions and the general consensus seems to be: perhaps some, but not much.
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****SD: A post from FTSE Russell’s new blog.

FTSE Russell Announces Schedule For Annual Russell Indexes Reconstitution
Press Release
FTSE Russell, the global index provider, today announced the 2016 schedule for the annual reconstitution of its Russell indexes. The closely watched annual process, which also includes the Russell global indexes, is designed to capture and reflect market shifts that have occurred in the past year to ensure investors continue to have the most accurate market benchmarks.
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Precious metals equity funds surge as equity slump continues in February
Christian Charest – Morningstar
A surge in the price of gold, stagnating oil prices, flat market returns and a turnaround for the loonie were the main themes in February affecting the 42 Morningstar Canada Fund Indices, which measure the aggregate returns of funds in various standard categories. Ten of the 42 fund indices — including just four equity fund indices — posted gains during the month, while 15 indices lost 2% or more, according to preliminary performance data released today by Morningstar Canada.
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New York Stock Exchange Launches NYSE U.S. Pure Exposure Index Family
Press Release
The New York Stock Exchange, a subsidiary of Intercontinental Exchange (NYSE: ICE), today announced the launch of the NYSE U.S. Pure Exposure Index Family, a new series of nine sector indices that aims to isolate pure sector returns by hedging market risk.
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An ETF That Cements The Case For Smart Beta
Benzinga
The term “smart beta,” as it pertains to exchange-traded funds, has been derided by critics, but the success of some of the funds occupying this corner of the ETF landscape is undeniable.
According to FTSE Russell’s first U.S. retail financial advisor market survey – Smart Beta: 2015 survey findings from U.S. financial advisors – 68 percent of financial advisors polled are using smart beta ETFs and 70 percent are using multiple strategic beta approaches.
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Gold

Trump’s Ascendance Could Be Good for Gold
Ese Erheriene – WSJ
The other winner from Super Tuesday could be gold. With Donald Trump solidifying his status as the front runner in the Republican field, some investors and analysts watching from overseas say that the ascendancy of the brash New York businessman could rattle global markets as the November presidential election inches closer. Nervous investors, they say, could pile in to gold and other safe-haven assets as an insurance policy.
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Gold’s ‘golden cross’ is not a golden ticket for bulls
Tomi Kilgore – MarketWatch
Gold prices produced a rare bullish “golden cross” technical pattern this week, the first of its kind in over 1 1/2 years, but it might be flashing more of a yellow light than green for gold bulls.
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Miscellaneous

The Myth of the Barter Economy
Ilana E. Strauss – The Atlantic
Imagine life before money. Say, you made bread but you needed meat. But what if the town butcher didn’t want your bread? You’d have to find someone who did, trading until you eventually got some meat. You can see how this gets incredibly complicated and inefficient, which is why humans invented money: to make it easier to exchange goods. Right? This historical world of barter sounds quite inconvenient. It also may be completely made up.
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What are the drawbacks of free college
Jeremy Berke – Business Insider
While the notion of free college might seem like a good idea to anybody with kids, several economists recently told NPR’s “Planet Money” that it’s not a good plan. Bernie Sanders and Hillary Clinton, who are vying for the Democratic party’s nomination, both want to make college more affordable.
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Molotovs and Death Threats: Russian Debt Collectors Go Medieval
Carol Matlack and Anna Andrianova – Bloomberg
On the night of Jan. 27, a Molotov cocktail crashed through the window of a house in the central Russian city of Ulyanovsk, badly burning a toddler. Prosecutors charged a 44-year-old man with the firebombing, saying he had threatened the child’s grandfather over past-due payments on a 4,000-ruble ($51) loan. The accused, a former police officer, has denied the charges.
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A Goldman Sachs partner sent a memo to the bank’s junior staff, and every young person on Wall Street should read it
Julia La Roche and Matt Turner – Business Insider
It is a tough time to work on Wall Street. It has been a terrible start to 2016, and it follows a brutal 2015. It seems barely a week goes by without fresh news of job cuts at a top investment bank. Morale is low, and junior bankers and traders who have just started in finance are asking themselves about the industry’s long-term prospects.
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