First Impressions

Post-Trade Views: Euronext’s Andrew Simpson on Interoperability and Open Access

Financial regulators began their overhaul a few years ago with several goals in mind, one of which was to make clearing and trading venues more open and transparent. But can cash securities and derivatives be shoehorned into the same set of rules? Andrew Simpson, head of post-trade services at Euronext, compares the regulatory objectives with the realities of the market.

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Quote of the Day

“We do not share Draghi’s optimism that the measures announced so far would come even close to bringing the ECB to its balance sheet target. Expansion of the purchases thus looks to be ahead already at the December meeting. We expect the ECB to include at least investment-grade corporate bonds, possibly also agency and supranational bonds.”

Jan von Gerich, an analyst at Nordea Bank Finland Abp in the story, ” Draghi Plays Down ECB Rift as Officials Study More Stimulus”.

Lead Stories

Volatility Soars as Bank of Japan Influence Spreads
Kevin Buckland – Bloomberg
Traders raised their outlook for currency price swings to the highest in more than a year as an unexpected stimulus boost from the Bank of Japan roiled financial markets.
Deutsche Bank AG’s Currency Volatility Index climbed to 8.62 percent yesterday, the highest close since September 2013, from 7.12 percent on Oct. 30. That’s the day before BOJ Governor Haruhiko Kuroda increased the annual target for expanding the monetary base to 80 trillion yen ($697 billion). The gauge was at a record low of 4.93 percent as recently as July 21. Volume on ICAP Plc (IAP)’s EBS trading platform jumped to the highest this year after the BOJ meeting.

Borrowers must improve bond liquidity
Euromoney Magazine
Last month’s volatility provided a worrying reminder of how illiquid the bond markets have become, how piecemeal has been the response of traders, investors and issuers and how concerned regulators now are

Ukraine bonds: Keep calm and carry on paying
Euromoney Magazine
When Ukrainian state energy company Naftogaz paid $1.6 billion to redeem a bond maturing on October 1, one Twitter commentator accused the country’s policymakers of “defaulting on its citizens”.

Bond Investors Set to Endure ECB Inaction Amid QE Outlook
David Goodman and Lucy Meakin – Bloomberg
Euro-area bond investors are ready to weather inaction at today’s European Central Bank meeting amid speculation it won’t spell an end to their hopes for sovereign-debt purchases.

Fed has built a thorny central bank divide
Ousmène Mandeng – Financial Times
Top Federal Reserve officials were careful to be seen to be understanding of the plight of lesser central banks during the International Monetary Fund’s meetings in Washington last month. However, they may have unintentionally made things worse.

Central Banks

Should the ECB Follow the BOJ’s ‘Shock and Awe’?
Alen Mattich – MoneyBeat – WSJ
After last week’s ‘shock and awe’ announcement by the Bank of Japan 8301.TO -3.47%, speculation has shifted to how much more the European Central Bank might do, possibly as early as at Thursday’s policy meeting..

Draghi Plays Down ECB Rift as Officials Study More Stimulus
Jeff Black and Alessandro Speciale – Bloomberg
European Central Bank President Mario Draghi said he’ll be ready to boost stimulus to the economy if needed, as he dismissed claims of acting without the backing of his colleagues.
Responding to questions on his management style and whether there is a faction of dissent among officials, Draghi signaled that he has the support to expand the ECB’s current range of asset purchases. He also said the institution’s actions are expected to push its balance sheet back toward 3 trillion euros ($3.73 trillion).

Morning MoneyBeat Europe: Central Banks Have the Floor
David Cottle – MoneyBeat – WSJ
It’s monetary policy decision day in Europe, and, while neither the European Central Bank or Bank of England is thought likely to alter their settings, focus on what the ECB is thinking is likely to be intense.

Fed’s Fisher says hopes new Congress will not interfere with Fed’s independence
Dallas Federal Reserve president Richard Fisher said on Wednesday he hopes the new Republican-controlled Congress will limit any new laws that might endanger the Fed’s independence.

BOJ May Revisit Stimulus in ’15 to Offset Tax, Nomura Says
Finbarr Flynn – Bloomberg
The Bank of Japan isn’t done with monetary stimulus and may jolt markets a third time as it looks to offset the impact of an “almost inevitable” sales tax increase, Nomura Holdings Inc. said.
The central bank’s decision Oct. 31 to add to already unprecedented bond purchases lifts the chances Prime Minister Shinzo Abe will proceed with a plan to raise the national sales tax, according to a survey of 10 economists. Abe should decide by year-end whether the levy will be raised to 10 percent next October, from eight percent now.

Off-Script, Markets Seem to Cheer Mario Draghi’s Comments
Peter Eavis – Dealbook – NY Times
Mario Draghi, the president of the European Central Bank, is scheduled to host a regular news conference on monetary policy on Thursday. If the event progresses as it normally does, he will start by reading out a numbers-heavy statement composed by the council that sets policy. Then, things could get interesting.


Bankers Boost Dollar-Yen Forecasts After BOJ’s Big Move
James Ramage – MoneyBeat – WSJ
Goldman Sachs Group Inc. and other banks raised their forecasts for the dollar against the yen following the Bank of Japan’s recent unexpected move to enlarge its asset-purchase program to boost consumer prices.

Japan’s monetary easing prompts volumes jump on forex platform
Daily spot foreign exchange volumes hit a three-year high on trading platform EBS on Oct. 31, the day the Bank of Japan stunned markets with another dose of monetary easing, boding well for currency markets and trading banks.

Fed Said to Seek More Time to Mull Actions on FX Traders
Suzi Ring and Jesse Hamilton – Bloomberg
The Federal Reserve asked some currency traders under investigation for foreign-exchange manipulation to waive the deadline for civil actions against them, according to two people with knowledge of the situation.
The Fed sent the requests, known as tolling agreements, to at least two individuals in recent months, said the people, who asked not to be identified because the letters are private. The agreements would suspend the statute of limitations, usually five or ten years depending on the relevant law, which isn’t clear as no accusations have been made yet.

Hong Kong banks compete for offshore renminbi
Gabriel Wildau in Shanghai – Financial Times
Offshore renminbi interest rates in Hong Kong have climbed to near record highs this week as banks compete for funds in preparation for the launch of a highly anticipated trading link that will grant investors there unprecedented access to China’s mainland equity market.

Yen Plunge A Shot In Arm For Icap
Chiara Albanese – MoneyBeat – WSJ
The sudden plunge in the yen last week, driven by the Bank of Japan’s surprise bazooka delighted and disappointed yen speculators in equal measure, depending which way they were pointing. But Icap’s currency-trading platform EBS, which dominates interbank trading in the Japanese currency, was sitting pretty.

Banks, Bitcoin & the Blockchain
Jonathan Camhi – Wall Street & Technology
The Bitcoin Blockchain could offer benefits to banks that are willing to experiment with it.

Indexes & Index Products

ETF Trading Last Month Was Heaviest Since 2011 – Focus on Funds
Chris Dieterich –
Daily trading in exchange-traded funds last month was the heaviest in three years as market players zipped in and out of positions as stocks careened lower, according to Credit Suisse.

Nasdaq Lists First Trust Emerging Markets Local Currency Bond ETF And First Trust Low Duration Mortgage Opportunities ETF – Two Actively Managed Funds Focused On Current Income Opportunities


Why Gold’s at a New Four-Year Low
Paul Vigna – MoneyBeat – WSJ
Gold slid to a fresh four-year low on Wednesday, with the $1,200 level that been support receding further into the distance as all the traditional crutches for the yellow metal fade away. Usually, the goldbugs could find support in inflation, WSJ’s Ira Iosebashvili said this morning on the MoneyBeat show, but today there’s none to be found anywhere. In fact, deflation’s a bigger problem than deflation, and that’s just one of gold’s problems.

Swiss Gold Initiative Would Interfere With SNB’s Currency Policy, Central Bank President Says
Andrew Morse – WSJ
An initiative requiring the Swiss National Bank to hold a fifth of its assets in gold would interfere with the bank’s policy of capping the value of the country’s currency if passed later this month, the central bank’s president said.

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