First Impressions

Boca Bits and Pieces
John J. Lothian – John Lothian News

Wednesday at the Futures Industry Association’s International Conference saw R.J. O’Brien & Associates honored for 100 years of service to the futures industry. Prior to a lunch-time speech by commentator Ted Koppel, a short video from John Lothian Productions for RJO, was shown talking about RJO’s 100 years (see the video at ).

Mr. Koppel liked the video, as did the audience.

The exchange leader panel was one of the best I can remember, with a great lineup of exchange CEOs and great balance. Bob Greifeld was there to represent Nasdaq OMX and Jeff Sprecher was there to represent his 17 exchanges.

Mr. Greifeld showed appreciation for monopolies by saying it was good to have one, but that all monopolies eventually go away. I think he was trying to deliver a message.

I ran into CFTC Commissioner Scott O’Malia who reported that former CFTC Chairman Gary Gensler’s mother had died yesterday. Condolences to Mr. Gensler and his family.

Trading Technologies unveiled their new NextTrade platform and a rebranding of the company. I think you will like both. You can check out a video about their new trading platform, from John Lothian Productions, at

We are going to sue Chuck Mackie for stealing our theme as he is calling his reports Boca Bits. We are willing to settle at Bar Luna tonight.

Is it me or does the new A in FIA look a lot like the logo from Google Drive?

The question Doug wanted to ask at the SEF panel to the nine members on the panel was, “Which of these SEFs won’t exist next year?”

Jim Kharouf and the video team interviewed Jeff Sprecher, Bob Greifeld, Garry Jones, Magnus Böcker and Alan Gandelman so far at Boca for our upcoming video series on Global Exchange Competition.

***JM: Glad to see you all are getting some real work done. If there are any Jeff Sprecher action figures left, pick one up for me, preferably the one with the blue tights and Scepter of Liquidity.

Quote of the Day

“All the Trumans – the economists, fund managers, traders, market pundits – know at some level that the environment in which they operate is not what it seems on the surface. But the zeitgeist is so damn pleasant, the days so resplendent, the mood so euphoric, the returns so irresistible, that no one wants it to end.”

Seth Klarman, the manager of the $27bn hedge fund the Baupost Group in the story, “Hedge fund managers face up to ‘Truman Show’ markets”.

Lead Stories

Will China’s Dim Sums Come Back to Bite?
MoneyBeat – WSJ
China’s opacity is making people nervous. When the Chinese economy was booming, investors were forgiving. They approached the Chinese economy the way a physicist might analyze a particularly obscure fundamental particle: by looking at its interactions with the rest of the world.

China Default Risk at 5-Week High as Li Speaks After Chaori
Chinese Premier Li Keqiang said that defaults may be unavoidable in some cases, after the first such occurrence in the country’s onshore bond market drove credit risk to a five-week high.
Credit-default swaps to protect Chinese sovereign bonds from non-payment for five years climbed to 95.8 basis points yesterday, the highest since Feb. 5, according to prices from data provider CMA. China is paying great attention to financial risk and is monitoring threats from so-called shadow banks, Li said in a press conference today in Beijing.

Overshooting and the Fed
Robin Harding | FT Alphaville
I think people are confusing two separate questions in the recent debate about wage rises and spare capacity in the US economy: first, the amount of slack left in the labour market, and second, whether the Fed should deliberately try to overshoot its inflation objective of 2 per cent.

Hedge fund managers face up to ‘Truman Show’ markets
Miles Johnson –
In the Truman Show, the late nineties Hollywood film, the eponymous character lives a seemingly charmed world, snuggled comfortably into an American suburbia of white picket fences and crisply cut lawns. But gradually Truman starts to notice something is not quite right.

The BoE weighs in on the base money confusion
David Keohane | FT Alphaville
The Bank of England is perhaps a little late getting around to this explanation of money creation and a debunking of the money multiplier theory… but that really doesn’t mean it shouldn’t get a wide reading.

BlackRock Junk ETFs Push Buyers to Dark Corners: Credit Markets
Lisa Abramowicz – Bloomberg
Buyers of junk bonds are retreating to the market’s more obscure securities as the rise of exchange-traded funds fuels concern that such fast-moving cash is exacerbating price swings.
Investors are delving into smaller, older junk-bond issues that trade less frequently, pushing yields on such securities to the lowest on record, while those on more frequently traded notes are holding above lows reached last May, Barclays Plc data show.

George Soros says euro most viable option for Scotland
Michael Stott –
Billionaire investor George Soros has suggested that an independent Scotland would be better off joining the eurozone, rather than creating its own currency or pursuing monetary union with an unwilling Bank of England.

Bitcoin needs to grow out of its obsessive adolescence
John Gapper –
Newsweek’s flawed attempt to expose a 64-year-old Californian called Dorian Nakamoto as Bitcoin’s mysterious inventor has come at an opportune moment for exponents of the cryptographic currency. It has distracted from a crisis of trust caused by the failure of Mt Gox, the Tokyo Bitcoin exchange.

***JM: I agree, but to be fair, the product/system/currency or whatever it is, sort of had its newfound adolescence thrust upon it. It wasn’t really ready to mature when it “got noticed” last year.

Central Banks

Fed Looked at Currency Trading in 2012, Didn’t Act
The Federal Reserve examined a key foreign-exchange benchmark months before global regulators sounded the alarm about potential manipulation, but officials took no public action.

The Fed and the Reserve
Next week, Janet Yellen will chair her first meeting of the Federal Reserve’s Open Market Committee (March 18-19) and once again tapering will be at issue. Will the Fed continue to decrease the flow of its fountain of stimulus – from $75 billion since January, presumably down to $65 billion after this session – until the tapering finally tapers away sometime before 2015?

Q&A: The Fed Will Manage a Soft Landing
Binyamin Applebaum – The New York Times
John Williams, president of the Federal Reserve Bank of San Francisco, is feeling pretty good about the economy. He is ready to continue the Fed’s retreat from bond-buying and forward guidance. And he says he’s optimistic that this time, the Fed will manage to produce a soft landing. The transcript of our conversation earlier this week has been lightly edited for clarity.

London lawyer named to lead FX probe at Bank of England
A top London lawyer who investigated phone hacking at News Corp’s British newspapers will lead a probe into the role of Bank of England officials in the possible manipulation of foreign exchange rates.

Japanese Bonds Fall After BOJ Cuts Superlong Buys
Japanese government bonds fell Thursday in unusually volatile trading, hit by a further cut in the purchases of superlong securities by the Bank of Japan in its latest round of debt buying.


CNH Tracker-New York’s quiet emergence intensifies offshore yuan competition
As the competition to become the leading offshore yuan centre in Europe intensifies among candidates such as London, Luxembourg and Frankfurt, the quiet growth of yuan business in the Americas may have caught many by surprise.

Daily FX volumes hold above $5 trillion in Feb-CLS
Average daily volumes in the foreign exchange market dipped slightly in February from a month earlier, although the value of trades stayed above the $5 trillion mark for a second straight month, data from FX settlement system CLS showed.

JPMorgan to HSBC Face EU Rate-Rigging Fines From Almunia
Gaspard Sebag and Aoife White – Bloomberg
JPMorgan Chase & Co. (JPM) and HSBC Holdings Plc (HSBA) face a European Union complaint as soon as next month as the bloc’s antitrust chief races to fine a quartet of financial companies that snubbed rate-rigging settlements.

Venezuela set to ease currency rules
Andres Schipani in Bogotá –
Venezuela’s Socialist government is expected to relax foreign currency market rules, aiming to easing shortages of basic goods that fuelled month-long protests which have left at least 24 dead.

Singapore puts Bitcoin dealers under the microscope
Paul J Davies in Hong Kong –
Bitcoin exchanges in Singapore will have to identify their customers and report suspicious transactions to regulators after the city-state said all dealers in virtual currencies will be subject to money laundering laws and other rules.

BitBeat: Coindesk Index Finds a Mt. Gox Replacement
MoneyBeat – WSJ
It’s been just a few weeks since CoinDesk dumped Mt. Gox from its bitcoin price index, but it already has found a new exchange to take its place.

Bitcoin Isn’t a Currency, Can’t Replace Gold: Goldman Sachs
Brendan Conway – MoneyBeat – WSJ
Goldman Sachs’ Allison Nathan and a slew of co-authors are out with a report on Bitcoin this week, and the message might not please digital-currency enthusiasts. The firm’s economists Dominic Wilson and Jose Ursua argue Bitcoin has promise as a payments technology, but calling it a “currency” is a bridge too far

Perseus, Atlas Launch Global Bitcoin Trading Platform
Michael J. Casey –
High-speed telecommunications provider Perseus Telecom and digital currency trading platform Atlas ATS formally launched Wednesday a globally integrated bitcoin exchange system in New York, Hong Kong and Singapore to facilitate trading in the digital currency by high-frequency trading firms and other large financial institutions.

Indexes & Index Products

ETF Money Back to Betting VIX Will Pop Higher
MoneyBeat – WSJ
While the Chicago Board Options Exchange Volatility Index remains low by historical standards even amid turmoil in Ukraine and worries about China, markets are seeing renewed interest in bets that volatility is likely to pop higher.

Traders Beat Market Indexes Borrowing Tools From Sports
Jeremy Kahn – Bloomberg
Graham Davidson was in a slump, the worst he’d ever known.
In 15 years as a foreign-exchange trader in Sydney, New York and London, he’d always made money. Now, in the winter of 2011, he seemed to have lost his touch, Bloomberg Markets magazine will report in its April issue.

MSCI’s China Index Proposal Seen Luring $4 Billion to A Shares
Weiyi Lim – Bloomberg
MSCI Inc.’s proposal to include China’s mainland-traded shares in its emerging-market indexes may lure $4.4 billion in funds, with China Merchants Bank Co. (3968) and Agricultural Bank of China Ltd. among the top beneficiaries.

Newly Launched STOXX Europe Low Beta High Div 50 Index Licensed To Deutsche Bank


Gold has confirmed it is a safe haven: Capital Economics
John Shmuel – Financial Post
Gold’s 14% rally this year has confirmed that the precious metal is still viewed as a safe haven by investors, says Capital Economics.
“Safe-haven status is confirmed in bad times, not good, and gold has again passed that test,” said Julian Jessop, chief global economist at Capital Economics.

***SR: Three cheers for pessimism?

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