First Impressions

Best of Both Worlds: Fidessa’s Steve Grob on Keeping Tech Costs Low

With rapid changes in the financial industry, firms are challenged to keep their technology robust and resilient while at the same time being secure and compliant, says Steve Grob, director of group strategy for Fidessa. He spoke with John Lothian News at the FIA Boca conference about this technology balance as well as what companies like Fidessa are doing to address IT costs.
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Quote of the Day

“We know what changes we need to make financial markets work better. Strengthen the rules to prevent cheating. Make the cops do their jobs. Cut the banks down to size. Change the tax code to promote more long-term investment.”

Senator Elizabeth Warren in the story, ” Warren Says Banks Should Face Bigger Tax Burden to Balance Risks”.

Lead Stories

Would You Let the I.R.S. Prepare Your Taxes?
NY Times
Around this time every year, Joseph Bankman, a professor of tax law at Stanford Law School and a longtime advocate of using technology to simplify tax filing, gets on the phone with reporters to explain what is wrong with how we do our taxes in the United States. Every year he says pretty much the same thing: No other industrialized country asks its citizens to jump through as many hoops to calculate their taxes as ours.

Greece Is Running Out of Money, and Time
Greece, as everyone knows, is running out of money. That means it might not be able to pay its debts, including what it owes the International Monetary Fund, which should be a cause for serious anxiety in Europe. But there’s a dangerous myth starting to gain traction that the nation could default on its obligations but still remain a member of the euro.

The case for active management weakens
John Authers, FT
Can active equity managers log better performance by being more active? An influential study published six years ago suggested that they could. That sparked a mini-revival for the beleaguered active management industry which, as regular readers will know, has been losing out to passive managers for a while. The key, it appeared, was to have the courage to divert from benchmark indices and take high-conviction, concentrated bets.

No Rebukes For Regulators? Jamie Dimon Stays Mostly Silent.
Jamie Dimon let his 39-page annual letter to shareholders released last week mostly speak for itself Tuesday.

Japan Snaps China’s Six-Year Run as Top Holder of Treasuries
Japan overtook China as the top foreign holder of U.S. government debt for the first time since the global financial crisis, a sign of economic and policy shifts in Asia’s two largest economies.
Japan’s ownership of Treasuries fell by $14.2 billion to $1.2244 trillion in February, according to Treasury Department data released Wednesday in Washington. China’s holdings were $1.2237 trillion as of February, $15.4 billion lower than a month earlier.

Public Citizen’s Bartlett Naylor on Too Big to Fail and Too Big to Jail
Corporate Crime Reporter
In Washington, D.C., Wall Street and the Big Banks have a slew of corporate lobbyists and a ton of money to push their agendas in Congress.

Ernst & Young in Settlement Over Lehman Brothers
Dealbook – NY Times
Another loose end stemming from the collapse of Lehman Brothers was wrapped up on Wednesday as Ernst & Young agreed to pay $10 million to settle a four-year-old lawsuit brought by New York State authorities.
The settlement between the big accounting firm and Eric T. Schneiderman, the New York State attorney general, resolves civil allegations that Ernst helped Lehman engineer an accounting fraud that made the Wall Street firm appear less leveraged that it really was in the months before its September 2008 bankruptcy filing.

Wall Street Rebounds for J.P. Morgan, Wells Fargo in First Quarter;Trading, investment-banking businesses are bright spots for banks
Round One: Wall Street. Trading and investment-banking businesses boosted earnings of the U.S.’s two most valuable banks in the first quarter, even as consumers failed to keep pace.

Warren Says Banks Should Face Bigger Tax Burden to Balance Risks
Wall Street banks and their top executives should face new tax penalties to keep them from engaging in risky practices that can pose threats to the financial system, U.S. Senator Elizabeth Warren said Wednesday.
Warren, who has been a leading defender of the Dodd-Frank Act, called on the Republican-led Congress to relent from attacks on the 2010 law and close a tax loophole that she said encourages bank chief executive officers to seek quick gains.

The war for technology talent: banks and Fintechs go head-to-head
Banking Technology
New research shows firms in London’s financial district created more than 3,030 new jobs in March 2015, 25% more than the same time last year, as banks continue to look to enhance their technological capabilities and strengthen their deals teams amid strong M&A activity.

Prop trader throws down gauntlet to regulators on latency
The Trade
Regulators investigating latency and the manipulation of smart order routers are unlikely to ever prevent widespread manipulation, a prop-trading fund manager has warned.

SEC panel calls for a single database to run background checks on all financial professionals
Investment Week from April 9
Recommends making it easier for investors to track securities violations by advisers and brokers

Ex-Freddie Mac Leaders Reach Deal With S.E.C.
Dealbook – NY Times
At a news conference in Washington three years ago, federal regulators trumpeted their case against former executives at the mortgage giant Freddie Mac, proclaiming that “all individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations.”
Now a case that began with such fanfare has ended with a whimper.

Finance Industry Should Fund Swaps Oversight, CFTC’s Bowen Says
by Silla Brush, Bloomberg
Wall Street banks and other financial firms should pay new fees to bankroll their own government oversight, according to a member of the top U.S. derivatives regulator.

UK regulator hits BNY Mellon with record fine
Lindsay Fortado, FT
Bank of New York Mellon has been hit by a record £126m fine by the UK finance regulator for failing to comply with rules that require customer accounts to be kept properly ringfenced.

Dubai regulator’s $8.4m fine on Deutsche Bank its largest ever
Simeon Kerr in Dubai, FT
Dubai’s regulator has imposed the largest fine in its history on Deutsche Bank as the emirate’s financial centre gets tougher on wealth management procedures.

Central Banks

E.C.B. Says Bond Buying Is Making Its Mark and Leaves Rates Steady
NY Times
Just weeks ago, the European Central Bank began a bond-buying program intended to stimulate the economy and to last at least 18 months. On Wednesday, the bank’s president, Mario Draghi, indicated that the measure had already begun to bear fruit.
The eurozone as he described it is benefiting from a convergence of low oil prices, improved government policy and — not least — the bank’s newest stimulus program.

Wary of natural disaster, NY Fed bulks up in Chicago
The New York branch of the U.S. Federal Reserve, wary that a natural disaster or other eventuality could shut down its market operations as it approaches an interest rate hike, has added staff and bulked up its satellite office in Chicago.

Bernanke Makes Case for Keeping Fed’s Balance Sheet Large
U.S. monetary authorities ought to consider making the central bank’s big balance sheet a permanent fixture, said former Federal Reserve Chairman Ben Bernanke.
“I wonder if the case for keeping the balance sheet somewhat larger than before the crisis has been adequately explored,” Bernanke said on Wednesday in prepared remarks to an event at the International Monetary Fund in Washington. “Indeed, most other major central banks have permanently large balance sheets and are able to implement monetary policy without problems.”

Fed’s Bullard repeats call to hike now, cites asset bubble risk
Falling unemployment and an improving U.S. economy are evidence that the Federal Reserve should start raising interest rates, a top Fed official said on Wednesday, citing risks of asset bubbles if the central bank keeps rates too low for too long.
St. Louis Fed Bank President James Bullard said he expects the unemployment rate to drop into the 4 percent range and the U.S. economy to maintain a growth rate near 3 percent over the medium term.

The Fed’s Beige Book: We Read It So You Don’t Have To – Real Time Economics
The U.S. economy expanded across most regions of the country in February through the end of March, with cheaper gasoline boosting retail sales in some districts and travel and tourism rebounding in other areas. Still, a strong dollar, falling oil prices and harsh winter weather slowed activity in some sectors, according to the Federal Reserve’s Beige Book report, a survey of regional economic conditions.
Here are some of the anecdotes offered from the Fed’s 12 regional banks:

ECB promises ‘firm’ roll-out of money printing
The head of the European Central Bank pledged on Wednesday to roll out its money-printing program ‘firmly’ and granted continued backing for Greece, saying there was no need yet to limit emergency funding for its banks.
Describing speculation that the fledgling 60 billion euro a month scheme would be scaled back as “surprising”, Mario Draghi underlined his determination to see through quantitative easing until September 2016, or until inflation was back up to target.

China’s central bank asked lenders to check margin trading risk – memo
The Shanghai branch of China’s central bank has ordered commercial lenders to check for risks in their margin trading business, according to a memo obtained by Reuters.
The move comes after margin trading soared among brokerages, prompting regulators to clamp down on risky behaviour earlier this year.

Four Fed banks call for discount rate hike: minutes
Four regional Federal Reserve banks pushed to convince the central bank to raise the rate it charges commercial banks for emergency loans, meeting minutes released on Tuesday showed.
Ahead of the Fed’s March 17-18 policy-setting meeting, directors of the Cleveland, Philadelphia, Kansas City and Dallas Fed banks asked the Fed’s board to bump up the discount rate to 1 percent from 0.75 percent, according to the minutes of Fed board meetings.


Citi seeking to sell retail FX arm -source
Citigroup Inc is looking for a buyer for its retail forex brokerage CitiFX Pro as part of efforts to streamline the banking world’s biggest currency trading operation, a source familiar with the situation told Reuters on Tuesday.

London stakes its claim as global bitcoin hub
London, center of the $5-trillion-a-day global currency market, now wants to be home to a controversial upstart – bitcoin.
British authorities have come out in support of digital currencies in the name of promoting financial innovation, while proposing that regulations should be drawn up to prevent their use in crime.
But it is technophiles who are leading the drive to make London a real-world hub for trade in web-based “cryptocurrencies”, of which bitcoin is the original and still most popular.

IMF says currency shifts support global economic growth
Recent shifts in exchange rates should help the global economy, boosting Japan and Europe in particular, amid increasing divergence in the growth paths of the world’s major economies, the International Monetary Fund said on Tuesday.
The Washington-based institution kept its global growth forecasts unchanged, with faster economic expansion in the euro zone and India expected to be offset by diminished prospects in other key emerging markets such as Russia and Brazil.

The Top 10 Forex Brokers Regulated In The UK
In January 2015, forex broker Alpari UK applied for insolvency after the Swiss National Bank’s surprise decision to abandon the peg against the euro. The event put the spotlight on forex brokers and their regulation, especially in the United Kingdom. In this article, we’ll review the leading forex brokers in the United Kingdom and the basics of how they are regulated.

Is It Time For The Rise Of Local Currencies? – Analysis
It’s an almost long forgotten historical fact that most trade was undertaken by local based currencies right into the 20th Century. Australia had a number of colonial currencies before federation in 1901. The United States of America had a number of currencies issued by private banks before the Federal Reserve Bank was formed in 1913, and individual states of the European Union had their own national currencies before the mega-currency, the Euro was launched in 1999.

Indexes & Index Products

Sector Dispersion and Active Management
S&P Dow Jones Indices Indexology Blog
Dispersion and correlation not only provide insight into the volatility of sector returns, but offer guidance for active analysts as well.

Bye-bye USA: Investors putting money elsewhere
Funds that focus on global equities have taken in $81.5 billion this year, a pace that, if continued, would break a record for four-month inflows in the category, according to data research firm TrimTabs.

Why you should always look under the hood of your ETFs
Financial Post
If you’re considering a robo-adviser, you have in effect also decided to use exchange-traded funds, because most of the new online wealth management services use ETFs as their building blocks. As in the glory days of mutual funds in the 1990s, when one role of financial advisers was to help confused consumers pick from among the thousands of funds, so do 21st century robo-advisers relieve investors of the burden of choosing from the growing number of ETFs

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