Boca’s Last Bits
As the final day of the FIA Boca Conference came to an end, several themes have emerged from the event.
The first is the lawyers have taken over the exchange leader panels. Gone are the days when CEOs could banter about new possibilities, replaced by boilerplate disclaimers read word for word on stage. Among the exchanges not talking are Deutsche Boerse, London Stock Exchange, Nasdaq, BATS and ISE. In a word – boring.
But there is significant movement in technology solutions. As one attendee put it, the downpour of rain, which is regulation, is mostly coming to an end. Now firms are trying to deal with the flood water around them with new business models and new technologies.
The technologies emerging in the space are largely designed to meet regulatory, compliance and risk management needs. Alex Lamb‘s company Technancial recently signed a deal with Broadridge Financial Solutions to provide its real-time margin technology to its post-trade operations. The idea here is to give margin information quickly so firms can better manage cost at the trading level, rather than as a traditional post-trade item.
Cinnober, which recently was signed to build out a brand new clearing house for the Japan Exchange Group to bring that boerse realtime clearing, is also working on European trade reporting. The service, called BOAT, will partner with the London Stock Exchange Group to offer OTC trade reporting to firms that are required to comply with MIFID II on the gamut of OTC derivatives transactions.
Meanwhile, Chicago-based startup Neurensic which debuted at the FIA Expo last November is getting traction on its surveillance technology. It says it has signed several deals including a yet-unnamed global bank, to provide an artificial intelligence-based solution that identifies risky behavior and regulatory and compliance problems before violations occur. It is the kind of technology that is blending Silicon Valley-esque wonder with practical industry needs.
Oh yeah, and everyone is doing something in blockchain – everyone. From ICAP to Overstock.com to exchanges, blockchain is being studied, tested and pitched.
ICAP has completed testing on a distributed ledger technology that applies to post trade operations. It will be a private blockchain that uses “smart contracts” which, according to ICAP, will reduce the need for reconciliation.
And New York-based itBit is currently testing a blockchain solution for the gold market, which allows for the trading and settlement of physical gold.
Today’s industry solutions are less about cool new technology bells and whistles and more about cost savings for firms. And with the regulatory picture much clearer now, those tech solutions are finding a more receptive audience.
2016 Exchange CEO Series: CME’s Gill Looking For Customer Efficiencies
CME Group has been focused on global growth, just like every other major exchange. But to get there, the exchange leader believes it has to work with customers to streamline costs so it can expand.
In part one of our two-part interview at the FIA Boca Conference, CME CEO Phupinder Gill said that the exchange is working on new ways to address capital efficiencies through products such as cleared swaptions, but also new clearing services that will help institutions reduce collateral.
CME is also continuing to work on market disruptors such as blockchain technology, which may change the way in which clearing services are delivered.
How to Transform Your Coffee Into a Wonder Drug
Coffee lovers of the world know that their morning cup contains a substance to be reckoned with. Caffeine is so effective at juicing our energy and productivity that until 2004, its intake was restricted by the International Olympic Committee. But the original performance-enhancing drug doesn’t just provide a jolt to athletes. “In many ways, it is the drug of work,” says Stephen Braun, a medical writer and author of Buss: The Science and Lore of Alcohol and Caffeine. “When caffeine was first introduced to Europe in the late 17th century, it was seen by business owners as a miracle drug that turned formerly dozy workers into productive cogs in the industrial machine.”
****JB: Just when we need our resident coffee aficionados for comment they are both busy traveling.
From the Fed to the Philippines: Bangladesh’s Stolen-Money Trail
More details emerged Thursday of the brazen theft of tens of millions of dollars from Bangladesh’s account at the Federal Reserve Bank of New York, including the use of allegedly forged bank accounts in the Philippines and testimony about money being bundled into the car of a bank manager.
****SD: A few weeks ago I was thinking 2015’s Hatton Garden Heist was a cinch for theft of our young century. Now, not so much.
If You’re Over 65, You Should Love the Fed
Conventional wisdom suggests that monetary stimulus is particularly bad for senior citizens: When the Federal Reserve holds interest rates low, retirees tend to get less income from their nest eggs. Over the past eight years, though, they’ve done a lot better than this simple logic would imply.
****JB: What if you’re under 65?
The Selling of the American MBA
As the U.S. appetite for the MBA degree wanes, many of the country’s more than 700 B-schools are stepping up recruiting abroad, where regard for this American invention appears undiminished.
****SD: Related: Silicon Valley May Want MBAs More Than Wall Street Does
Hull Tactical Funds takes home ETF.com’s “Best New Alternatives ETF” award
Blair Hull, industry innovator and founder of Hull Tactical Funds, and his team were awarded “Best New Alternatives ETF” at ETF.com’s annual awards dinner in New York City last night. This accolade recognizes the innovative approach of the Hull Tactical US ETF (NYSE: HTUS), an actively-managed strategy designed to avoid large market drawdowns while allowing investors to maintain exposure to the U.S. equity market.
****SD: Congrats to our 16th floor neighbor.
Slippery Banknotes Become Latest Problem for U.K. Lenders to Fix
As they grapple with shrinking profitability and the threat of a British exit from the European Union, the U.K.’s banks also face another challenge: slippery banknotes. Lenders from HSBC Holdings Plc to Royal Bank of Scotland Group Plc are working to upgrade or replace thousands of cash machines before the Bank of England starts to switch paper money with notes made of sophisticated polymers later this year.
****SD: Trying to eliminate the potential for one of those elusive bank errors in your favor that Monopoly taught me about.
Thursday’s Top Three
Top stories yesterday once again starts with a runaway leader with the story ICE’s Sprecher Contemplates Next Move as LSE Bidding Looms. We certainly have had no shortage of LSE stories this week. In second place Industry criticises CFTC’s plans for new automated trading rules. Does the industry ever not criticise new rules? Finally we have Bill Ackman is acting a lot like he did the last time he blew up a hedge fund which sounds like you caught your child coloring on the walls again and they shrug like there is no problem.
| April 21 in Chicago – Register Today – FinTech Exchange 2016
Limited Seats for Onstage Presentations
Join us on April 21, 2016 in Chicago for the 2nd annual FinTech Exchange hosted by Barchart.
This one-of-a-kind event will showcase concise and engaging on-stage presentations from financial technology leaders like Google Cloud, Tally Capital, Amazon Web Services, Trading Technologies, Rival Systems, CME Group, CBOE Livevol, Quandl, Cantor Exchange, Narrative Science, Nadex, Neurensic, Alpaca and many more as they cover topics such as trading software, cloud infrastructure, artificial intelligence, Bitcoin and Blockchain, binary options, market data APIs, R&D tax credits and much more. Last year’s event was a sold-out show and space is limited, so be sure to register today.
To view the event, register, or to learn more, please visit www.fintechchicago.com
Don’t Say Europe’s Biggest Exchange Takeover Is Too Big to Fail
Deutsche Boerse AG and London Stock Exchange Group Plc want to create a European trading champion. They just don’t want regulators to think it’s too big to fail.
The companies took pains in their announcement on Wednesday to emphasize that the combined firm, holding some $170 billion in collateral from their customers, would help reduce risk in the multi-trillion dollar derivatives market. They also stressed the union wouldn’t hurt competition or potentially destabilize the wider financial system.
ICE shakes up scandal-hit Libor
The new administrators of Libor are overhauling the way it is calculated, reducing its reliance on banker estimates in an attempt to restore faith in the scandal-hit rate. US markets operator Intercontinental Exchange took over administration of the London Interbank Offered Rate in 2014 after a global investigation found traders were influencing the daily rate calculations to benefit their own books.
Vladimir Putin Starts His Own Ratings Firm
Vladimir Putin’s homegrown credit-ratings firm is up and running and foreign competitors are already feeling the heat.
In the past three weeks, Moody’s Investors Service Inc. and Fitch Ratings Ltd. have said they plan to stop issuing local ratings rather than agree to having their Moscow branches regulated by the Russian government at the cost of breaking international sanctions. As the New York-based firms scale back, the venture known as ACRA is poised to fill the void when it starts publishing opinions in the second half.
Ackman’s Horror Week Gets Worse as Valeant Fall Threatens Rating
Bill Ackman’s bad week just keeps getting worse.
After watching one of his top stocks, Valeant Pharmaceuticals International Inc., get mauled again, Ackman now confronts another indignity: news that the publicly traded security of his hedge fund, Pershing Square Holdings Ltd., might be headed for the junk-bond yard.
Big equities investors prefer ‘bond-like’ trading
Modern equity markets work so much better than their fixed income counterparts. The transparency of continuously clearing electronic trading in shares is preferable to old-style bond markets where middlemen give you a price on demand and take a big cut. That, at least, seems to be the attitude of regulators.
IMF’s Lagarde Says Negative Rates Have Helped Global Economy
The world economy would be worse off without negative interest rates, according to International Monetary Fund Managing Director Christine Lagarde.
Negative rates in Europe and Japan have helped support global growth and price gains, she said in an interview in Ho Chi Minh City on Friday. The finance sector may need to implement new business models as a result, she said.
Euronext looks to snap up assets from any Deutsche Boerse-LSE fallout
European stock exchange operator Euronext NV is considering acquisitions to help it stay competitive after Deutsche Boerse AG and London Stock Exchange Group Plc agreed to merge in a $30 billion deal, according to people familiar with the matter. With a market value of about 2.6 billion euros, Euronext, which runs stock exchanges in Paris, Amsterdam, Brussels, London and Lisbon, will be reduced to minnow status among European bourses if the LSE-Deutsche Boerse deal goes ahead.
Bonds Damned by Cryan May Still Be Only Option for Weakest Banks
Deutsche Bank AG’s John Cryan says the riskiest bank debt is “very expensive,” misunderstood and hard to justify. For Europe’s weakest lenders, it may be something else — unavoidable.
EU Banks Set to Win Easier Curbs on Bond, Derivative Trading
European Union banks and asset managers are set to win looser rules on buying and selling bonds and derivatives, after the bloc’s executive branch called for a rewrite of restrictions on securities.
UK fraud prosecutors get arrest warrants for Euribor bankers
Kirstin Ridley – Reuters
The UK Serious Fraud Office (SFO) said on Friday it had obtained arrest warrants to try to bring four Germans and one Frenchman to Britain to face charges of conspiracy to rig Euribor benchmark interest rates.
Commission forces Esma back to the drawing board over MiFID II reforms
The European Commission has asked capital markets watchdog Esma to reconsider some of the more contentious aspects of its planned reforms of MiFID II, raising the prospect of further delays in implementing the new rulebook.
SEC Expected to Delay Decision on Trading Venue IEX Until June
Andrew Ackerman and Dave Michaels – Wall Street Journal
U.S. securities regulators are preparing to again delay a decision on whether to grant upstart trading venue IEX Group Inc.’s request to become a full-fledged stock exchange, according to people familiar with the matter.
CFTC Brought in to Police Murky Market for Biofuel Credits
The Environmental Protection Agency is enlisting the help of the U.S. Commodity Futures Trading Commission to help it police the creation and trading of biofuel credits, an opaque $1 billion market that has seen cases of fraud.
MiFID II Ushers in New Reality for Regulatory Reporting
Only 10 percent of firms are ‘very ready’ for MiFID II, while 57% plan to invest in technology to support the regulation’s complex requirements. Despite the announced delay to MiFID II implementation, firms need to fundamentally change the way they approach trade and transaction reporting. Here are four solution requirements for the new reporting landscape.
Market abuse rules go to the wire
European lawmakers have written to the European Commission’s financial services chief, saying that they will extend their scrutiny period for parts of the Market Abuse Regulation to three months rather than one, as the industry prepares for their enactment in July.
Fed Lawyer Who Helped Bail Out, and Regulate, Wall St. Will Retire
Peter Eavis – NY Times
Thomas C. Baxter Jr., a long-serving Federal Reserve lawyer who helped shape Wall Street bailouts during the financial crisis of 2008, is retiring from his post at the Federal Reserve Bank of New York. Mr. Baxter, who is 61 and has worked at the New York Fed for 36 years, plans to leave in September, the regulator said in a statement. He has served as the New York Fed’s general counsel, one of the most powerful jobs in the financial regulatory world, since 1995.
Global watchdog flags slow ‘too big to fail’ bank rule adoption
Huw Jones – Reuters
Many countries have not yet introduced laws allowing regulators to write down bank’s debts to avoid taxpayer bailouts and prevent them being “too big to fail”, the world’s top financial watchdog warned on Friday. The Financial Stability Board (FSB), which can “name and shame” those which do not yet comply with its rules, said member countries that do not yet have these laws include Argentina, Australia, Brazil, Canada, China and Chinese territory Hong Kong, India, Indonesia, Korea, Mexico, Russia and Saudi Arabia.
UBS says European court accepts French tax case petition
Swiss bank UBS (UBSG.S) said on Friday that the European Court of Human Rights (ECHR) had accepted its petition to challenge French court rulings in a case over whether it helped clients avoid tax. French authorities placed UBS under formal examination in 2014 and investigating judges ordered the bank to provide bail of 1.1 billion euros ($1.2 billion) in relation to the case.
UK narrows carve-out for swap bail-in clauses
UK regulators have quashed banks’ hopes of a carve-out from a requirement to insert bail-in clauses into thousands of derivatives contracts. The European Union’s Bank recovery and resolution directive (BRRD) requires all out-of-the-money liabilities, including derivatives, to be subject to bail-in, even if they are not governed by EU law.
FCA paper dismisses bond liquidity concerns as ‘anecdotal’
Members of the Financial Conduct Authority’s economics department have claimed there is no evidence that bond liquidity has deteriorated over the last eight years and has in fact improved, contrary to the concerns of many market participants.
How UK company formation agents fuel fraud
British government efforts to crack down on money laundering and fraud through UK businesses are failing to tackle a key area – the role of company formation agents – a Reuters study of the sector shows. Some formation agents, who typically offer to create new businesses for fees of about 200 pounds ($288) or less, fail to perform significant due diligence on who their customers are or why they are buying new companies, according to lawyers. The agents offer to set up companies within a day or even a few hours, allowing time for only minimal checks.
Exchanges & Trading Facilities
JPMorgan rattles traders with LME aluminium stockpile
Henry Sanderson, Neil Hume and David Sheppard – Financial Times
JPMorgan Chase is holding more than half of the aluminium on the London Metal Exchange, a multibillion-dollar position that has rattled rival traders and raised questions in London’s tight-knit metal market about its influence on prices. The bank’s $2bn-plus physical stockpile of aluminium, which could cover 40 years of Coca-Cola’s current UK drinks can output, has been blamed by many traders for pushing up the price of near-term contracts that are about to expire, even though the industry is in its seventh year of a major supply glut.
Save our Stock Exchange: Fightback begins to stop Germans buying the City’s crown jewel
The Daily Mail
Frankfurt will also have the upper hand with a 54.4 per cent stake, although the parent company will be based in London. Business groups, including the slavishly pro-Brussels CBI, last night gave their blessing to the marriage. But there was a growing backlash from MPs and business figures, who warned it could damage the City of London, with jobs and business eventually moving to Frankfurt. John Longworth, who was ousted as director general of the British Chambers of Commerce after daring to publicly back Brexit, led the criticism. He questioned why Ministers have refused to intervene given the London Stock Exchange’s crucial importance to the UK economy.s6
Firms must assess role in value chain – experts
Luke Jeffs – FOW
There is a lot of opportunity in market infrastructure, says CurveGlobal COO Senior exchange figures have said firms must re-assess their role in a trading value chain that has been challenged by drastic regulatory reforms introduced since the financial crisis, adding that change also presents new opportunities. Helen Lofthouse, executive general manager at ASX, told the FIA International Futures Industry Conference in Boca Raton on Wednesday: “From a regulatory perspective everything has changed but the result of change is there will be new players in the market. New problems equal new opportunities, this is quite an exciting time.”
Euronext nears 100-day listing drought
Exchanges around the world are off to their worst start to the year for flotations since 2009, with both Euronext and its former stablemate the New York Stock Exchange closing in on 100 days without an initial public offering. Dealogic said that IPO activity has dropped 58% year-on-year globally, with just 66 IPOs priced so far in 2016, the lowest number since the global financial crisis saw only five listings take place by this point in 2009. Euronext has gone 97 days without an IPO of more than $20 million, according to data from research provider Dealogic published on March 17, which also shows that NYSE, which is owned by ICE, has yet to have an IPO in 90 days by the same criteria.
DGCX plans to set up shop at GIFT-IFSC
The International Financial Service Centre coming up at GIFT City near Ahmedabad might soon get another high-profile international exchange. Dubai Gold and Commodities Exchange (DGCX) is planning to set up shop there. The exchange sector in general is gearing up for launching their operations once relaxations in the Companies Act and setting up of dispute resolution mechanisms is operationalised. DGCX is understood to have held a meeting with the GIFT-IFSC authorities and sought more information after the Union Budget.
FTIL-NSEL merger stayed till 22 April
The Bombay high court on Friday extended relief for Financial Technologies India Ltd (FTIL) from the merger order, which proposed to merge wholly-owned subsidiary National Spot Exchange Ltd (NSEL) with the parent company.
HKEX: Stock Exchange Participants’ Market Share Report
Euronext to host first Investor Day on 13 May 2016
Euronext announced today that it will be hosting an Investor Day for analysts and investors on 13 May 2016 at Euronext’s Paris headquarters, 14 Place des Reflets, 92054 Paris La Défense Cedex.
SGX welcomes Anchor Resources to Catalist
Singapore Exchange (SGX) today welcomed Anchor Resources Limited (Anchor Resources) to Catalist under the stock code “43E”.
Trump China Tariff Bad for Business, Consumers: Chamber’s Donohue
Donald Trump’s proposed 45% tariff on Chinese exports to the United States would be such a blow to U.S. consumers and businesses that “they’d probably impeach [him] when they figured out what that really meant,” the CEO of the U.S. Chamber of Commerce said Friday morning.
Cameron’s Man in Brussels Evokes Thatcher as `Brexit’ Odds Drop
It was Margaret Thatcher’s landmark speech on her vision for the future of the European Union that helped define her premiership and the U.K.’s decades-long frosty relationship with the rest of the bloc.
2 Senate Democrats Introduce Bill to Curb Activist Hedge Funds
Liz Moyer – New York Times
Two Senate Democrats introduced a bill on Thursday that would take aim at activist hedge funds and their ability to act together in “wolf packs” to overtake public companies. The bill would shorten the number of days that activists have to disclose newly acquired shares in a company and force the disclosure of derivatives and other holdings that now don’t have to be reported. It would also redefine the rules about who has to report when they have amassed a greater than 5 percent stake in a company.
Justin Trudeau’s Message to Wall Street: I Am Not My Father
Canada Prime Minister Justin Trudeau sought to reassure Wall Street investors he’ll remain cautious on spending as he prepares to push the nation deeper into deficit, distancing himself from another deficit-spending leader: his father Pierre.
FIA inducts former House Speaker John Boehner into the Futures Hall of Fame
Press Release – FIA
John Boehner, Speaker of the House from 2011 to 2015, was inducted into the Futures Hall of Fame yesterday at the 41st annual FIA International Futures Industry Conference in Boca Raton, Florida.
Boehner was a featured speaker at the ICE Energy Breakfast, where he participated in a fireside chat on a range of geopolitical topics with Jeff Sprecher, Chairman and CEO, Intercontinental Exchange and Chairman, New York Stock Exchange.
Hedge Funds & Managed Futures
If No One’s Trading Stocks, Is it Really a Rally?
Corrie Driebusch and Leslie Josephs – Wall Street Journal
U.S. stocks have rebounded, but few investors have come to the party. Stock-trading volumes have been relatively light in recent sessions, which many traders say reflects a reluctance to make big bets amid mixed signals from central banks and the economy. Trading on the major U.S. stock exchanges has fallen to about 6.9 billion shares a day over the previous four trading sessions – below the average for the month and the year. Trading volumes on Monday were the lightest of the year. Tuesday was a close second.
More Hedge Funds Shuttered Than Opened During 2015 Turmoil
Will Wainewright – Bloomberg
Hedge-fund shutdowns outnumbered startups last year for the first time since 2009, according to data firm Hedge Fund Research, as the global industry contracted amid market volatility. In the last quarter, 305 funds closed compared with 257 a year earlier, taking the total for the year to 979. Startups totaled 968, the Chicago-based company said in a report on Thursday. In 2009, hedge-fund closures totaled 1,023 and 784 opened.
Bond returns imperilled by modest moves
As bond yields have relentlessly fallen towards — and even beyond — zero over the past few years, investor returns are very vulnerable to small movements in prices and yields. The upshot is that a whole year of income can be erased by a tiny uptick in yields, which move inversely to price.
Bitcoin finds room in small funds; large institutions still on sidelines
Digital currency bitcoin has found favor among smaller investors, thanks to the availability of funds designed to invest in it, but remains a niche among the larger investing community. Investors at some family offices, smaller mutual funds, and traders at hedge funds say bitcoin has helped returns and demonstrated a low correlation with other asset classes.
The Mystery of America’s Missing Capital Investment
The public is in a foul mood this campaign season, in part because living standards have stagnated. The median household income in January was slightly lower, adjusted for inflation, than it was in January 2000, according to Sentier Research. Pay is lagging partly because companies have been underinvesting in the tools that workers need to be more productive. Those tools, which range from machines to software to land and buildings, are collectively known as capital.
How the herd mentality hurts hedge funds
Mary Childs – Financial Times
A s they hunt for good trade ideas, hedge fund money managers have a new source of worry: their friends. At this year’s downbeat Morgan Stanley hedge fund conference in Palm Beach, investor Paul Tudor Jones used the metaphor of cattle grazing to describe the complaint du jour of “crowding”. He compared trading in the euro versus the US dollar to a herd that eats grass down to the roots. When the land is bare, the cows all move on together, creating dislocation as they do.
Sweden’s ‘Warren Buffett’ eyes bigger investment crown
In a country where family-run business spheres dominate the landscape, Fredrik Lundberg, often referred to as Sweden’s Warren Buffett, is tackling bigger rivals on several fronts. A new center dedicated to Sweden’s Nobel Prize is planned near his company’s headquarters on one of Stockholm’s Baltic promenades, with funding from the Wallenberg investment empire and the Perssons who created retail giant Hennes & Mauritz.
BlueCrest Money Manager John McNiff Said to Leave Hedge Fund
John McNiff, a money manager at BlueCrest Capital Management, has left the hedge fund, according to a person with knowledge of the matter who asked not to be identified because the information is private.
J.P. Morgan Boosts Stock Buyback Authorization by $1.88 Billion
Tess Stynes – WSJ
J.P. Morgan Chase & Co. said its board authorized the repurchase of an additional $1.88 billion of the New York bank’s stock through the end of the second quarter. The nation’s biggest bank by assets said the latest share-buyback plan is in addition to its $6.4 billion stock-buyback authorization last year. Banks shares, including those of J.P. Morgan, have come under pressure this year amid worries about a protracted period of slowing global growth. Shares closed Thursday at $58.75, off 0.3%, and have declined 11% so far this year.
This is the big risk for stocks with the Fed’s ‘dovish tightening’
Barbara Kollmeyer – MarketWatch
With the dust still settling post-Fed, some corners of the market are buying into a more dovish U.S. central bank. Oil and gold are tearing higher, and the dollar continues to get beat up, but the post-Fed cheer has faded on the equity side as caution comes creeping in.
Legg Mason survey: UK investors hold more than third of assets in cash
A survey conducted by Legg Mason has found UK-based high net worth investors are the most cautious in Europe, with more than a third of their portfolios invested in cash.
Brevan Howard Said to Cede Management of $450 Million Hedge Fund
Brevan Howard Asset Management is giving full control of a systematic trading hedge fund to David Gorton as billionaire Alan Howard focuses on macro strategies, according to a person with knowledge of the matter.
Banks & Brokers
How Many Bad Brokers Could There Be? Don’t Play the Percentages
When you reflect on the grim news that 73% of financial advisers who get caught breaking the rules are still doing business with the public a year later, you might just cross your fingers and hope that yours is one of the good guys.
Which brokers were IROs’ favorites in 2015?
As revealed in IR Magazine’s most recent global roadshow report, Bank of America Merrill Lynch tops the most popular brokers’ list once again. Last year, the US bank was hired by nearly one third of respondents, who used the bank for an average of 1.4 roadshows each.
Here’s What Big Bank CEOs Have Made Since the Financial Crisis
Wall Street’s titans are still making enough to put food on the table. JPMorgan Chase & Co. gave Jamie Dimon a 35 percent pay raise to $27 million for 2015, eclipsing Goldman Sachs Group Inc.’s Lloyd Blankfein as the highest paid CEO at the six biggest U.S. banks. Wells Fargo & Co. gave John Stumpf $19.3 million for a fourth straight year. Bank of America Corp.’s Brian Moynihan was the lowest paid at $16 million.
Clearing & Settlement
Clearing conundrum at heart of LSE-Deutsche Börse deal
Tim Cave – Financial News
It was the merger announcement the market had been waiting for. But when the London Stock Exchange Group and Deutsche Börse formally revealed their intention to tie-up on March 16, it was largely confirmation of facts everyone had known for almost a month. For shareholders’ benefit, Carsten Kengeter, the Deutsche Börse chief executive who will become chief executive of the merged company, was explicit – the merger would reduce operating costs by a highly ambitious EUR450 million a year, helping to create a “Europe-based market infrastructure leader”. It would be the world’s largest exchange group by total income, creating a “liquidity bridge” that would unite London, Frankfurt and Milan. However, it was on derivatives clearing that the announcement left many questions unanswered.
China Construction first Chinese Eurex Clearing member
The Frankfurt branch of the China Construction Bank has received authorisation as a trading and direct clearing member of Deutsche Boerse’s cash and derivatives market.
Leverage ratio ruling imminent – clearing panel
Luke Jeffs – FOW
The world’s top clearing houses said they expect in the coming weeks a ruling on the controversial leverage ratio rules that will impose tough capital requirements on brokers and could force some out of business.
European Commission Adopts Legislation for Mandatory Clearing Obligation for Credit Derivatives
On March 1, 2016, the European Commission announced that it had adopted a Delegated Regulation on the clearing obligation for credit derivatives. Under the European Market Infrastructure Regulation, the European Securities and Market Authority is required to develop draft Regulatory Technical Standards setting out the categories of OTC derivatives that should be subject to the clearing obligation, the date/s from which the obligation should apply and the minimum remaining maturity of OTC derivatives.
CCB gets authorization as trading & direct clearing participant in markets operated by Deutsche Boerse
China Construction Bank (CCB) Frankfurt Branch has obtained authorisation as a trading and direct clearing member to the cash and derivatives markets operated by Deutsche Boerse AG (ETR:DB1).
Indexes & Products
‘Godfather of smart beta’ defends attack of smart beta
Attracta Mooney – Financial Times
Rob Arnott is used to antagonising people. But even he is surprised by the anger he has generated from senior executives and academics in the investment industry. They have taken exception to his warnings published in a study last month that smart beta, an investment strategy that sits between active and passive management, could go “horribly wrong”.
Does Market Volatility Favor Active Management? Evidence From the 2015 Year-End 2015 SPIVA U.S. Scorecard
Twice a year, S&P Dow Jones Indices releases the SPIVA U.S. Scorecard. The scorecard measures the performance of actively managed equity and fixed income funds across various categories. Since the initiation of the report in 2002, the results have consistently shown that managers across most categories overwhelmingly underperform on a relative basis against their corresponding benchmarks over a medium- to long-term investment horizon.
Taiwan Stock Exchange Establishes New Subsidiary To Create More Innovative Indices And Services – Taiwan Index Plus Corp. Will Promote TWSE’s Existing Indices, And Create New Ones, To Grow Taiwan’s Index Investment Market
The Taiwan Stock Exchange (TWSE) has set up a new wholly-owned subsidiary, Taiwan Index Plus Corporation (TIP), to provide more comprehensive index and information services to investors and to better meet the growing appetite for more innovative financial products.
Tokyo Stock Exchange To Begin Calculating Tokyo Stock Exchange REIT Net Total Return Index
Tokyo Stock Exchange will begin calculating and publishing the “Tokyo Stock Exchange REIT Net Total Return Index” in addition to the Price return index and Total return index.
S&P: Every Volatility Measure We Track Has Dropped – Focus on Funds
On Wednesday, stocks rallied after a dovish tone from the Federal Reserve, and thus, “the storm that welcomed us into 2016 ended,” according to Tim Edwards, Senior Director, Index Investment Strategy at S&P Dow Jones Indices.
MasterCard-backed FinTech accelerator picks startups for NYC program
StartupBootcamp FinTech, the recently launched accelerator focused on financial technology, has unveiled which startups will be involved in its very first New York program.
Swiss regulator amends rules to allow fintech to flourish
Swiss financial markets watchdog Finma has pushed through a raft of new initiatives in a bid to stimulate further growth and innovation in the country’s emerging fintech sector.
Fintech start-up scene thriving, News, News, AsiaOne Business News
An app supported by a team of 10 in Bishan proved a hit with commodity speculators the world over when oil prices went haywire in January.
Traders, including 20,000 in the Middle East, were using the app to get live alerts every time the price of crude hit a new level.
The app was launched in 2014 by Call Levels, one of Singapore’s fastest-growing fintech start-ups.
NFA orders Newport Beach, Calif., introducing broker Hollencrest Securities to pay $125,000 fine
National Futures Association (NFA) has ordered Hollencrest Securities, also known as Hollencrest Capital Management (Hollencrest), an NFA Member introducing broker located in Newport Beach, Calif., to pay a $125,000 fine.
Former Chicago Fed analyst pleads guilty to theft from bank
A former senior analyst at the Federal Reserve Bank of Chicago pleaded guilty on Thursday to stealing 35 confidential financial documents from the bank shortly before resigning to take a job elsewhere, federal prosecutors said.
2 Former Porsche Executives Are Acquitted of Stock Fraud
New York Times
Two former top executives of Porsche, the sports car company, were found not guilty on Friday of stock market manipulation in a case that had also posed a financial threat to the billionaire family that controls Volkswagen. Wendelin Wiedeking, 63, the former chief executive of Porsche, and Holger Härter, 59, the former chief financial officer, were acquitted by a German court of charges stemming from a news release the company issued in October 2008.
Environmental & Energy
Stunning Global Heat Wave Pushes Planet Into Uncharted Territory
Tom Randall – Bloomberg
Humanity’s experiment with planetary warming has reached a new level of extremes. Last month was the hottest February in 137 years of record keeping, according to data released Thursday by the National Oceanic and Atmospheric Administration. It’s the 10th consecutive month to set a new record, and it puts 2016 on course to set a third straight annual record.
CFTC And EPA Enter Into A Memorandum Of Understanding
The U.S. Commodity Futures Trading Commission and the Environmental Protection Agency today entered into a Memorandum of Understanding that allows the agencies to share Renewable Fuel Standard (RFS) data and analysis. Under this agreement, the agencies agree to cooperate and coordinate on topics related to implementation of the RFS program and the market for renewable identification numbers.
Obama’s drilling ban thwarts the fanatical explorers of the ancient supercontinent of Pangaea
When US president Barack Obama reversed himself this week and barred oil exploration along the country’s eastern seaboard, he frustrated the practitioners of a quirky obsession followed from the cold Canadian waters off Newfoundland all the way south to Brazil. This interest, mirrored across the ocean, along the west coast of Africa, is focused on the arcane corner of scholarship surrounding the 200-million-year-old breakup of the ancient supercontinent of Pangaea.
Boom Times for Fracking’s Toxic Wastewater Come to a Shaky End
In 2010, as fracking was taking off in Oklahoma, Jeff Andrews, a former oil rig manager and drilling consultant, had an idea for how to cash in on the boom. Rather than drill a well that would produce oil, Andrews decided to drill one that could be used to dispose of all the salty, toxic waste?water that comes up with it.
India’s carbon strategy to counter climate change
The environment ministry’s special secretary, Susheel Kumar, said earlier this week that the Indian government is now looking to retrofit existing national action plans on climate change while building new ones. With the date of signing of the historic Paris climate change agreement in April approaching fast, and its ratification to follow soon, that’s good to hear. But the entire process will require care and finesse—particularly the groundwork for integration with the world’s networked carbon market.
Business Mogul Li Ka-shing: Hong Kong Economy Is ‘Worst I’ve Seen In 20 Years’
International Business Times
Hong Kong business magnate Li Ka-shing is raising alarm over the state of the city’s economy.
“Today’s Hong Kong is getting worse … the worst I’ve seen in 20 years,” Li, a billionaire regarded as one of the most powerful businessman in Asia, told reporters Thursday.
Japanese Government Bond yield hits record low
The yield on the benchmark 10-year Japanese Government Bond dropped to a record low and equities wilted as investors showed deepening frustration with the negative interest rate policy and the faltering Abenomics growth programme.
EU lobby says China should open market to meet economic goals
China should open its markets to foreign business and implement overdue reforms if it wants to achieve its economic goals, a European business lobby said on Friday, weighing in on Beijing’s new five-year plan.
Chinese Premier Li Keqiang has said the country faces a tough battle to keep its economy growing by at least 6.5 percent a year over the next five years while creating more jobs and restructuring inefficient industries.
BOJ policymakers in heated debate over negative interest rate: minutes
The Japan Times
Bank of Japan policymakers were aware of the need for pre-emptive action to achieve an inflation target, but some voiced concern a negative interest rate could cause confusion, minutes of the central bank’s January policy meeting show.
Toshiba confirms SEC investigation as accounting woes spread to US
Toshiba has announced its US businesses are cooperating with authorities over alleged accounting irregularities and is to cut a further 3,000 jobs.
Toshiba boss quits over £780m accounting scandal
The company has been shaken by a profit-padding scandal in which senior management for years systematically pushed subordinates to cover up weak financial figures.
Emerging markets back from the brink
Australian Financial Review
It was a case of one step forward and two steps back for emerging market enthusiasts this week, as political tensions in Brazil and South Africa threatened to overshadow the good news coming from the United States central bank. In the past six weeks there has been a surge of inflows into emerging markets, with investors spending billions of dollars snapping up their shares and bonds, amid growing optimism that China will avoid a hard landing and a recovery in commodity prices.
Turns Out a ‘Lie’ Lurked Beneath the Bookends of the BRICS
They were the darlings of the Davos set, the bookends of the BRICS. Simultaneous booms raised millions out of poverty and generated billions for a lucky few.
Bank heist puts Philippines financial system at risk – central bank
MANILA (Reuters) – The Philippines’ financial system is facing a risk because of the $81 million (56 million pounds) that was stolen by hackers from the New York Fed account of Bangladesh’s central bank and then transferred to Manila, the country’s central bank governor said on Friday.
Southeast Asian Stocks Crawl Back From Bear Market as Funds Buy
Southeast Asian stocks are bouncing back from a bear market, outpacing global indexes as foreign investors pour in amid recovering economies. The MSCI South East Asia Index is up 20 percent from a closing low on Jan. 21. Leading the way is Philippine shares, which entered a bull market, considered by many to be a 20 percent rebound based on closing prices.
Cheap credit and rising incomes fire fuel demand in India
Three hours east of New Delhi, in the village of Piplera, recently married Abhilekh Swami has stopped to refuel his first automobile, a Hyundai hatchback, at an Indian Oil filling station. Late model SUVs and Mercedes also ply the potholed roads and dusty lanes of the small gathering of dwellings in Uttar Pradesh.
Don’t Count Emerging Markets Out
The jolt that the Federal Reserve’s tilt toward higher interest rates gave Asia may have a silver lining: prodding developing economies to get their acts together. “The emerging-economy growth engine is not broken; it simply needs to be serviced,” says Korea University economist Lee Jong-Wha. “With appropriate policies and structural reforms, the emerging economies can recapture their dynamism and move onto an even stronger growth path – taking the entire global economy with them.”
California man gives $2 million aluminum penny back to U.S. Mint
A San Diego man who inherited from his father a 1974 aluminum penny valued at $2 million has surrendered it to the U.S. Mint to settle a lawsuit over ownership of the rare coin, a federal prosecutor said on Thursday.