Boca Bound – Boca Bits
Doug Ashburn – JLN
A few of us are headed down to Boca Raton today for the annual FIA conference. If you are attending, keep an eye out for Jim Kharouf, Sarah Rudolph, me, and a late addition to the lineup – John Lothian, who has conned his wife into believing he will more effectively recuperate from his back surgery in the Florida sunshine. Also, keep an eye on the John Lothian Newsletter this week, as each day we will feature a roundup of the big (and the no-as-big-but-still-important) news.th a fresh round of merger mania hitting the exchange world in the last month, plus new regulations and new technologies about to come online, Boca 2016 promises to be one of the most exciting in recent years.
Speaking of exchanges, John Lothian News will once again be shooting videos of a number of exchange leaders. At last count we have seven (or is it eight?) exchange CEOs scheduled to sit down with Jim to discuss the state of the industry.
If you plan to attend the conference, send any one of us an email. Our schedules are filling fast, but there is always time to fit in one more. Happy trails.
Let’s Pause a Moment: Keith Ross Talks Dark Pool Rules and IEX
The addition of high speeds and multiple execution venues has altered the equity market structure in recent years. Now, the SEC is weighing in with newly proposed rules on dark pools. Meanwhile, IEX, which rose to fame with Michael Lewis’ “Flash Boys”, is trying to move from dark pool to full-fledged exchange. Keith Ross of PDQ ATS says transparency is a good thing, and a market pause has its benefits in alternate venues, but as an exchange, could create chaos.
Watch the video »
Expanding the TT Ecosystem
Drew Shields, Trading Technologies TradeTalk
In the last two months, we have accomplished a significant milestone in the development of the TT platform. We’ve rolled out access to 16 new markets, bringing TT very close to market parity with X_TRADER. Adding new markets to a trading platform is not necessarily newsworthy. It’s what a software provider like us does multiple times a year, year after year. However, this mass rollout over the last two months has been unique in the way that 10 of those markets were integrated into TT.
FACT: Women are better traders
It’s official. Women are better at trading than men. At least that’s the finding of new research undertaken by academics at the UK’s University of Leicester. To be more specific, employing a greater number of female traders reduces the chances of a market crash and increases the regularity of positive trading returns, according to the study. Despite the findings, the majority of trading desks continue to be dominated by male traders. A study conducted by JM Coates in 2012 found that trading desks are 95% male and 5% female on average, following a survey of operations in the UK and the US.
***We’re WILD about this story.
| 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
Bridging the Week by Gary DeWaal: March 7 – 11, and 14, 2016 (Civil Rights Violation; Spoofing; Disorderly Liquidation; Risk Management; Disaggregation)
Bridiging the Week – Gary DeWaal
Last week, a federal court in New York permitted a lawsuit to proceed alleging that a United States Attorney and other government officials violated the civil rights of a former hedge fund operator. In addition, both ICE Futures U.S. and CME Group settled a number of disciplinary actions alleging possible spoofing and market disruption; liquidating positions in a disorderly fashion; and trading based on non-public customer information. Finally, IFUS proposed amending one of its rules to permit the possible disaggregation of certain positions among affiliated persons for position limits calculation purposes to parallel a rule proposed by the Commodity Futures Trading Commission that has not yet been adopted.
Friday’s Top Read Stories
We had a clear winner in Friday’s click count tabulations, Matt Leising’s story in Bloomberg on a new paper on swaps accounting. Leising, by the way, had a good week here in JLN, as his story earlier in the week, Manipulation or Brilliant Trade? The Curious Case of Don Wilson, was the most clicked story thus far in 2016. Also topping the charts Friday was A High-Speed Trading Pioneer Spots a New Way to Make Big Returns, also from Bloomberg, and rounding out the top three was CME Group’s Erik Norland’s look at the sudden correlation between oil and equities
Proposed Exchange Chief Carsten Kengeter Was Viewed as Possible Libor Co-Conspirator
Carsten Kengeter is on track to run Europe’s largest stock exchange. Three years ago, British prosecutors viewed him as a possible co-conspirator in the global interest-rate-rigging scandal.
Mr. Kengeter is chief executive of Deutsche Börse AG , the German exchange that is in talks to merge with London Stock Exchange Group PLC. Under terms of the planned merger, Mr. Kengeter would become CEO of the combined company, which will be based in London.
World Federation Of Exchanges Calls For Vigilance And Coordination As Industry Backs Global Cyber Standards
The World Federation of Exchanges (WFE) is the global trade association that represents more than 200 market infrastructure providers including exchanges and CCPs. Each year over $26 trillion in trading is processed by the infrastructure operated by WFE members. Cyber security is a matter of enormous importance to WFE’s members, and is vital to the continuing stability of the financial system.
LSE and Deutsche Börse to highlight London’s advantages
Philip Stafford in Boca Raton and Arash Massoudi – Financial Times
The London Stock Exchange Group and Deutsche Börse will emphasise London’s strength as a financial hub when Europe’s two largest bourses ‘announce their combination, expected this week. The two exchanges have confirmed that London would be the location for the holding company and the German bourse’s Carsten Kengeter its chief executive. However, customers and rivals are keen to see the affect on trading and whether any unwanted assets might become available.
China Burns Hedge Funds as $562 Million Yuan Bet Turns Worthless
The battle over the fate of China’s currency is starting to get bloody for the bears.
Seven months after a shock devaluation spurred hedge funds and other speculators to wager on further declines, the yuan’s unexpected resilience has turned many of those bets into losers. At least $562 million of options that pay out if the currency drops below 6.6 per dollar — its weakest point since the devaluation — have expired worthless since August. Another $807 million will lapse within three months.
Here’s What’s at Stake for London’s Trading Share in a `Brexit’
Silla Brush and John Detrixhe – Bloomberg
A British exit from the European Union may not be an immediate shock to London’s standing as a global financial hub. The City, after all, just got a vote of confidence from Europe’s biggest exchange operators, who are considering a 20 billion pound ($28 billion) tie-up that would place its holding company in London. Deutsche Boerse AG and London Stock Exchange Group Plc have said the merger makes sense whether or not Britain votes for an EU “Brexit.” Stuart Gulliver, chief executive officer of HSBC Holdings Plc, said a June 23 vote by Britain to leave the EU would affect a “very small percentage” of the bank’s U.K. employees and wouldn’t force the bank to move its headquarters from London.
Central banks beat Bitcoin at own game with rival supercurrency
Ambrose Evans-Pritchard – The Telegraph
Computer scientists have devised a digital crypto-currency in league with the Bank of England that could pose a devastating threat to large tranches of the financial industry, and profoundly change the management of monetary policy. The proto-currency known as RSCoin has vastly greater scope than Bitcoin, used for peer-to-peer transactions by libertarians across the world, and beyond the control of any political authority.
The Bangladesh Job
Michael P Regan – Bloomberg Gadfly
Most of the major pieces of financial news all shared one thing in common this week: an air of mystery. Was Mario Draghi a hero or a goat this week by unleashing another Whitman’s Sampler of stimulus, including sending deposit rates further into negative territory? What exactly led to the the death of “cocky, bold, seemingly indefatigable” fracking king Aubrey McClendon? Why did one of the world’s biggest hedge funds, Bridgewater Associates, hire the guy who invented the iPod to help run the firm? Will anyone ever buy Steve Cohen’s allegedly “cursed” penthouse?” Who is the mysterious person or entity known as “The Dude” who’s been freaking everyone out in Turkey with enormous trades that can be twice what the market does on an average day?
BNP Paribas to introduce standard investment banking titles
BNP Paribas will be naming more investment bank managing directors than any of its rivals this year — even if it does not hire a single person.
The French group, which grew its corporate and institutional bank’s revenue faster than any European rival last year, is preparing to introduce traditional investment banking titles globally, said people familiar with the situation.
Why global stock markets will get worse before they get better
Of three potential outcomes for the troubled global economy, the most ideal is the least likely.
The first and best result would be a “Lazarus” economy, where the strategies central banks and governments have put in place lead to a strong global recovery.
The U.S. would lead the way forward. Europe in turn would improve, as the required internal transfers and rebalancing takes place and Germany accepts debt mutualization to preserve the euro.
‘Bid This Bond’ – How Regulation Will Change Trader and Sales-Trader Workflow
Gary Stone, Bloomberg Trading Solutions – TABBForum
The once-simple process of bidding a bond for the buy side is growing more complex. Regulation is adding more steps, checks and validation points to traders’ workflow. But technology and quantitative methods are emerging that will enable dealers to adopt a framework that creates an efficient, repeatable, rules-based evaluation structure.
SEC kicks off first ad campaign to warn about investment fraud
The Securities and Exchange Commission is undertaking the first advertising campaign in its 82-year history amid concerns that consumers aren’t doing enough to protect their savings from investment fraud.
Robert Rubin Was Targeted for DOJ Investigation by Financial Crisis Commission
Stephen Gandel – Fortune
In late 2010, in the waning months of the Financial Crisis Inquiry Commission, the panel responsible for determining who and what caused the financial meltdown that lead to the worst recession in decades voted to refer Robert Rubin to the Department of Justice for investigation. The panel stated it believed Rubin, a former U.S. Treasury Secretary who has held top roles at Goldman Sachs and later Citigroup, “may have violated the laws of the United States in relation to the financial crisis.”
MF Global bondholders reach $29.8 million settlement with banks
Investors who lost money when Jon Corzine’s MF Global Holdings Ltd collapsed reached a $29.83 million settlement with five underwriters that helped the futures brokerage sell bonds in the summer of 2011, less than three months before it went bankrupt.
New China Stocks Chief Vows Decisive Intervention If Needed
China’s new stock regulator vowed to step in “decisively” if needed to stem the sort of stock-market panic that resulted in a $5 trillion wipeout last summer, adding that it was far too early to think about the state rescue fund leaving the market.
China Pledges Greater Effort to Crack Down on Financial Crime
China’s judicial authorities vowed to do more to combat financial crimes in the coming year, as the economy slows and leaders remain concerned that financial risks might lead to higher unemployment and social unrest.
Banks forced to rely on whisper network after register shrinks
Lucy McNulty – Financial News
Banks are being forced to develop their own informal system of background checks on job applicants since the UK authorities have stopped maintaining a register of people approved to do a wide range of jobs in finance.
Self-listing of exchanges pose conflict of interest risk: Sebi
Firm on its stand barring self- listing of stock exchanges, regulator Sebi says there is an “evident and clear” conflict of interest risk in such a scenario but it is willing to look into any genuine problems that an exchange may have on this issue.
CFTC Commitments Of Traders Reports Update
The current reports for the week of March 8, 2016 are now available.
Exchanges & Trading Facilities
Deutsche Börse Readies Data IP ‘Think Tank’
Deutsche Börse has unveiled plans for a think tank, dubbed Content Lab, as part of a structural rejig of its market data and services business. Headed by Konrad Sippel, who last served as head of product and market development at index provider Stoxx, Content Lab will focus exclusively on the development of “innovative content and intellectual property” for the exchange’s market data unit.
LSE and Deutsche Borse step up charm offensive
Daniel Dunkley – The Australian
The London and Frankfurt stock exchanges will this week promise savings of more than £400 million ($529m) from their proposed £20 billion merger, and pledge that a crucial derivatives market will stay in London. They are also expected to confirm that Donald Brydon, the highly regarded chairman of the London Stock Exchange, will stand down as chairman of the merged company in three years.
Turquoise to launch ‘A-list’ ETF platform
Tim Cave and Mark Cobley – Financial News
Turquoise, the equity trading venue majority-owned by the London Stock Exchange, is to launch a specialist market for exchange-traded funds in a bid to boost liquidity in the products. The London-based platform has joined forces with TrackInsight, part of investment adviser Koris International, to launch a market segment for trading only highly rated ETFs.
The London Stock Exchange is for sale: Who will get it?
Stock exchanges do not come up for sale very often; one as large and prestigious as the London Stock Exchange even less often, so there is a lot of interest around this. Deutsche Borse’s attempt to merge with the LSE is reaching a critical stage. Deutsche Borse has until March 22 to make a formal offer. It’s gotten more complicated because Intercontinental Exchange, which owns the NYSE, has also indicated they are interested in the LSE. The CME is also a potential bidder.
Opinion: An Acquisitive Nasdaq
Rob Daly – Markets Media
Wall Street’s boilerplate of “past performance is not guarantee future results” might be true for financial performance, but under the leadership of CEO Bob Greifeld, Nasdaq has compiled quite a track record when it comes to integrating exchange acquisitions. In late 2007, the then Nasdaq Stock Market announced the acquisition of the Boston and Philadelphia stock exchanges for $61 million and $652 million respectively.
CME Group Announces Record FX Futures and Options Volume
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it reached a trading volume record for total FX futures and options yesterday, March 10, of 2,517,334 contracts, surpassing the previous record of 2,371,202 by 6 percent set on May 6, 2010. FX futures also set a new record of 2,350,478 surpassing the previous record of 2,208,417 on May 6, 2010.
Deutsche Börse Venture Network Passes 200-Member Mark – Sharp Rise In Number Of Foreign Participants – Investor Networking For The First Time In London And Once Again In The US
Deutsche Börse Venture Network, Deutsche Börse’s programme to fund young growth companies, has passed the 200-member mark nine months after its launch. The Network has gained 31 investors and 10 growth companies since the beginning of this year. Specifically the number of participants from outside Germany, currently at 81, has seen a particularly large increase. In total, there currently are 60 growth companies and 142 investors active in the Deutsche Börse Venture Network.
TAIFEX Received SEC Class Relief For Index, Equity And ETF Options
The Taiwan Futures Exchange (TAIFEX) has successfully obtained class no-action relief (“Class Relief”) status for its index options, equity options and ETF options from the United States Securities and Exchange Commission (SEC). TAIFEX and its members can now market its flagship TAIEX Options (TXO) and its newly listed ETF options to eligible broker-dealers and eligible institutions in the United States through U.S.-registered broker-dealers, in compliance with SEC regulations.
Deutsche Börse-LSE deal: would it impact IR?
As Deutsche Börse has once again proposed a so-called merger of equals with the London Stock Exchange – the third attempt to bring these European exchanges together – we look at what the potential impact might be for IROs. Both Herbie Skeete, managing director of exchange intelligence firm Mondo Visione, and David Lloyd-Seed, deputy chair of the UK’s IR Society, agree that while savings are likely to be made – and ultimately passed on to customers – there’s likely to be little change as far as IR is concerned.
HKEX: Risk Management Arrangements In Respect Of The Easter Holidays
The Traded Options Market will be closed for business from 25 to 28 March 2016. In order to assure that safeguards are in place against potential market risk that may arise during the aforesaid periods when some of the major markets are open, the Clearing House has decided to adopt the following risk management measures:
Germany’s Merkel under renewed attack after populists’ poll success
Chancellor Angela Merkel came under renewed attack on Monday from her most important critic — Bavarian conservative leader Horst Seehofer — amid widespread concern in Germany about the success of rightwing populist forces in Sunday’s regional elections. Mr Seehofer, head of the CSU, sister party to Ms Merkel’s CDU, pledged to resume his fight against the chancellor’s contentious refugee policy following the dramatic advance of the anti-immigration Alternative für Deutschland party.
Germany Wakes Up to Politics Trump-Style as AfD Takes on Merkel
Chad Thomas – Bloomberg
If you think Donald Trump has some outrageous ideas, wait until you meet Germany’s AfD party. The Alternative for Germany, to give the party its full name, has shaken up the country’s consensus-driven politics with headline-grabbing policies that include telling Germans to have more children to avoid the need for immigration. Frauke Petry, the AfD’s co-leader, has said that police must “prevent illegal border crossings, using firearms if necessary.”
Hedge Funds & Managed Futures
Bond Traders Can’t Sleep as Fed Policy Becomes a Foreign Affair
Susanne Walker Barton, Wes Goodman and Alexandra Scaggs – Bloomberg
Even in the mighty U.S. Treasury market, bond traders are taking their cues from central bankers in Europe and Japan. With Mario Draghi and Haruhiko Kuroda pressing ahead with their grand monetary experiments, negative yields in Germany and Japan are exerting greater and greater influence over U.S. Treasuries. Overnight trading of Treasury futures has exploded, reaching levels not seen in years. Ten-year U.S. notes are also moving the most in tandem with German bunds since 2014.
Top Start-Up Investors Are Betting on Growth, Not Waiting for It
Katie Benner and Michael J. de la Merced – NY Times
For the last few years, the spotlight in start-up investing has largely shone on those who poured money into a company when it was already well along on a growth path. It turns out that spotlight may have been misdirected. While some investors are throwing giant sums into more mature start-ups like Uber and Airbnb at soaring valuations, it is the venture capitalists who identify a promising company at its infancy and bet on its growth who often come out on top. http://goo.gl/aEHIZm
A CEO who laid off 15% of staff says: ‘The economic environment is changing for all startups’
A chill wind is blowing through the world of startups right now. If 2015 was the year of the unicorn, 2016 looks like it could be the year of down rounds — where startups raise money at a lower valuation — and cutbacks. Stats on venture capital funding into fintech (financial technology) startups released by KPMG and CB Insights this week show a steep drop-off in funding at the end of last year and Bloomberg on Friday also reported a “pullback in startup investing.”
UBS Set to Reopen ‘CoCo’ Bond Market
A market freeze on a risky type of bank debt is set to be broken Monday, with Swiss lender UBS Group AG lining up a sale of some contingent convertible, or CoCo, bonds, according to a person familiar with the deal.
The world’s largest investor is betting on traders in their twenties to help fix the market’s biggest weakness
What does a 25-year old know about trading bonds? Maybe enough to help one investing giant solve a problem that Wall Street can’t seem to get its head around. BlackRock, which manages $4.6 trillion in assets, has a team of young traders thinking of ways to apply electronic trading to markets where it’s not yet prevalent. The program pairs young staff – the firm calls them “medium-experienced” – who are more adept at using technology with more experienced hands who know how to do things the old-fashioned way.
Legg Mason merges Martin Currie funds into global fund range
Legg Mason acquired Martin Currie, an Edinburgh-based Asian equities specialist asset manager, in October 2014. The board of directors decided to merge the seven funds due to issues with the Legg Mason charging structure and economies of scale of operating on the Legg Mason platform.
Is there gender bias in hedge funds?
Running a successful hedge fund is a challenge for anyone. But it’s especially hard for women, a recent study says. Hedge funds run by women are struggling for capital despite there being no statistically significant difference in performance between their funds and those run by men, according to new research. Part of the reason, say the researchers, is that women running hedge funds get a low level of news-media attention. The lack of capital doesn’t just stunt the growth of the funds run by women, the report says — it’s often fatal for the funds.
Gold Believers Scoff at Goldman Warning as Wagers on Rally Rise
Megan Durisin – Bloomberg
There seems to be almost nothing that will deter this year’s newfound gold enthusiasm. Even with a turnaround in global equities and signs of a more robust U.S. economy, investors are still piling into the metal. Money managers are holding the biggest net-wager on a rally in more than a year, and holdings in bullion-backed funds have climbed for 10 straight weeks, the longest streak since 2012. All this comes as Goldman Sachs Group Inc., the bank that foresaw gold’s collapse in 2013, continues to stick by its prediction that prices will start to retreat.
Morgan Stanley’s top equity strategist recommends investors do the opposite of whatever they think they should do
Stocks, crude oil, and high-yield credit have all made a comeback in recent days. This has improved sentiment on Wall Street compared to earlier this year when everything was selling off. But in a note to clients Monday, Morgan Stanley’s Adam Parker advises clients to not feel better about the markets.
Carl Icahn setting up son to take his place: sources
New York Post
Carl Icahn is hoping his financially successful offspring never flies the nest. The billionaire investor is negotiating a new deal with his son, Brett Icahn, in hopes that he will stay at his father’s publicly traded company and eventually succeed him, The Post has learned. Brett and partner David Schechter manage roughly $7 billion of stocks for Icahn Enterprises. Thanks to savvy bets, their Sargon Portfolio, which started out with $3 billion, has grown to represent nearly 20 percent of the firm’s $36 billion of assets.
Hedge fund managers are not always thinking about their investors
Disciplined Systematic Global Macro Views
Is there moral hazard with CTA’s? That is, do CTA’s change their risk behavior to increase their chance of an incentive fee at the expense of investors? If you read the new paper, “Risk-taking behavior of Commodity Trading Advisors” by Li, Jiang and Molyboga, the answer is clearly yes. Investors will bear the consequences of a manager’s risk choice, albeit the impact is based on market conditions.
Cautious investors focus on limits to central banks’ powers
John Authers – Financial Times
What are the limits of central bank action? The question is back after another of the world’s biggest central banks moves further into unprecedented territory, to be greeted with a market reaction that seems the opposite of what might be expected. In the latest instalment, the European Central Bank, whose president Mario Draghi had already promised “monetary dominance”, managed to surprise the markets with a monetary package that went far further than expected.
The financial crisis scarred an entire generation of investors
Bob Bryan – Business Insider
The last recession cut deep. From stocks crashing to the housing market blowing up to unemployment skyrocketing, there’s a reason it was called the Great Recession. According to Liz Ann Sonders, chief investment strategist at Charles Schwab, this experience has scarred the way Americans see the economy and will continue to do so. “When you look at how people are acting towards the economy, you can see how big the effect was from the recession,” Sonders told Business Insider.
Banks & Brokers
City of London stockbrokers struggle as challenges pile up
Harriet Agnew and Kate Burgess – Financial Times
“We started working for Associated British Foods in 1932. They haven’t paid us since 1933,” jokes Patric Johnson, the newly promoted chief of Panmure Gordon. Panmure, whose chief executive and chairman quit within days of each other, may be one of the oldest names in stockbroking in the City of London — but that has not protected it from the troubles afflicting the City’s small and mid-cap stockbroking sector. The group has warned that the intense market volatility has taken its toll on capital market issues and fees — and admits it has not weathered the problems as well as some of its rivals.
Goldman revamps electronic stock trading to catch rival
John McCrank – Reuters
Raj Mahajan achieved a rare when he rejoined Goldman Sachs Group Inc (GS.N) last year with the coveted title of partner, the Wall Street bank’s highest rank. Then he got to work on fixing the pipes. That plumbing has to do with the technology Goldman uses to route stock orders to exchanges and private trading pools. The bank has long been one of the top two stock brokerages in terms of revenue and customer rankings. But in recent years Goldman’s status slipped in electronic trading because its technology did not keep up with client demands for ever-faster trades.
JPMorgan places a big bet on jobless youth
JPMorgan Chase is making a big bet — on younger Americans who don’t have jobs. Last month, the Wall Street mega-bank committed $75 million to tackle youth unemployment, which in parts of Europe, the Middle East and Africa is well above 20 percent, and is frequently mentioned as being responsible for a range of social ills in those regions. In the U.S., the youth unemployment rate runs at 10 percent, about double the national jobless rate and totaling more than 5 million.
Frugality the order of the day at broking houses
Grace Leong – The Straits Times
When the stock market was booming, wine flowed freely at the annual parties of some brokerages. But last year as market conditions deteriorated, employees at one brokerage noticed that the plonk was restricted to just one bottle per table.
Balkaner Enerji Chooses Trayport’s Broker Trading System For Turkish Power Market
Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, announced today that Balkaner Enerji has chosen Trayport’s GlobalVision Broker Trading System (BTS) for its OTC trading operations in the Turkish power market.
Clearing & Settlement
Guaranteed IBs Authorized by CFTC Staff to Introduce OTC Swaps to Swap Dealer and Cleared Swaps to FCM Other Than Guarantor
Staff of the Commodity Futures Trading Commission’s Division of Swaps Dealer and Intermediary Oversight granted no-action relief to a futures commission merchant, permitting its guaranteed introducing brokers to arrange non-cleared over-the-counter swaps for its customers with swap dealers and cleared swaps that would clear through other FCMs. Ordinarily, a G-IB may only handle transactions for customers that carry their accounts on a fully disclosed basis with its guarantor FCM.
TriOptima Compression Exceeds $750 Trillion In Eliminated Notional Principal
TriOptima, an award-winning post trade infrastructure provider, announces today that market participants have eliminated more than $750 trillion in notional principal outstanding using triReduce, its risk-constrained, multilateral compression service for OTC derivatives, established in 2003. Since launch, more than 210 financial institutions worldwide have participated in this significant risk-reducing achievement which includes compression across a broad spectrum of products: cleared and uncleared interest rate products in 27 currencies, credit default swaps, commodity swaps, inflation swaps, cross currency swaps, and FX forwards. Currently TriOptima delivers triReduce compression for cleared trades in collaboration with leading clearinghouses (CCPs) around the globe. TriOptima also offers triReduce to CLS members for FX forwards.
Chinese Lenders Repay Loans Borrowed During Stock Rout: Chart
Financial firms in China are repaying bank loans they took during the stock rout last year as the government unwinds its support for the equity market, according to Mark Williams, chief Asia economist at Capital Economics in London.
Indexes & Products
Hedge Funds Look to Space With New China Economy Gauge
Here’s the latest way to get a read on China’s economic pulse: view it from space. San Francisco-based SpaceKnow Inc. has launched the China Satellite Manufacturing Index, or SMI, based on analysis of thousands of photos taken from commercial satellites.
The Fed caused 93% of the entire stock market’s move since 2008: Analysis
Lawrence Lewitenn – Yahoo Finance
The bull market just celebrated its seventh anniversary. But the gains in recent years – as well as its recent sputter – may be explained by just one thing: monetary policy. The factors behind that and previous bubbles can be illuminated using simple visual analysis of a chart. The S&P 500 doubled in value from November 2008 to October 2014, coinciding with the Federal Reserve Bank’s “quantitative easing” asset purchasing program.
“Fed Caused 93% Of The Entire Stock Market’s Move Since 2008”?
“The Fed caused 93% of the entire stock market’s move since 2008: Analysis” at Yahoo! Finance generated hundreds of comments. For those who asked about data and techniques, these replies are for you… Yes, for many people this is widely known – “Captain Obvious.”
Exchange-traded product commodity investing pitfalls
A recent email I received promoted a WTI crude oil three times leverage daily exchange traded product. While I question the need to leverage your risk three times, I do think commodities are beginning to look interesting. The Bloomberg commodity index peaked in June 2008 and having shed two-thirds of its value, is currently near levels not seen since 1999. Arguably, however, some markets are moving from oversupply into equilibrium and the demand picture is not actually too bad, notwithstanding China’s retrenchment. Early signs of stabilisation can be seen in several indices from the LMEX Metals Index to the CRB RIND index, comprised of industrial commodities that do not have associated futures contracts (and therefore are not so subject to speculative market behaviour).
Oil Rout Crimps Sector’s Presence on U.K.’s FTSE 100
Not long ago, if a firm was a British blue chip, there was a good chance it was an oil company. Nearly 24% of the total market value represented in the FTSE 100 index in 2009 comprised oil drillers or oil-service companies.
66% of fund managers can’t match S&P results
That hot-shot mutual fund manager you’re betting on to make you rich might be generating returns that fall far short of the benchmark stock index the fund tracks.
G. H. Financials and Object Trading Bring the World to ASX 24
Press Release – Object Trading
Object Trading and G. H. Financials today announce readily-available direct market access to the ASX 24. G. H. Financials, a leader in order-routing, clearing and settlement services to the world’s derivatives markets, has become a conformed broker on the managed DMA (Direct Market Access) service platform of Object Trading, a provider of a global, multi-asset trading infrastructure. Market participants can now easily trade on the ASX 24, with minimal onboarding times, as G. H. Financials’ execution, clearing, and risk management infrastructure and related setup processes are in place and already active on the Object Trading platform.
RBS cuts face-to-face service and brings in ‘robo-advisers’
Emma Dunkley – Financial Times
Royal Bank of Scotland is cutting its face-to-face advice service and slashing 550 jobs in another move to reduce costs, as more customers turn to digital “robo-advisers”. The state-backed bank is cutting 220 investment advice positions and scaling back its service to only those customers with at least £250,000 to invest — more than double the current £100,000 threshold. RBS is also removing 200 protection advice jobs. The move soon comes after RBS, which is 73 per cent owned by government, posted its eighth successive net annual loss, dealing a blow to government plans to sell off the bank.
****SD: Bloomberg’s version here
Asset managers are losing business over data
The Trade News
Over a quarter of investment managements firms claim to have lost business due to poor use of data, according to a new survey. The survey found that firms are struggling with the use of data as an asset, with 27% saying they had missed out on business opportunities due to its poor use. Only 11% of respondents felt data was used ‘very well’ for strategic decision making, while 31% said it is not being used well, if at all.
Fintech Growth Accelerates in Asia With Record $4.5 Billion Investments
Investors poured a record $4.5 billion into financial start-ups in Asia last year, four times as much as the previous year, data shows, putting the region at the center of the global tech revolution poised to shake up the financial services industry.
VC Fintech Funding Sets Record In 2015, Fueling Bitcoin And Blockchain Growth
Two thousand fifteen was the year fintech – including blockchain technology – entered the “mainstream,” signified by a groundswell of venture capital (VC) investment.
Go Grandmaster Lee Sedol Grabs Consolation Win Against Google’s AI
Cade Metz – Wired
Korean Go grandmaster Lee Sedol has won his first game against AlphaGo, Google’s artificially intelligent computing system, after losing three straight in this week’s historic match. AlphaGo had already claimed victory in the best-of-five contest, a test of artificial intelligence closely watched in Asia and across the tech world. But on Saturday evening inside Seoul’s Four Seasons hotel, Lee Sedol clawed back a degree of pride for himself and the millions of people who watched the match online.
****SD: Ever so tangentially related: Media mogul Dmitry Itskov plans to live forever by uploading his personality to a robot
California Businessman Attempted Cover Up of Stolen Investor Funds
The Securities and Exchange Commission today announced fraud charges against a California businessman accused of stealing investor assets and then trying to cover it up once the SEC caught onto his scheme. The SEC alleges that Daniel R. Nase raised money from investors through an unregistered offering of common stock in his Bakersfield, California-based company, BIC Real Estate Development Corp., and used the funds for personal expenses.
Bank Employee Pleads Guilty to Conspiring to Work as Secret Russian Agent
Benjamin Weiser – New York Times
Just weeks before he was to go on trial in federal court, a Russian bank employee in New York pleaded guilty on Friday to one count of conspiring to act as an unregistered Russian agent in the United States. Federal prosecutors in Manhattan had accused the employee, Evgeny Buryakov, 41, and two other Russians stationed in New York of being part of a ring that collected intelligence on behalf of the S.V.R., the Russian foreign intelligence agency. The two other Russians, Igor Sporyshev and Victor Podobnyy, have left the United States. All three men were originally charged with conspiracy and acting as an unregistered agent of a foreign government.
Sebi bans wilful defaulters from mkts, company boards
Cracking a whip on ‘wilful defaulters’, market regulator Securities and Exchange Board of India (Sebi) has decided to bar them from raising public funds through stocks and bonds, and also from taking board positions at listed companies — a move that would disqualify Vijay Mallya from various posts he holds at the moment.
Environmental & Energy
Large equity funds score poorly on sustainability
Attracta Mooney – Financial Times
Many of the world’s largest equity funds run by powerful investment houses including T Rowe Price, American Funds and Invesco are at risk of losing millions of dollars for failing to invest responsibly, according to new data. Morningstar, the research company, will soon publish ratings for 20,000 funds that show none of the world’s largest investment products scores highly when it comes to environmental, social and governance factors.Stephen Miles, global head of equities at Willis Towers Watson, the consultancy, said the ratings are likely to prompt some investors to pull money from funds with bad scores.
These ancient shipwrecks hold a hidden message about climate change
The Washington Post
Inventive new research has found a surprising way of investigating the relationship between hurricanes and climate change — by examining the history of Spanish shipwrecks in the Caribbean Sea during a planetary cool period in the late 17th and 18th century.
China coal protests highlight overcapacity tensions
Thousands of Chinese coal miners have taken to the streets in a city near the Siberian border to protest against unpaid wages, in the first direct challenge to Beijing’s plan for orderly downsizing and job cuts in the state-owned coal sector. Beijing has said it would lay aside Rmb100bn ($15.4bn) to “resettle” coal and steel workers as part of a plan to cut unproductive capacity in both sectors, but local governments and the companies themselves are supposed to bear a portion of the costs.
22 Amazing Renewable Energy Projects That Pave The Way to a Cleaner Future
There’s a growing demand for greener, safer renewable energy sources. Sun, wind, water, biomass, waves and tides, and the heat of the soil, all provide alternatives to non-renewable energy. The following collection showcases some of the most amazing renewable energy projects and prototypes from the past few decades, including quite a few you’ve probably never heard of before.
China’s Growth Target Is the Next Test for Its Central Bank
China’s central bank chief oozed calm in an annual press briefing in Beijing Saturday, supported by weeks of composure in markets as investor anxiety over the nation’s currency policy eased. How long the lull lasts will depend on how policy makers manage a balancing act made tougher by a weaker-than-anticipated start to the year for the world’s No. 2 economy. After People’s Bank of China Governor Zhou Xiaochuan spoke at the country’s annual gathering of the legislature, data showed an “alarming” failure of growth to respond to recent stimulus, Bloomberg Intelligence analysts Tom Orlik and Fielding Chen concluded.
China economic data paints a gloomy picture
Mark Magnier – WSJ via MarketWatch
Factories and retailers in China put in weaker-than-expected performances in the first two months of the year, as anemic demand and excess capacity continued to bear down on the world’s second-largest economy.
China rebuts economy doomsayers on debt and ‘zombies’
Gabriel Wildau – Financial Times
Chinese economic and financial officials responded to worries about bad debt, “zombie companies” and currency depreciation over the weekend, insisting that doomsayers were underestimating the economy’s resilience and the government’s ability to balance growth with reform. Volatility in the currency and stock markets has reverberated around global markets, largely because they are thought to be the symptom of deeper problems in the economy. Chinese officials used tightly controlled press appearances on the sidelines of the annual rubber-stamp parliament to try to restore confidence after their reputation for policy competence has been bruised.
China Plans to Merge State Companies While Avoiding Job Cuts
China will combine more of its biggest state-owned enterprises as part of a sweeping plan to cut overcapacity in the $18 trillion sector but won’t see the widespread layoffs that accompanied a similar overhaul in the 1990s, a senior regulator said.
Asia shares looking up as Fed hike unlikely ‘until June’
Wong Wei Han – The Straits Times
Following the buzz around the European Central Bank’s (ECB) aggressive easing package unveiled last week, market attention will return to the United States this week as the Federal Open Market Committee (FOMC) sits down for its March meeting. It is not expected to announce another rate hike after the two-day meeting starting tomorrow, but it might drop hints on when it might raise interest rates again.
Panda Bonds Set to Lure Borrowers From the Land of the Kangaroo
Benjamin Purvis – Bloomberg
Australian borrowers tempted by one of the world’s fastest growing pools of capital are considering yuan bond sales in mainland China, according to HSBC Holdings Plc. The bank is currently in “reasonably deep dialogue” with about five or six Australian companies regarding the process for selling so-called Panda bonds, according to Andrew Duncan, head of debt capital markets at HSBC in Australia. While several issuers from Australia have sold Chinese currency bonds in offshore markets such as Hong Kong — securities known as Dim Sum notes — none of them have yet borrowed onshore.
Bond markets reopen for EM borrowers
Elaine Moore – Financial Times
Brazil and Turkey are rushing to tap international debt markets for the first time this year as rising oil prices and radical central bank stimulus plans create an opening for bonds from emerging markets. The two countries have issued debt in the past fortnight after a prolonged market absence, helping to increase this year’s emerging market debt issuance from $15bn in late February to $25bn, according to Dealogic. At the start of the year, emerging markets were gripped by a negative feedback loop as concerns about slowing growth left investors unwilling to lend and lack of lending reinforced concerns about growth.
MF backs unconventional monetary policies despite warnings from emerging economies
Rajesh Kumar Singh – Reuters
Unconventional monetary policies of central banks in Europe and Japan received an endorsement from the International Monetary Fund on Sunday, even as policymakers from emerging markets warned that such policies were increasing risks for the global economy. The debate over the merits of unconventional policies comes days before major central banks such as the U.S. Federal Reserve, the Bank of England and the Bank of Japan unveil their interest rate decisions.
Battle for South African Treasury Risks Gordhan Stability Pledge
South African Finance Minister Pravin Gordhan’s complaint of police “harassment” signaled that a deepening battle over the independence of the Treasury is overshadowing his message of policy stability to investors.
Turkey Bonds Extend Rally With Terrorism No Deterrent So Far
Turkey’s deepening confrontation with terrorism has done nothing to deter the hot money that has driven a market rally the past month.
Norway’s Sovereign Wealth Fund Drops Pimco as External Manager
Norway’s $830 billion sovereign wealth fund last year ended a contract for Pacific Investment Management Co. to handle some of its bond investments.