First Impressions
Boca Bits & Pieces, Day Two
Sarah Rudolph – JLN
Wednesday’s big news came from Nasdaq, which announced plans to enter the energy futures market, challenging the dominance of the CME and ICE. Named Nasdaq Futures (NFX), the new market will launch around midyear with support from leading energy companies.
“What do the CME, ICE and Hillary Clinton have in common?” Nasdaq’s CEO Bob Greifeld asked reporters. His answer? “All seem to have a monopoly on their exchanges.”
“We’re here to disabuse you of that idea,” he added. “Monopolies are against the natural order of competitive forces.”
Not one of Nasdaq’s customers wanted the new exchange to be a vertical silo model, he said. So the new market will be a horizontal model, clearing through the OCC rather than an exchange-owned clearinghouse.
The exchange has 12 FCMs committed to NFX, representing about 25 percent of the energy marketplace.
Read the rest of the column, including a summary of the Exchange Leaders panel, at JohnLothianNews.com
Quote of the Day
“Some have said that the commission and its staff routinely grant waivers without rigorous analysis. That is simply not true.”
Mary Jo White, the chairwoman of the Securities and Exchange Commission in the story, “S.E.C. Chief Defends Agency’s Handling of Bank Punishment”.
Lead Stories
RBS Trader Admits Defrauding Customers In Multimillion Dollar Securities Fraud Scheme
MondoVisione
U.S. Attorney Deirdre M. Daly of the District of Connecticut, Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP) and Special Agent in Charge Patricia M. Ferrick of the FBI’s New Haven Division announced that Matthew Katke, 34, of New York City, waived his right to indictment and pleaded guilty today in Hartford federal court to participating in a multimillion securities fraud scheme. Katke also entered into an agreement to cooperate in the government’s ongoing investigation.
jlne.ws/1FQQGC2
Commerzbank Pays Nearly $1.5 Billion to Settle U.S. Investigations
Dealbook – NY Times
Commerzbank agreed on Thursday to pay nearly $1.5 billion to settle civil and criminal charges related to its role in enabling a huge accounting scheme and other illicit transactions, state and federal authorities announced, imposing the latest black eye on a giant global bank.
The settlement closes the book on several overlapping investigations into the actions of the bank, Germany’s second-largest lender behind Deutsche Bank, and caps months of negotiation that dragged on as new evidence of wrongdoing continued to emerged.
jlne.ws/1wArsYB
What 3 Banks May Have Cut to Pass the Stress Tests
Dealbook – NY Times
One important number usually remains under wraps when the Federal Reserve conducts its annual health checks of large banks.
It is the amount of money that the Federal Reserve effectively stopped the banks paying out to their shareholders and other investors.
One of the reasons that the Fed’s so-called stress tests become a source of agitation on Wall Street is that they can determine how much money the banks can distribute through stock buybacks, dividends and other types of transactions.
jlne.ws/18fRkgY
Banks Can Now Prep for a Tougher Exam
Dealbook – NY Times
Ater an arduous couple weeks of putting their institutions through a series of stringent stress tests, America’s top bankers might want to kick back and earn some money, perhaps even whistling to the possibility of higher interest rates. If only it were so easy. The only suitable tune would be Led Zeppelin’s bluesy stomp, “When the Levee Breaks.”
The 29 banks that passed the Federal Reserve’s annual boot camp mostly proved they have built up sufficient capital, the financial world’s equivalent of sand bags, to weather a once-in-a-generation deluge like the 2008 crisis. Only one of them has yet demonstrated what happens when the floodwaters rise well beyond even those barriers.
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Citi’s Corbat says stress test efforts ‘far from over’
Reuters
Citigroup Inc Chief Executive Mike Corbat told employees that the bank’s stress test work is “far from over”, despite the Federal Reserve raising no objections to Citi’s capital plan.
Citi failed the so-called stress tests in 2012 and 2014. Corbat has staked his job on the bank never failing them again.
“We all must recognize that our efforts are far from over”, he wrote in an internal memo seen by Reuters on Thursday.
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Exclusive: Former risk chief warned Deutsche Bank on stress test, emails show
Reuters
In the weeks leading up to the U.S. Federal Reserve’s annual stress test of major banks, a former risk executive of Deutsche Bank AG repeatedly warned senior managers of the German bank’s U.S. unit that they were painting a far too rosy picture of the bank’s health.
The warnings weren’t about this year’s stress test. They were written by William Broeksmit in December 2013 and January 2014 as the bank was preparing its Fed-mandated, internally run stress test. At the time, Broeksmit was serving as a director of the U.S. unit.
jlne.ws/1wAtTKA
S.E.C. Chief Defends Agency’s Handling of Bank Punishment
Dealbook – NY Times
One of Wall Street’s top regulators on Thursday shot back at criticism that the nation’s biggest banks enjoy special treatment in Washington, delivering a sweeping defense of the government while also rebuking the financial industry’s “repeated and disturbing violations of law.”
In a speech at Georgetown University, Mary Jo White, the chairwoman of the Securities and Exchange Commission, publicly addressed for the first time a growing debate over whether her agency allowed banks to avoid certain repercussions for their misdeeds.
jlne.ws/18fRKnQ
Morgan Stanley nixed preferred buyback in capital plan-source
Reuters
Morgan Stanley withdrew a proposal to repurchase $4.9 billion worth of trust preferred securities in order to get approval from the U.S. Federal Reserve for its capital plan, a person familiar with the matter said.
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Goldman Sachs Statement on Proposed Capital Actions
Goldman Sachs
The Goldman Sachs Group, Inc. (NYSE: GS) today announced that the Federal Reserve Board did not object to its revised 2015 capital plan, which includes the repurchase of outstanding common stock, an increase to its quarterly common stock dividend and the possible issuance and redemption of other capital securities. The firm intends to increase its quarterly common stock dividend by five cents a share to $0.65 per share, effective in the second quarter of 2015, subject to its Board of Directors’ approval.
jlne.ws/1FQTkre
Societe Generale Corporate & Investment Banking takes an Equity Stake in Eris Exchange
Press Release – Eris Exchange
Eris Exchange (Eris), a U.S.-based futures exchange group offering swap futures as a capital-efficient alternative to OTC interest rate swaps, today announced that Societe Generale Prime Services – formerly Newedge – has completed an equity investment in Eris. As part of the arrangement, Societe Generale will join Eris’ board of directors.
jlne.ws/1B9JkVu (PDF)
Nasdaq to challenge ICE and CME with new energy futures market
BY JOHN MCCRANK,Reuters
Nasdaq OMX Group said on Wednesday it is expanding into energy derivatives with energy futures and options set to trade on the Nasdaq Futures Exchange at less than half the prices charged by incumbents CME Group and Intercontinental Exchange .
jlne.ws/1Ao8hfU
Worrying Too Much about Geopolitics
by Kevin Noblet, WSJ MoneyBeat
Regional conflicts and other world events can tinge advisers’ and their clients’ outlook on investing. But they sometimes make a connection between headline-making news and markets that really doesn’t exist, notes San Diego-based adviser Kevin Clewley. “Stocks actually rose during Vietnam and the Korean War, as well as during both of the conflicts in Iraq,” he writes on Wealth Adviser at WSJ.com.
jlne.ws/18CSvao
Spanish Lender Offers to Buy TSB Banking Group of Britain
Dealbook – NY Times
TSB Banking Group, the lender spun out of Lloyds Banking Group last year, said on Thursday that it had received a preliminary takeover offer from Banco Sabadell of Spain.
The deal, if completed, would greatly expand Sabadell’s presence in Britain, where it primarily offers business accounts and banking services to Spanish companies.
jlne.ws/1wArZcT
Josh Sason Made Millions From Penny-Stock Financing
Bloomberg
Two thousand people cheered as Joshua Sason walked up to a boxing ring at an arena in Providence late last year. He trailed the actor Miles Teller, and the crowd was made up of extras—they were shooting a boxing movie, directed by the guy who made Boiler Room. Sason got to make a cameo in the fighter’s entourage because he’s producing the movie with Martin Scorsese and put up the budget. He’s 27 years old.
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Central Banks
Federal Reserve Officials Impair GAO Audits By Destroying Their Source Records
Robert Auerbach – HuffingtonPost
Both Republicans and Democrats have submitted bills to audit the Federal Reserve. Senator Rand Paul submitted an audit bill on January 27, 2015 for a General Accountability Office, GAO, audit of the nation’s central bank: the “Federal Reserve Transparency Act of 2015″. The 32 cosponsors were all Republicans except for Senator Mazie Keiko, (Democrat, Hawaii).
jlne.ws/1wAxt7t
Wondering What the Fed’s Statements Mean? Be Patient
James B. Stewart – NY Times
When the Federal Reserve convenes next week to ponder the most momentous monetary policy decision since the financial crisis — when to raise interest rates — it will also be grappling with the meaning of one deceptively simple word: “patient.”
What, exactly, does it mean if the Fed keeps “patient” in its outlook for monetary policy, or, as investors now seem to think more likely, drops the word?
jlne.ws/1wArH5W
Federal Reserve Tells Bank of America to Resubmit Capital Plan in Fall
WSJ
Bank of America Corp. can’t quite ace the “stress test.”
In a blow to Chief Executive Brian Moynihan’s efforts to clean the slate and improve relations with regulators, the Federal Reserve told Bank of America on Wednesday that it would need to change its capital-planning process and submit a reworked plan in the fall.
jlne.ws/1wAwvYV
American workers’ wages are stronger than we think
Fortune
On Friday, the Labor Department will release its monthly employment report, which will include an estimate of the number of jobs the U.S. economy added in February.
But many market watchers will be paying closer attention to how quickly the report estimates wages have risen, rather than the headline jobs figure. This is because we have already reached a point where job growth is faster than at any point since the late 1990s; for the economy to really gain steam, all that’s needed now is for workers to start to see their wages rise faster.
jlne.ws/1wAx0SQ
Asian central banks in rate cut rush
Financial Times
Asian central bank watchers are having a tough time deciding where to look.
On Thursday, South Korea became the latest to surprise the market with a rate cut, following in the footsteps of Thailand, China and India — all of which have loosened policy unexpectedly in the past two weeks alone. Indonesia’s February move to lower borrowing costs is also still fresh in the mind.
jlne.ws/1wAxRTy
PBOC’s Zhou Keeps Calm and Carries On
WSJ
What, me worry? Not China’s central bank governor. At a rare press conference Thursday, a relaxed and jovial Zhou Xiaochuan swatted away reporters’ concerns on the Chinese economy.
jlne.ws/1wAulZs
Currencies
U.S. Stocks Rally, Dollar Drops From 12-Year High
Bloomberg
U.S. stocks climbed, after equities had their biggest two-day selloff in six weeks, as banks rose and an unexpected drop in retail sales bolstered the case for keeping interest rates low.
Morgan Stanley, American Express Co. and Citigroup Inc. added at least 2.7 percent as they announced dividend payments and details on share buybacks after approval from the Federal Reserve following stress tests. Intel Corp. slid after cutting its first-quarter revenue outlook.
jlne.ws/1wAuH2f
Forex reserves to scale pass $380 bn this year: Barclays
Zee News
British brokerage Barclays has said it sees the Reserve Bank continuing to shore up the forex reserves, which have been hitting new highs for many months, to the tune of USD 50 billion to take the overall kitty to over USD 380 billion by December.
For the week ended February 26, forex reserves had increased to USD 328.12 billion, the highest ever, according to the RBI data, which also showed that it had net bought USD 12.2 billion from markets in January alone.
jlne.ws/1wAChKd
Oppenheimer’s Memani Says He Was Wrong on Dollar Rally Easing
Lananh Nguyen – Bloomberg
Krishna Memani, the New York-based chief investment officer at Oppenheimer Funds Inc., says he was wrong about the dollar.
“I thought the dollar’s rally would moderate in the near term,” Memani said in a blog post on Oppenheimer’s website. “Alas, that has not happened at all.”
jlne.ws/1wAviAU
Investors Forced to Get Creative for ‘Carry’ Trade; Borrow in euros, buy in the Philippines and Sri Lanka
By JAMES RAMAGE and ANJANI TRIVEDI
Whipsawed by upheaval in the world’s foreign-exchange market, investors are ripping up the rule book on a popular trading strategy.
jlne.ws/1FR1mQR
How much will a Grexit cost Asian currencies?
Business Spectator
Already driving a housing bubble in all major Asian cities from Seoul to Jakarta, significant hot money inflows are what Hong Kong, China and Singapore seek to avoid. However, Greece’s exit from the eurozone coupled with subsequent quantitative easing by the People’s Republic of China (PRC) to jump-start flagging growth could quickly exacerbate this Asian dynamic.
jlne.ws/1wAC6P6
Exclusive: IBM looking at adopting bitcoin technology for major currencies
Reuters
International Business Machines Corp is considering adopting the underlying technology behind bitcoin, known as the “blockchain,” to create a digital cash and payment system for major currencies, according to a person familiar with the matter.
The objective is to allow people to transfer cash or make payments instantaneously using this technology without a bank or clearing party involved, saving on transaction costs, the person said. The transactions would be in an open ledger of a specific country’s currency such as the dollar or euro, said the source, who declined to be identified because of a lack of authorization to discuss the project in public.
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Indexes & Index Products
CBOE to List MSCI Options, Expand its Index Coverage
Jim Kharouf – JLN
CBOE announced it will list options on the MSCI Emerging Markets Index and MSCI EAFE Index on April 21. The exclusive licensing deal with MSCI, is part of the CBOE’s efforts to expand its index coverage well beyond the US market. It also recently signed an exclusive deal to list FTSE and Russell Index products on CBOE.
jlne.ws/1Bz4X5n
Commodity Index Gains Ground in Short Month
Bloomberg Brief
The Bloomberg Commodity Index inched into positive territory in February for the first time since June. The index, which takes into account energy, grain, metal and livestock prices, gained 2.6 percent in February.
jlne.ws/1GGYkSY
MSCI Named a Top 5 Risk Technology Firm in RiskTech100
MarketWatch
MSCI Inc. MSCI, a leading provider of investment decision support tools worldwide, today announced it has been named a top 5 risk management technology firm in the 2015 RiskTech100, the most comprehensive study of the world’s most significant risk and compliance technology companies by Chartis. MSCI was also named the top firm in the Organizational Strength and Capital Markets – Buy-Side categories.
jlne.ws/1Bz65ps
MSCI China gets ready for a tech upgrade – Macroeconomic News
London South East
The rise of China’s private sector, particularly that of its internet and e-commerce companies, could finally be better reflected in the main equity benchmark that offshore investors track
jlne.ws/1Bz6cl0
U.S. Small & Large Cap Indexes Reflect YTD Changes in Relative Performance & Volatility for Small & Large Cap U.S. Stocks; Russell 2000 Index & CBOE Russell 2000 Volatility Index
MarketWatch
U.S. small cap stocks have exhibited stronger relative performance and lower relative volatility to U.S. large cap stocks in 2015 year-to-date as of March 6, according to Russell Indexes.
jlne.ws/1Bz6lEZ
Cheap vs smart (it doesn’t matter, beta wins)
Financial Times
Here’s an argument to cheer the hearts of anyone who thinks wealth management fees are too high: Adam Nash, Wealthfront chief executive, has penned a critique of what he calls broken values at Charles Schwab, prompting a sharp response from the venerable provider of investment services.
jlne.ws/1L1h1DP
Gold
Spot Gold Set for Longest Slump in 17 Years on U.S. Rates
Bloomberg
Spot gold fell, heading for the longest slump in 17 years, as speculation mounted that the Federal Reserve will boost interest rates for the first time since 2006, eroding the investment appeal of the precious metal.
U.S. equities rebounded from a two-session slump as bank stocks rose. Domestic oil prices fell for the third straight day on concern that a glut will expand, eroding gold’s allure as an inflation hedge.
jlne.ws/1wAB71o
Why gold could rebound to $1,400 an ounce
CNN Money
But the gold rally has come to an abrupt halt. Prices have plunged more than 11% from their highs earlier this year to about $1,150.
Much of the sell-off has taken place in the past few weeks as the dollar has strengthened.
That’s key. Gold is often looked at as an alternative currency. It does well when investors are worried about the outlooks for the legal tender printed by governments.
There are no such concerns about the greenback right now.
jlne.ws/1wABgSt
The Apple Watch Won’t Help Lift the Sagging Price of Gold
The Street
With gold prices knocking on five-year lows, and ETF investors selling out again after a brief New Year return, could Apple (AAPL – Get Report) be about to resurrect the bull market, as some have suggested?
Not a prayer.
Apple’s design chief Jony Ives might walk on water as far as tech-heads and gadget fans as concerned, but helping the sagging price of gold price by selling one million watches per month at $10,000 each — as some click-bait stories claim — would truly be a miracle.
jlne.ws/1wABHvS
OpenLink Expands Metals Team
Press Release – OpenLink
OpenLink, the global leader in Energy, Commodities and Treasury trading systems, has announced the expansion of its metals division to support growing demand for precious and base metals trading and risk management requirements from metals companies.
OpenLink has hired Sanket Kulkarni as a Senior Metals Consultant and Charly Shungu as a Metals Consultant, to perform requirement analysis, guide clients on best market practice, and implement the OpenLink metals solution. Both will be based in London and report to Premvir Jain, Head of Metals.
jlne.ws/18fNe8R
READ MORE: JLN Financials: RBS Trader Admits Defrauding Customers In Multimillion Dollar Securities Fraud Scheme; Commerzbank Pays Nearly $1.5 Billion to Settle U.S. Investigations; What 3 Banks May Have Cut to Pass the Stress Tests.