First Impressions
OCC Lingo: SIFMU Stands For Clearinghouse Changes
JohnLothianNews.com
The OCC was designated a systemically important financial market utility in 2012. That led to some big changes at the organization, along with challenges in risk management and credit and liquidity resources. John Lothian News spoke with John Fennell, executive vice president, financial risk management at the OCC, about what the organization is doing to insure that it meets these and other regulatory obligations.
Watch the video »
Quote of the Day
“If there was better U.S. and European news then U.S. interest rates would go up. Our concerns remain that rebounding U.S. and global data take rate hiking risks to the next level, causing credit spreads to widen.”
Bank of America Corp. credit analysts in the story, “There’s Nothing Like Disappointment to Keep Debt Markets Booming”.
Lead Stories
Crash Boys
Michael Lewis – Bloomberg
The first question that arises from the Commodity Futures Trading Commission’s case against Navinder Singh Sarao is: Why did it take them five years to bring it?
A guy living with his parents next to London’s Heathrow Airport enters a lot of big, phony orders to sell U.S. stock market futures; the market promptly collapses on May 6, 2010; it takes five years for the army of U.S. financial regulators to work out that there might be some connection between the two events. It makes no sense.
jlne.ws/1IQMIuD
Details in Deutsche Bank’s Libor Settlement Point to Acute Cultural Flaws
By DOMINIC ELLIOTT, NY Times
Deutsche Bank has found a new form of Libor shame. The firm, Germany’s biggest bank, agreed on Thursday to pay a record $2.5 billion in a settlement of rate-rigging misdeeds with three United States authorities and the Financial Conduct Authority of Britain. On top of the manipulation, it misled the British regulator.
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The Private Equity Firm That Grew Too Fast
NY Times
Jonathan M. Nelson, the billionaire media mogul and founder of Providence Equity Partners, enters the room — limping.
The brace on his right leg is a souvenir from his private equity firm’s annual ski outing to Alta, Utah. Mr. Nelson ripped his A.C.L. while heli-skiing. Because Masters of the Universe never just trip.
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There’s Nothing Like Disappointment to Keep Debt Markets Booming
Bloomberg
If not for a steady stream of disappointing economic news, what would corporate-bond investors do?
The fact that company debt has rallied in recent months isn’t so much a reflection of optimism on growth and profits than it is a bet the spate of underwhelming data will keep the Federal Reserve from declaring happy hour over by raising interest rates for the first time since 2006.
jlne.ws/1EApJ9m
Supervisors Look to Bank Stress Tests For Clues About Clearinghouses
Kary Burne, WSJ
International market supervisors, moving to fortify so-called “clearinghouses” that act as a key safety net for the financial system, are taking lessons from bank stress tests, said people familiar with the discussions. Supervisors at the Bank for International Settlements’ Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have been reaching out to officials involved with bank stress tests to ask how similar measures could work for their monitoring of clearinghouses, the people said.
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HSBC to Weigh Moving Headquarters From London
By CHAD BRAYA, NY Times
The British bank HSBC said on Friday it would review whether to move its headquarters from London amid a shifting regulatory landscape that includes a bank tax that has hit Britain-based lenders particularly hard.
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HSBC, JPMorgan, C Agricole to fight EU charges at June hearing: sources
Reuters
HSBC Holdings (HSBA.L), JPMorgan (JPM.N) and Credit Agricole (CAGR.PA) will seek to fight European Union charges of rigging financial benchmarks at a closed door hearing in June, two people familiar with the matter said on Friday.
The European Commission accused the three banks in May last year of manipulating the Euribor interbank offered rate after they refused to settle a case five months earlier, unlike six other banks.
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UBS Wealth cuts allocation to U.S., UK stocks
Reuters
UBS Wealth Management, the world’s biggest wealth manager, has cut its positions in U.S. and UK stocks, betting that euro zone shares offer the best value and growth prospects, the firm’s chief investment officer said in a note to clients.
The firm cut its tactical allocation to U.S. stocks to the lowest in three years at “neutral” from “overweight” while initiating an “underweight” on UK stocks.
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Google’s Eric Schmidt Plays the Adult in D.E. Shaw Investment
Dealbook – NY Times
Eric E. Schmidt, the executive chairman of Google, is reprising the adult supervisory role he played with Google’s founders.
Not for him the frivolity of, say, a sports team investment like the $2 billion that Steven A. Ballmer paid for basketball’s Los Angeles Clippers. Mr. Schmidt’s family vehicle, Hillspire, is instead buying 20 percent of the $36 billion hedge fund firm D.E. Shaw from the estate of bankrupt Lehman Brothers.
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Tech triumvirate propels Nasdaq, S&P to record highs
Reuters
The Nasdaq Composite and S&P 500 chalked up record high closes on Friday, propelled by strong results from tech behemoths Google, Amazon and Microsoft.
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Nasdaq CEO: Exchange Operators Should ‘Assume the Worst’ on Market Manipulation Efforts; ‘We need to be paranoid,’ Nasdaq CEO Robert Greifeld says
By BRADLEY HOPE, WSJ
Exchange operators need to “assume the worst” when it comes to rogue traders and firms trying to manipulate U.S. markets, Nasdaq OMX Group Inc. Chief Executive Robert Greifeld said in an interview.
jlne.ws/1Hy0KlU
Talk of China Dim Sum Bond Market’s Death Is Greatly Exaggerated
Bloomberg Business
When Hong Kong hosted the first Dim Sum bond sale in 2007, it was where Chinese firms went for cheaper debt and global funds flocked to access the nation’s closed markets. Now the dynamics are changing.
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Junk Bond Investors Better Start Thinking More About Russia
Bloomberg
Take a quick glance at the composition of the Barclays global high-yield index – one of the most widely-used indices for tracking junk-rated bonds – and the proportion of emerging market debt doesn’t look like it’s moved all that much. A deeper dive shows a different picture, however, with emerging market debt accounting for a much greater portion of the index on a risk-adjusted basis.
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Euro zone warns Greece no cash till full reform deal
Reuters
Euro zone finance ministers warned Greece on Friday that its leftist government will get no more aid until it agrees a complete economic reform plan, as Athens lurches closer to bankruptcy.
Greek Finance Minister Yanis Varoufakis faced a harsh morning in which euro zone ministers bemoaned talks they felt “were going nowhere” and one minister said that maybe it was time governments prepared for the plan B of a Greek default.
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Goldman Said to Lose Two Traders From Mortgage-Backed Bond Team
Bloomberg
Two Goldman Sachs Group Inc. mortgage traders left the company this month, according to a person with knowledge of the departures.
The pair, Alexander Reiss and Costin Bontas, traded mortgage bonds guaranteed by government-backed entities, said the person, who asked not to be named because the information isn’t public. Reiss and Bontas declined to comment, as did Michael DuVally, a spokesman for the bank.
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Central Banks
ECB to Debate Greek Banks Collateral as IMF Payment Looms
Bloomberg
The European Central Bank prepares to debate on May 6 whether to make access to emergency cash for Greece’s banks more difficult if aid talks remain deadlocked, just as the cash-strapped country will be faced with yet another debt payment.
While Prime Minister Alexis Tsipras’s government struggles to pay pensions and salaries at the end of the month, Greece may get a brief respite in interest of about 201 million euros ($217 million) on its International Monetary Fund loans due on May 1. As the deadline coincides with a holiday, followed by a weekend, the payment can be delayed until May 6, a person familiar with the matter said.
jlne.ws/1EAm8YR
Federal Reserve prepares toolkit for higher rates
Financial Times
For the Federal Reserve, deciding the date of its first interest rate rise is only part of the battle. As the US central bank prepares for the first increase in nearly a decade, a debate is still under way over new levers it will use to transmit its decisions into the broad reaches of the financial markets.
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Fed Should Make Bond Buys a Regular Policy Tool, A Boston Fed Paper Finds
WSJ
The Federal Reserve should consider keeping bond buys as a regular tool of monetary policy rather than return to a more conventional policy relying just on setting short-term rates, a newly-released paper from the Federal Reserve Bank of Boston says.
In particular, the central bank’s new de-facto third mandate, overseeing financial stability, might benefit from a broader array of available policy measures, argues Michelle Barnes, a senior economist adviser at the Boston Fed.
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Asian central banks to ease further, but effects may be muted: Reuters poll
Reuters
Emerging Asian central banks are expected to cut interest rates again in the coming months, but economists polled by Reuters are doubtful the moves will significantly boost growth or inflation.
The findings echo results from earlier this week in Reuters surveys of more than 250 economists in Europe and North America who also expect more easing.
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Currencies
FX broker Advanced Markets clarifies its AFS licence
ASIC
Following concerns raised by ASIC, Advanced Markets Ltd (Advanced Markets) has agreed to make changes to its website (www.advancedmarketsfx.com). The changes relate to statements which may have been misunderstood as implying that ASIC regulates all financial services provided by Advanced Markets, including those which are not carried on in Australia.
jlne.ws/1aXLzFX
Blockchain s Rise Can Upend Traditional Payment Providers
PaymentsSource
Most people remain skeptical of the libertarian utopia wherein the government cedes control of the money supply to Bitcoiners. But some are starting to come around on the blockchain technology that enables Bitcoin as an important part of our digital future, as well as an advancement that threatens the third parties that often manage financial transfers.
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Bitcoin Island: cleaning up the crypto currency
BBC News
Bitcoin tends to hit the headlines for all the wrong reasons – the spectre of infamous Japanese exchange MtGox, which went bankrupt in 2013 after a spate of hacking resulted in the theft of around 650,000 of the virtual coins (today worth around £150/$223 each), still looms large. But the Isle of Man government believes a combination of regulation and encouragement can not only reverse Bitcoin’s reputation, but also push it towards the mainstream.
jlne.ws/1Jk9gqV
BitBeat: Tackling Bitcoin Price Swings, With Eye on Emerging Markets
MoneyBeat – WSJ
A flurry of new payment products targeted at the developing world has revived hopes that bitcoin can gain a foothold in a promising market that has until now eluded the digital currency.
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Indexes & Index Products
Will the Nasdaq Go On to Set Sustainable New Highs?
By KRISTEN SCHOLER, WSJ
It’s one for the book. The Nasdaq Composite closed at its best level on record Thursday, eclipsing its previous high of 5048.62 set back in the dot-com heydays. Gains in Apple Inc., the Nasdaq’s biggest component, over the past 12 months have played a big role in fueling the index. Strength this year in the technology and health-care sectors have helped too.
jlne.ws/1Oj7mKJ
Fanfare for the Uncommon Index: Nasdaq Leaves Dot-Com Era Behind, Closes at Record High
Barrons.com
After 15 long years, the Nasdaq Composite finally broke its dot-com-era high. The question now: Does it really matter anymore?
jlne.ws/1Jk8qua
Passive, but Powerful: How Index Funds Exercise Their Clout
Knowledge@Wharton
Index-style investing is all the rage. Investors by the millions believe that funds do better by seeking to match the stock market rather than trying to beat it. But what happens to companies with large blocks of shares owned by these “passive” investors?
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SPIVA Interpretation and Misinterpretation
S&P Dow Jones Indices Indexology Blog
The S&P Dow Jones SPIVA U.S. Scorecard is published semi-annually. It’s some twenty pages of hard-hitting data on active manager performance versus comparable market benchmarks. The report is parsed into multiple tables covering different time periods and different asset classes, and is provided in both equal-weight and asset-weighted returns. There’s also information on survivorship bias and style consistency.
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Gold
Venezuela carries out $1 bln gold swap with Citibank -media
Reuters
Venezuela’s central bank has converted part of its gold reserves into at least $1 billion in cash through a swap with Citibank, local media reported on Friday.
The deal will make more foreign currency available to President Nicolas Maduro’s socialist government as the OPEC nation struggles with soaring consumer prices, chronic shortages and a shrinking economy worsened by low oil prices.
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Like Turning On A Switch: The Gold Standard And Japan’s Economic Miracle
Forbes
Dr. Simon Bytheway has made two major career mistakes in life: First, he teaches Japanese finance students an uncomfortable truth — that their country’s economic preeminence derives in large part from the influence of western culture. His second career mistake was to specialize in research pertaining to the gold standard, something which his Keynesian academic colleagues told him would consign him to the sidelines of the discipline.
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Urge To Merge: 6 Gold Juniors That Could Be Acquired Soon – AuRico Gold Inc. (NYSE:AUQ)
Benzinga
Faced with a gold market slump that’s set to hit four years, many juniors have been forced to take extreme measures, which includes merging with other miners.
That being said, any one of the following six junior gold companies could be the next takeover target or even make an acquisition of its own.
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How central banks mislead on gold reserve reporting
www.mineweb.com
Since writing yesterday’s article on scepticism regarding central bank gold reporting, I have had my attention drawn to the publication by The Gold Anti Trust Action Committee (GATA) around 2 ½ years ago of a leaked IMF confidential document on central bank reporting of gold reserves. I append the GATA article, with a link to the full IMF document, on this below and from it it can be seen how non-transparent such reporting has become – in the interests of protection of bank-sensitive data – when it comes to central banks hiding leasing and swap agreements for their gold in their overall reserve figures.
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Gold Prices Fall to Lowest Level in More than a Month
WSJ
Gold prices fell to their lowest level in more than a month Friday, as a rally in U.S. technology stocks prompted investors to dump the safe-haven metal and buy equities.
jlne.ws/1EArqn6
There be gold thar: Scottish hamlet braced for rush after prospectors find deposits
www.telegraph.co.uk
A tiny Scottish hamlet named Towie is bracing itself for the world’s next gold rush after prospectors found evidence that it sits on major deposits.
The remote community in Aberdeenshire does not even have a shop but local streams have been well known for grains of gold of “significant size” for decades.
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Miscellaneous
As Cognition Slips, Financial Skills Are Often the First to Go
NY Times
When Helen Clark brought her father-in-law, then 83, to the doctor last year, she knew his mind was slowing, but a mental status exam confirmed it. He knew the year, where he lived and the name of the president. But when the doctor asked him to count backward from 100, subtracting seven from each number — 100, 93, 86, 79 – a look of confusion washed over his face.
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Meet The Richest Person in the World’s Happiest Place
Bloomberg
Ernesto Bertarelli has every reason to be happy. His $15.8 billion fortune makes him the richest person in Switzerland, the world’s happiest place, according to a new survey. The World Happiness Report 2015 names the alpine nation of 8 million people as the happiest country in the world, followed by Iceland, Denmark, and Norway.
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READ MORE: JLN Financials: Crash Boys; Details in Deutsche Bank’s Libor Settlement Point to Acute Cultural Flaws; The Private Equity Firm That Grew Too Fast.