Saturday 20th December 2014
NEWS TICKER: FRIDAY DECEMBER 19TH 2014: Scotiabank’s Commodity Price Index dropped -4.8% m/m in November (-6.1% yr/yr) and will end 2014 in a ‘deflationary’ mode, says economist Patricia Mohr. "Significant capacity expansion and the defence of market share by major oil and iron ore producers— against a backdrop of lacklustre world economic growth — account for the softness at the end of the year," she says. Mohr adds that the decision by Saudi Arabia not to reduce output to shore up international oil prices, but instead to allow prices to drop to levels curbing US shale development appears to be having a negative impact on confidence in a wide variety of other commodity as well as equity markets. She predicts prices will fall further this month, but will start to rebound in mid 201 - Jonathan Hill, the EU's financial-services commissioner, says he plans to pursue rules that separate a bank's proprietary trading from retail operations. "The sensible thing to do is to seek to make progress quickly" on the issue, Hill said. "There are still areas of risk in some of the biggest and most complicated banks,” reports Bloomberg- CME Group, said yesterday that it will change daily price limits in its CME Feeder Cattle futures effective today, pursuant to its emergency action authority. The current daily price limit for CME Feeder Cattle futures is $3.00 per hundredweight and will change to $4.50 per hundredweight effective on trade date December 18th Additionally, effective December 19th (tomorrow) these limits will have the ability to expand by 150% to $6.75 per hundredweight on any business day in the event that one of the first two contract months settles at limit on the previous trading day. CME Feeder Cattle futures have been locked limit for five consecutive days as a result of various factors. The change to daily price limits is necessary to ensure continued price discovery and risk transfer, says the CME. Daily price limits for CME Live Cattle futures will remain unchanged at $3.00 per hundredweight. Effective Friday, December 19th, these limits will have the ability to expand by 150 percent to $4.50 per hundredweight in the event that one of the first two contract months settles at limit on the previous trading day - The Straits Times Index (STI) ended +16.42 points higher or +0.51% to 3243.65, taking the year-to-date performance to +2.49%. The FTSE ST Mid Cap Index gained +0.29% while the FTSE ST Small Cap Index gained +0.71%. The top active stocks were Keppel Corp (+2.68%), SingTel (-1.02%), DBS (+2.36%), Global Logistic (-3.21%) and UOB (+0.30%). The outperforming sectors today were represented by the FTSE ST Basic Materials Index (+3.13%). The two biggest stocks of the FTSE ST Basic Materials Index are Midas Holdings (+6.38%) and Geo Energy Resources (unchanged). The underperforming sector was the FTSE ST Telecommunications Index, which declined -0.98% with SingTel’s share price declining -1.02% and StarHub’s share price declining-0.73%. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+2.56%), DBXT CSI300 ETF (+0.42%), STI ETF (+0.61%). The three most active Real Estate Investment Trusts (REITs) by value were Ascendas REIT (-0.42%), Keppel DC REIT (unchanged), Suntec REIT (+0.26%). The most active index warrants by value today were HSI23400MBeCW150129 (+7.32%), HSI22600MBePW150129 (unchanged), HSI24000MBeCW150129 (+12.50%). The most active stock warrants by value today were KepCorp MBeCW150602 (+21.95%), DBS MB eCW150420 (+29.29%), DBS MB ePW150402 (-18.03%) - Spain’s Director of Public Prosecutions, Eduardo Torres Dulce, has resigned from the post for “personal reasons”, Spanish daily El Mundo reported this morning. A spokesman for the Public Prosecutor’s office confirmed the news by telephone to The Spain Report, saying that Mr. Torres Dulce had informed Justice Minister Rafael Catalá of his decision: “but that it perhaps would not come into effect until they find a replacement”. That decision is taken at cabinet level. The next cabinet meeting for Rajoy’s government is tomorrow morning - Hedge funds including Marshall Wace, Odey Asset Management and Lansdowne Partners are shorting OTP Bank Plc, a Hungarian lender with a Russian subsidiary whose shares have fallen almost 6% this month reports Albourne Village. All three London-based funds took or increased their position this month in OTP, Hungary’s largest lender, according to data compiled by Bloomberg. The ruble rose today in Moscow after plunging as much as 19%against the dollar yesterday, when Russia’s central bank increased interest rates to 17% percent from 10.5 percent in an attempt to stem the decline. The ruble is down 52% this year and has taken a disproportionate beating in the wake of sanctions and falling oil prices. The country still has the third largest currency reserves in the world and so is unlikely to default. According to Eric Chaney, Manolis Davradakis and Greg Venizelos from AXA IM’s Research and Investment Strategy team Russia will likely resort to fiscal stimulus to contain the risk of social and political unrest. Capital controls, political unrest and even default on private hard currency debts are possible outcomes they say. They credit default swaps market is pricing a one-third probability of sovereign default within five years - Indonesia is ramping up financing for its $439bn development program, planning an almost fivefold increase in sales of project sukuk. The government is seeking to raise IDR7.14trn rupiah (around $568m) from notes that will fund particular construction ventures next year, compared with IDR1.5trn this year, which say local press reports, will help finance its estimated spending of about IDR5,519trn from 2015 to 2019 to build roads, railways and power plants.

20-20: The new world order in securities lending

Thursday, 15 December 2011
20-20: The new world order in securities lending During a FTSE Global Markets interview at the end of 2010, Brian Lamb, chief executive officer of New York-based EquiLend, a provider of trading and operations services for the securities finance industry, suggested that the most successful beneficial owners are the ones that consistently allocate resources and apply professional investment-management processes and approaches to their programmes—because, said Lamb, “as history has often shown, one can’t afford not to be educated”. http://www.ftseglobalmarkets.com/media/k2/items/cache/9d8de7ef67b13c9c52fcfb74767a1564_XL.jpg

During a FTSE Global Markets interview at the end of 2010, Brian Lamb, chief executive officer of New York-based EquiLend, a provider of trading and operations services for the securities finance industry, suggested that the most successful beneficial owners are the ones that consistently allocate resources and apply professional investment-management processes and approaches to their programmes—because, said Lamb, “as history has often shown, one can’t afford not to be educated”.

For the better of the past decade, securities lending was a perpetual wellspring of revenue for beneficial owners and, not surprisingly, a sense of complacency ultimately took hold. Then came the fall of 2008 (literally), and owners quickly assumed a defensive posture, some exiting sec-lending altogether, others finding few plausible alternatives and ultimately returning, albeit with a renewed sense of urgency and a need for full transparency.

While the market psyche may have changed for good, EquiLend is seemingly none the worse for wear. It is ten years since its incorporation (the platform went live in 2002), and chief executive officer (CEO) Brian Lamb has watched EquiLend’s business grow out from an initial ten-member ownership group to a roster comprising 70 or so different global financial organisations. It has obviously been a source of satisfaction for Lamb. “It’s certainly a proud moment to reach this milestone and to have things going so well at the same time,” he remarks. “The fact that the business continues to grow at this pace is tremendously important to us, as we see ourselves as a cog in the wheel of the securities-finance business, one that can continually bring more efficiency to the entire marketplace.”



EquiLend’s operational model is such that if there’s big volume, business is good—no matter which way the markets are moving. Not surprisingly, the most recent round of high volatility is reflected in EquiLend’s year-to-date stat sheet; through September 2011, total borrowing and lending transactions were up 16%, and in 2011 the platform experienced its ten largest trading days ever, including 28,000 transactions processed during a single day in August 2011. Volume has only been part of the story. Through 2011 EquiLend added 15 clients, a record for a single year, including newcomers such as Prudential Investment Management, Kellner DiLeo & Co., and RBC Dexia Investor Services. Backing Equilend are some of the world’s top global financial institutions, among them BlackRock, Goldman Sachs, JP Morgan, and Bank of America Merrill Lynch.

Key to EquiLend’s recent spate of success is innovation wherever possible, says Lamb. EquiLend’s post-trade offerings are ripe for investors seeking plausible risk-mitigating strategies. Additionally, a new trading-optimisation programme enables clients to pool long and short assets and includes limits based on existing bilateral relationships. “Our goal is to optimise these securities transactions to the fullest extent,” says Lamb.

While the EquiLend platform has always been able to accommodate fixed-income securities, it wasn’t until recently that investors on the bond side began to truly embrace the EquiLend concept, he adds. The firm launched BondLend, a fixed-income and repo-trading/post-trade services platform designed to boost liquidity and reduce risk using a single point of entry to the non-equities sector. “Of the roughly 20,000 trades that we handle daily, roughly 2,000 come from the fixed-income side,” says Lamb. “We see that number growing pretty significantly over the near term. Let’s face it—the world as a whole has a lot of debt, and is in need of tremendous financing. So in terms of notional size, we’re looking at a market that is much bigger than equities.”

Initially used mainly for general-collateral or “low-touch” type transactions, over time investors have begun to reap the benefits of EquiLend’s automation processes for other kinds of trading. Today, some 20% of platform activity is specialist-based or otherwise non-GC— “which is a pretty significant number, and we expect that trend to continue, particularly as the markets fully embrace automated solutions in order to keep pace,” notes Lamb.

Given the uncertain nature of the financial landscape, Lamb is heartened by beneficial owners’ efforts to stay informed. He observes:  “Events like the demise of MF Global serve as a reminder to all financial institutions that no one can afford to be complacent—you have to be diligent, applying sound financial modelling and market-tested principles in order to run your business successfully. [And] with leveraging down, capital allocation has become paramount, requiring that balance sheets are maintained more efficiently than ever before.”

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