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.

Corporate credit embraces electronic trading

Wednesday, 25 July 2012
Corporate credit embraces electronic trading Recent years have witnessed unprecedented growth in the electronic trading of European credit instruments. Designed to improve transparency and minimise counterparty risk in the derivatives markets, the direction of new regulation is an important factor behind e-trading of European credit. The rules that will govern trade execution, clearing and reporting have yet to be finalised, but it is clear that reform is likely to push trading further towards electronic markets, where there is enhanced price transparency, workflow efficiency and regulatory oversight. Rupert Warmington, director of European credit markets at Tradeweb, discusses why he expects this trend will continue. http://www.ftseglobalmarkets.com/

Recent years have witnessed unprecedented growth in the electronic trading of European credit instruments. Designed to improve transparency and minimise counterparty risk in the derivatives markets, the direction of new regulation is an important factor behind e-trading of European credit. The rules that will govern trade execution, clearing and reporting have yet to be finalised, but it is clear that reform is likely to push trading further towards electronic markets, where there is enhanced price transparency, workflow efficiency and regulatory oversight. Rupert Warmington, director of European credit markets at Tradeweb, discusses why he expects this trend will continue.

To improve portfolio yields in a climate where other fixed income instruments are showing historically low yields, many investors have turned to European corporate bond markets in recent years. Meanwhile, corporate issuers in Europe are increasingly looking to access capital markets as a result of balance sheet constraints in the bank loan market, which they have traditionally relied upon for a large part of their financing needs. Upcoming regulatory changes and a desire for greater operational ­efficiencies within asset managers have combined to form an ongoing and significant increase in the electronic trading of European credit instruments.

The shift towards e-trading in European credit bonds corresponds with widespread change in the investment patterns and workflows of “real-money” institutions. European dealers are increasingly looking to electronic platforms to service clients’ flow business in vanilla products—precisely where there is greatest liquidity. Growth in electronic trading of investors’ flow business has boosted e-trading volumes overall—estimated now to represent well over 35% of the European credit market, up from less than 20% just a couple of years ago.



Access to liquidity lies at the heart of successful e-trading platforms. There has been a sizeable increase in the number of market makers providing prices in European credit over electronic marketplaces such as Tradeweb. Sell-side participants’ desire to win volume through e-platforms has led to significant improvements in the quality of electronic liquidity compared to that offered by phone. This is especially evident in recent months, and has not necessarily reflected conditions in the market overall. There is indeed an increasing buy-side perception that a growing proportion of overall sell-side liquidity is now being offered electronically as opposed to voice trading.

Yet, for institutional investors, operational efficiency is almost as important as liquidity. Throughout the entire trading cycle of price discovery, ­execution and post-trade processing, electronic trading platforms provide ready access to trade information, analytics, and price transparency. And both buy- and sell-side institutions can fully integrate electronic trading platforms into their existing workflow systems.

This automation must not come at the cost of flexibility. Buy-side traders can tailor tickets to their precise requirements on electronic platforms and request prices from specific dealers (the “request-for-quote” or RFQ model). This auction-like process gives buy-side traders fast and trans­parent price discovery, simultaneously putting dealers into competition. Increased competition optimises pricing efficiency and helps the buy-side demonstrate best execution.

More sophisticated electronic trading platforms are also flexible enough to allow buy-side investors to execute multiple trades concurrently from a single list of orders across multiple asset classes. The time saved allows asset managers to invest resources more efficiently to boost overall productivity and performance.

The need for flexibility in trading these instruments has become increasingly important as both regulatory and macroeconomic factors coalesce, reducing overall market liquidity. This has led various market participants recently to explore new price discovery and execution models which, if successful, could increasingly challenge the way business is done and even the current market structure.

However, the common thread running through the fundamental changes underway in the marketplace is the greater use of electronic trading. Whilst the main driver stimulating the willingness to look at new ways to execute trades may be regulatory and macroeconomic change, the need for more efficient and cost-effective trade execution is also at the core of these moves. In other words, the evolution happening today is underpinned by some of the same drivers that have been central toward the increased use of electronic trading across fixed income markets for more than ten years.

It is clear that the fixed income markets are becoming an increasingly dynamic and exciting place in which to operate, especially in the burgeoning electronic marketplace for European credit. This presents us with challenges, but also many opportunities to contri­bute to the accelerating evolution of the market. As electronic trading continues to meet the needs of financial institutions seeking better liquidity, increased efficiency and improved performance, marketplaces like Tradeweb will continue to partner with the buy- and sell-side to drive innovation in the new regulatory and economic environment.

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