A Tale of Two Crises

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Top Headlines

A Tale of Two Crises – Profit & Loss (free story)
While traders in the western markets remain focused on the twists and turns unfolding in Greece and the Eurozone, a potentially more significant financial crisis is developing on the other side of the world that could have graver implications for the world economy.

Market Structure May be Contributing to Lack of Real Action in the Markets –Profit & Loss (subscription)
It’s been an interesting couple of weeks in the markets, as can be witnessed by my Twitter output going into meltdown over China’s woes (I tried to get #biggerthanGreece trending but failed miserably). Speaking to people in the market, the general sentiment remains surprise that things haven’t been busier and I suspect part of the reason for this may be the changing market structure.

Draghi Said to Doubt Greek Solution as Tsipras Reforms Awaited – Reuters
European Central Bank President Mario Draghi has voiced unprecedented doubts about the chances of rescuing Greece from bankruptcy as Greek Prime Minister Alexis Tsipras was due to put forward last-ditch reform proposals on Thursday.

Emerging Market Currencies in Line of Fire – Financial Times (subscription)
Emerging market currencies were left with no hiding place in the global economy on Wednesday as China’s equities turmoil put concerns about the Greek crisis in the shade.

Survey: Trade Reporting Costs Expected to Continue Rising – Profit & Loss(free story)
A new survey conducted by Sapient Global Markets shows that the costs for managing trade reporting is expected to rise significantly over the next two years.

Foreign Exchange Traders Focus on US and UK Policy Race – Financial Times(subscription)
With a deferential style at which the British excel, the Bank of England has politely allowed its American cousin, the US Federal Reserve, to make all the running on the timing of when to rise interest rates.

Industry Collaborates on Margin Processing Hub – Profit & Loss (free story)
Thirteen major global banks, in collaboration with Icap, Euroclear, DTCC and AcadiaSoft, have launched a margin processing hub for non-cleared OTC derivatives.

ITG Survey Reveals Concerns of Hedge Fund CFOs – Hedgeweek
Changing financial rules and regulations are the most pressing issue on the minds of almost half (47%) of the chief financial officers at US hedge funds, according to a poll by execution broker and research provider ITG.

China’s Market Meddling Makes Yuan Look Like a Poor Reserve Currency –Bloomberg
China’s escalating intervention in its collapsing stock market – after months of quiescence while equities surged – is tarnishing policy makers’ efforts to establish the yuan as an official reserve currency.

Regulatory News

FCA’s New Senior Managers Regime Could be Harmful in the Long Run –Global Investigations Review (subscription)
The UK’s Financial Conduct Authority (FCA) published final rules on 7 July for a new senior managers’ regime, which will make thousands more UK financial services workers accountable for potential misconduct.

FSB Publishes Interim Report on Progress in Reforming Major Interest Rate Benchmarks (press release)
The FSB is publishing today an interim progress report on reforms to existing major interest rate benchmarks (such as Libor, Euribor and Tibor, collectively the Ibors) and in the development and introduction of alternative near risk-free interest rate benchmarks (RFRs).

EU’s Moscovici Sees Financial Transaction Tax in Place Early 2017 – Reuters
Negotiations over a planned tax on financial transactions in 11 European countries could wrap up later this year and the levy could be in place by early 2017, EU Economic Affairs Commissioner Pierre Moscovici said on Wednesday.

Hedge Funds Are a Holdout in Fed’s Plan to Prevent the Next Lehman –Bloomberg
Regulators need help from hedge funds to make sure a bank failure in the future doesn’t roil markets the way Lehman Brothers did. The problem is hedge funds don’t see what’s in it for them.

Company News

EBS Direct Adds Metallinvestbank and Standard Bank as Liquidity Providers –Profit & Loss (free story)
EBS BrokerTec has expanded local market coverage on its EBS Direct currency trading platform with the inclusion of Metallinvestbank as the first Russian and Standard Bank as the first South African liquidity providers, bringing the total number of LPs to 24.

Blackwell Global Fortifies China Presence With Beijing Office – LeapRate
Blackwell Global is fortifying its presence in China, officially adding Beijing to its existing Shanghai branch, with a new office located in the heart of Beijing’s financial district.

SGX and ICE Report Uptick in FX Futures – Profit & Loss (free story)
Both the Singapore Exchange (SGX) and Intercontinental Exchange (ICE) saw a month-on-month increase in FX futures volumes in June.

Market Savvy  

Greece – Copout Still More Likely Than Bailout or Burnout
Olivier Desbarres
Events in the past 48 hours have reinforced my long-held view that a copout – whereby the Troika grants the Greek government new loans in exchange for agreeing to strict reforms – is more likely than a full bailout (including significant debt forgiveness) or burnout (Greece defaults and leaves the Eurozone).

Yen Advances to Seven-Week Peak Versus Dollar on Greece, China Worries
Reuters
The yen rose to a seven-week high against the dollar on Wednesday, as investors bought the Japanese currency for safety, spooked by plunging Chinese stocks and the still unresolved Greek debt crisis.

US Dollar Lower After Cautious FOMC Minutes
Wall Street Journal
The USD traded lower overnight after the June FOMC minutes highlighted external risks which could delay a Fed rate hike. Markets were also unsettled by the NYSE shutting down for some time due to a technical glitch, both these events lending Treasurys a bid tone.

Room for Recovery in the AUD
BNP Paribas
BNP Paribas STEER, its short-term fair-value model, indicates that the AUD appears oversold and entered a bullish signal yesterday targeting its fair-value of 0.7650. Hence, in the bank’s view there is further room for AUDUSD to rally.

Press Releases

Aite Report: Currency Risk: Hedge It, or a Source of Alpha?
The strengthening dollar is pushing pension funds, mutual funds and their investment managers to investigate the need for hedging currency risk and its impact on portfolio returns. Increasingly, these buy-side firms are considering foreign exchange a separate asset class and a source of alpha, and they are also actively hedging FX exposure on a regular basis.

Diverging Monetary Policy Cycles Impact International Use of the Euro: ECB Report
The euro was increasingly used as a funding currency by international borrowers in 2014 and early 2015, compared with the previous review period, while the share of the euro in foreign exchange reserves remained broadly stable. The European Central Bank (ECB) has published “The International Role of the Euro”, which examines developments in the use of the euro by non-euro area residents in 2014 and early 2015.

SS&C Completes Acquisition of Advent Software
SS&C Technologies, a provider of financial services software and software-enabled services, has completed its acquisition of Advent Software, a provider of software and services for the global investment management industry.

Crypto Facilities and Elliptic Bring Enterprise Standards to Bitcoin Trading
Bitcoin analytics and security firm Elliptic and Bitcoin derivatives exchange Crypto Facilities have launched a settlement and clearing mechanism that separates Bitcoin custody from all other exchange functions.

Industry Events