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China’s Central Bank Prioritizes Strong Yuan When Managing Liquidity

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China’s Central Bank Prioritizes Strong Yuan When Managing Liquidity –Wall Street Journal (subscription) China’s central bank faces a tough balancing act, trying to ease credit in the financial system without adding to pressures weakening the Chinese currency.

Desperate in Davos: Policymakers Struggle for Answers – Reuters Angela Merkel was missing from Davos this year, but the German leader’s optimistic mantra “we can do this” echoed through the snowy resort in the Swiss Alps.

Dollar Edges Down But Close to Recent Highs; Fed, BOJ in Focus – Reuters The dollar edged down on Monday but remained well off recent lows as markets started the week on a calmer note and investors turned their attention to upcoming central bank meetings.

There’s a Giant Elephant at the Bank of England – Bloomberg It’s a new year and Bank of England officials have been sharing their views on the outlook for the U.K. and the risks. Well, some of the risks.

China to Set Up its Own Virtual Currency – The Register The People’s Bank of China (PBOC), China’s central bank, hopes to launch its own virtual currency to cut the cost of handling paper money and to give the government more control of the country’s money supply.

Russian Officials Seek to Reassure Markets They Have Control Over Ruble – Wall Street Journal (subscription) Top Russian officials Friday sought to reassure markets they have control over the ruble and that its drop to all-time lows has a silver lining.    ‘

No Crisis’ Norway Holds Talks on Economic Cost of Oil’s Plunge – Bloomberg Norway’s prime minister, finance minister and central bank governor are holding an extraordinary meeting to assess just how bad the deepening plunge in the price of oil will be for the overall economy of Western Europe’s biggest petroleum producer.

 

 

Regulatory News

Kuroda Advises China to Impose Capital Controls to Defend Yuan – Bloomberg Bank of Japan Governor Haruhiko Kuroda said China should impose capital controls to defend the yuan rather than keep burning through currency reserves.

CFTC Grants Final Registration to 18 SEFs – Profit & Loss The US Commodity Futures Trading Commission (CFTC) has granted final registration to 18 swap execution facilities (SEFs). Prior to this, the SEFs had been operating under a temporary registration status.

Canadian Securities Regulators Implement Derivatives Reporting Rules – MondoVisione Securities regulators in Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and Yukon (the participating jurisdictions) today announced the implementation of new Multilateral Instruments 91-101 Derivatives: Product Determination and 96-101 Trade Repositories and Derivatives Data Reporting.

U.S. Banks Cut Off Mexican Clients, as Regulatory Pressure Increases – Wall Street Journal (subscription) U.S. banks are cutting off a growing number of customers in Mexico, deciding that business south of the border might not be worth the risks in the wake of mounting regulatory warnings.

 

 

Company News

Cross Joins HSBC GAM – Profit & Loss Former head of the FX division at the Bank of England, Michael Cross, has joined HSBC Global Asset Management.

Asset Managers Need to Get Ready for a Big Tech Shift – eFinancialNews Asset management chief executives yet to develop a digital strategy should be locked in a dark room with their mobile phones until they find one.

IBM, Apple Profit Have Forex Risk as Hedges Come Off in 2016, Says Morgan Stanley – Barrons The disappointing profit outlook offered by International Business Machines (IBM) on Tuesday afternoon is a harbinger of pain to come for tech from foreign exchange this year, writes Morgan Stanley’s hardware analyst, Katy Huberty, in a note to clients.

 

 

Market Savvy  

Offshore Yuan Advances as Xinhua Claims Short Sellers Will Lose – Bloomberg The offshore yuan rose for the first time in five days after China stepped up verbal defense of its currency to ward off speculators betting on depreciation.

Market Volatility Did the Work of Four Fed Rate Hikes: Morgan Stanley – Bloomberg Volatility in financial markets since the Federal Reserve last month announced its first interest-rate increase in nearly a decade is having the same effect as four additional quarter-point hikes, according to Morgan Stanley.

Hong Kong Dollar Likely to Come Under Additional Pressure This Week – South China Morning Post The battle between currency speculators and Hong Kong Monetary Authority will remain in focus this week amid a gloomy market sentiment worldwide.

Currency Woes Lead Brazil to Offer Support for Companies – Financial Times Brazil’s central bank is helping Brazilian companies to cope with market volatility by offering programmes to hedge currency risk.

 

 

Press Releases

Falling EM Claims Lead to Lower Q3 Cross-Border Lending – BIS – Profit & Loss The latest quarterly international banking statistics from the Bank for International Settlements (BIS) show cross-border bank lending shrank for the second consecutive quarter, driven by falling claims on major emerging market economies.

 

 

Industry Events

 
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Microsoft Joins FXPA

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Microsoft Joins FXPA The Foreign Exchange Professionals Association (FXPA) is pleased to announce the addition of Microsoft as the newest Advisory Member of the FX trade group. “We look forward to serving as an Advisory Member, helping shape dialogue with a broad spectrum of stakeholders in the industry to maintain a strong FX market,” says Tahreem Kampton, Senior Director, Microsoft.

Hong Kong Dollar Forwards Sink to Weakest Since ’99 on Peg Bets – Bloomberg Hong Kong dollar forwards sank to their weakest level this century, interbank loan rates jumped the most in seven years and the Hang Seng Index tumbled as China’s market turmoil fueled speculation the city’s 32-year-old currency peg will end.

Hedge Fund That Called Subprime Crisis Urges 50% Yuan Drop – Bloomberg Mark Hart, the hedge fund manager whose bets against U.S. subprime mortgages and European sovereign debt proved prescient, said China should weaken its currency by more than 50 percent this year.

The Weak Spot in China’s $3.3 Trillion Foreign Reserve Stockpile – Bloomberg By almost all measures, China’s $3.3 trillion foreign reserves, the world’s largest, look formidable. Except one. Compared with the amount of yuan sloshing around in the economy, a proxy for potential capital outflows, China’s firepower seems limited.

European Experiment Comes to a Reckoning – Wall Street Journal (subscription) Stagnating growth and multiple crises show member countries’ self-interest trumps the cohesion of the union.

 

 

Regulatory News

Brazil Central Bank Cast Doubt on Rate Hike as Outlook Worsens – Reuters The Brazilian central bank on Tuesday signaled that a worsening recession could force it to abandon plans to aggressively raise interest rates to battle inflation at a 12-year high.

European CCPs Start Publishing Quant Data – Profit & Loss The European Association of CCP Clearing Houses (EACH) today announced that central counterparties (CCPs) are publishing a broad set of quantitative data on their websites in compliance with the international guidance provided by the Committee on Payment and Market Infrastructures and the International Organization of Securities Commissions (CPMI-Iosco).

 

 

Company News

Kraken Acquires Two Rival Bitcoin Exchanges – Profit & Loss San Francisco-based bitcoin exchange, Kraken, is set to acquire two other bitcoin exchanges, Coinsetter and Cavirtex.

 

 

Market Savvy  

Stocks Slide on Oil Rout – Wall Street Journal (subscription) Global stocks resumed their recent selloff as oil prices sank to a 12-year low and resurgent concerns about global growth snapped a brief bout of stabilization in financial markets.

Developed Economies Likely to Benefit While Emerging Economies Likely to Suffer in Fourth Industrial Revolution – UBS UBS today released a white paper titled Extreme automation and connectivity: The global, regional, and investment implications of the Fourth Industrial Revolution at the World Economic Forum Annual Meeting 2016 in Davos, Switzerland.

BoE’s Carney Says Tightening Still Unwarranted – Profit & Loss Bank of England Governor Mark Carney says that current market conditions do not yet warrant a tightening of monetary policy and that recent developments, both domestic and global, suggest that the Bank’s long-held inflation target will take longer to achieve than originally thought.

Saudi Arabia Said to Ban Betting Against Its Currency – Bloomberg Saudi authorities ordered banks to stop allowing cheap bets on a currency devaluation, according to five people with knowledge of the matter.

Ruble Trades at Record Low as Oil Collapse Eclipses Sanctions – Bloomberg The ruble plunged to a record low as the collapse in crude weighed on the world’s biggest energy exporter.

 

 

Press Releases

ITG Names Minder Cheng as Chairman of Board of Directors and Frank Troise Starts as CEO, President and Board Member – ITG ITG, a leading independent broker and financial technology provider, announced that Minder Cheng has been appointed Chairman of its Board of Directors and Frank Troise has joined the company as Chief Executive Officer, President and member of the Board of Directors, effective January 15, 2016.

 

 

Industry Events

 
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China Stocks Enter Bear Market as State-Fuelled Rally Evaporates

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China Stocks Enter Bear Market as State-Fueled Rally Evaporates – Bloomberg Chinese stocks fell into a bear market for the second time in seven months, wiping out gains from an unprecedented state rescue campaign as investors lose confidence in government efforts to manage the country’s markets and economy.

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FXPA Welcomes FXSpotStream as New Member

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FXPA Welcomes FXSpotStream as New Member – FXPA The Foreign Exchange Professionals Association (FXPA) is pleased to announce the addition of FXSpotStream as the latest member of the FX trade group. FXSpotStream joins FXPA as an Associate Member.

UK to Close Loophole in Bank Bonus Clawbacks – E Financial News Bank traders and executives won’t be able to leave their past behind them under new proposals to let banks recoup ill-gotten bonuses from former staff.

Ex-Barclays, Citi FX Traders Sue for Unfair Dismissal in London – Reuters Two former foreign exchange traders will this month sue their former employers Barclays and Citigroup for unfair dismissal at a London court.

Six Ex-Barclays, Deutsche Bank Traders to Stand Trial in 2017 – Bloomberg Six defendants accused of conspiring to manipulate a key interest-rate benchmark while working at Deutsche Bank AG and Barclays Plc will stand trial in September 2017 in a London court.

 

 

Regulatory News

Buy-side Blames Policymakers for Chinese Volatility – The Trade Buy-siders have wagged their fingers at Chinese regulators for creating widespread volatility to equity and currency markets since the beginning of the year.

Cartel Fines in US and China Rise to Record Levels – Financial Times Antitrust fines in the US and China surged last year to record levels, but could not buoy the rest of world, which saw global cartel penalties drop.

 

 

Company News

Morgan Stanley Analysts Put Hard Hats on For Latest Forecast – E Financial News Morgan Stanley’s European financials research team, led by Huw van Steenis, is braced for a year in which equities trading will gain further ground on fixed Income, currencies and commodities and the investment banking industry will be dominated by shareholders’ willingness to show patience around banks’ restructuring efforts.

Goldman Plans to Cut Up to 10% of Fixed-Income Traders, Salespeople – Wall Street Journal (subscription) Cuts in debt, currencies and commodities could affect up to 250 people.

 

 

Market Savvy  

2016 – A Goldilocks Year? – Profit & Loss A Goldilocks Year, not too hot, not too cold is our central scenario for 2016, and it would look something like this.

China, Oil Show Peril of Faulty Assumptions – Wall Street Journal (subscription) When investors, policy makers and businesses see only upside, the downside can be a rude awakening.

Is Another Swiss Franc Shock Around the Corner? – GAM – Profit & Loss A year ago investors were caught on the wrong-foot when the Swiss National Bank (SNB) unexpectedly lifted the cap on its currency, prompting one of the biggest moves in the foreign exchange markets seen for decades.

Stocks Resume Slide on Oil Concerns – Wall Street Journal (subscription) Stoxx Europe 600 drops 2.8% after sharp decline on Wall Street.

Hong Kong Dollar Drops Most Since ’03 as Bets Mount on Peg’s End – Bloomberg The Hong Kong dollar sank by the most in more than a decade and speculation mounted in the options market that the city’s 32-year-old currency peg will end as investors lose confidence in Chinese assets.

 

 

Press Releases

FXCM Volumes Fall in December – Profit & Loss FXCM has reported average institutional trading volume was $1.6 billion per day in December 2015, 20% lower than the $2 billion in November 2015 and 54% lower than the $3.5 billion in December 2014.

 

 

Industry Events
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Market Makers Need to Review Last Look Practices

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Market Makers Need to Review Last Look Practices – FXPA Webinar FX market makers need to review their existing practices around “last look” in order to protect themselves from regulatory investigations, according to legal experts that participated in a webinar on the “Implications of the Recent Last Look Settlements on Your Business”, hosted by the Foreign Exchange Professionals Association (FXPA) yesterday. Read More
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FXPA ‘Last Look’ Webinar Starts at 10am Eastern/3pm GMT/11pm Asia

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FXPA ‘Last Look’ Webinar Starts at 10am (Eastern) / 3pm (GMT) / 11pm (Asia) Join the Foreign Exchange Professionals Association (FXPA) for a webinar today that looks at the Implications of the Recent Last Look Settlement on Your Business. The webinar features an overview of FXPA’s new paper, FXPA Focus on Last Look presented by Chip Lowry, Senior Managing Director at State Street Global Markets and Chair of FXPA’s Policy Committee. Following this, Michael Millerand Jason Weinstein, partners at Steptoe & Johnson, will share their insights into the implications of the recent settlements.

China Seeks to Stabilize Yuan, Stocks Still Fragile – Reuters China set another firm fix for its currency on Tuesday and stepped up a verbal campaign, backed by what dealers said was aggressive buying, to convince sceptical investors that they were in control of events.

Singapore Rates Benchmark Error Causes CCP Split – Risk Data gathering errors meant a key Singapore interest rate swap benchmark was set 11 basis points too high in March last year. While the rate was amended an hour and a half later, millions of dollars’ worth of swaps were traded in the meantime – and two major clearing houses still disagree on which rate to use.

China Banks Feel The Heat of Meltdown – Financial Times If the US or Europe had experienced the kind of equity market slump that China has suffered of late, its financial institutions would be quaking and leading the list of biggest fallers in Shanghai and Hong Kong trading.

 

 

Regulatory News

Banks Left Little Time to Amend ‘Bad Apples’ Rules Before SMR – Risk Lack of finality around rules on the provision of individual references to regulators in the UK is raising fears banks will not have enough time to implement changes to prevent so-called “rolling of bad apples” before the Senior Managers Regime (SMR) comes into force on March 7.

Blockchain Debate to Headline CFTC Meeting – The Trade Future applications of blockchain technology in derivatives markets will be discussed in Washington later this month.

Top Five Losses: JP Morgan Fined for Mis-Advising, London Whale – Risk Financial services firms suffered relatively minor losses in 2015, with the monthly top five loss total averaging approximately $307 million; by comparison, that number was $1.04 billion in 2014.

Smaller Firms ‘Falling Back’ on MiFID II Prep, says FCA – Investment Week Several trade associations present at a recent Markets in Financial Directive II roundtable believe the news that members of the European Commission have pushed for the directive to be delayed from an “unfeasible” deadline of January 2017 has led some firms to reduce preparatory efforts, the regulator has revealed.

Core Basel III Element Gets Central Bankers’ Approval – Profit & Loss The Basel Committee’s oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed the committee’s recommendation for a new market risk framework.

 

 

Company News

Thomson Reuters Options Volumes Surge – Profit & Loss Thomson Reuters reports a 166% year-on-year surge in options trading volumes during 2015 over its FX dealer-to-client venue. The firm attributes the spike to staying abreast of upward trends, as well as adding more clients.

Ex-Deutsche, Barclays and SocGen Traders in Court – The Trade Former employees of Deutsche Bank, Barclays and Societe Generale are to appear at Westminster Magistrates’ Court in London today charged with conspiracy to rig Euribor.

Banks Set for New Year Fintech Shake-Up – E Financial News The departure of long-standing fintech executives from banks in Europe has left their former institutions in need of a new wave of executives to spearhead their ongoing technological innovation.

CLS Outlines Plans for Expansion – Euromoney CLS, the systemically important FX settlement system, has a number of plans in the pipeline, including an initiative with LCH.Clearnet and a settlement system for currencies outside its proprietary system.

HSBC Is Likely to Stay Based in London, Aberdeen’s CEO Says – Bloomberg HSBC Holdings Plc is likely to stay based in London rather than move its headquarters to Asia, according to Martin Gilbert, chief executive officer of one of the British bank’s biggest shareholders.

 

 

Market Savvy  

Oil Flirts With $30 a Barrel – Wall Street Journal (subscription) A lack of confidence in China’s economy and an oil glut are putting pressure on oil prices.

Currency Volatility Jumps to 3-Month High as Turmoil Persists – Bloomberg Currency volatility rose to a three-month high as China’s market meltdown continued to ripple across the globe, hurting currencies of nations that rely heavily on demand from the world’s second-biggest economy.

Saudi Arabia Says It Remains Committed to Dollar Peg – Wall Street Journal (subscription) Cheap oil, record budget deficit had raised speculation over currency link.

China FX Reserve Sell-Off to Soon Move Beyond US Treasuries: BAML – Reuters The unwinding of China’s foreign exchange reserves could soon extend beyond US Treasuries, with US corporate and euro zone sovereign bonds among the assets most vulnerable to selling from Beijing, Bank of America Merrill Lynch said on Monday. 

 

 

Press Releases

Gain GTX, ICE See December Declines – Profit & Loss December average daily volumes in FX products at Gain GTX and the Intercontinental Exchange are showing slow year-on-year growth.

TriOptima Launches Automated End-to-End Margin Processing – Profit & Loss Post trade infrastructure provider, TriOptima, has launched TriResolve Margin, a Web-based, end-to-end margin processing solution delivered in collaboration with AcadiaSoft.

Bank of China Deploys SmartTrade in Hong Kong – Profit & Loss Bank of China (Hong Kong) has selected SmartTrade Technologies to deliver its e-FX platform.

 

 

Industry Events