Brian Bollen's Blog

MoU news from Russian and Serbian CSDs

Russia's National Settlement Depository and Serbia’s Central Securities Depository and Clearing House have signed a memorandum of understanding.

Chinese whispers

Bank of China (BoC) and the China Europe International Exchange (CEINEX) have signed a memorandum of understanding, the signing ceremony forming part of the Chinese-German government consultation currently taking place.

The value of relationships

A new study on interest rate derivatives sale shows that investors still rely on sell-side relationships, even though the business of trading interest-rate swaps is moving to electronic platforms at breakneck speed, largely driven by the implementation of Dodd-Frank.

Some 60% of notional client swap trading volume in the US this year is being executed electronically, up from just 20% in 2014 according to the new study from Greenwich Associates. Interest-Rate Derivatives Sales: Not What It Used To Be, But No Less Important demonstrates that as recently as 2010, nearly 90% of notional trading volume was executed via the phone, instant messages and email, with only the remaining 10% directed to electronic platforms. At that time, only 17% of US-based investors traded any interest-rate swaps electronically, a number that has since jumped to almost two-thirds.

Despite this shift to electronic trading, investors continue to place a high value on the service provided by sell-side interest-rate derivatives (IRD) salespeople. In fact, US investors allocate one-third of their trading volume based on the quality of the sales coverage they receive, putting sales on nearly equal footing with execution quality, which on average drives 44% of volume allocation.

“Immediately following the financial crisis, investors started relying on sell-side salespeople for education about regulatory changes, new clearing rules, SEFs, and how to make the transition to electronic trading,” says Jasper Clark, Greenwich Associates associate consultant and author of the report.

A critical role of the IRD salesperson today is focusing on large and complex transactions. Block trades, which above a certain size are not required by regulation to be executed electronically on SEFs, represent a key area where sales can continue to add value and, in turn, influence allocation decisions.

“Our research shows unequivocally that investors are still looking to speak to an expert on the sell side about their trades, even if regulations tell them they ultimately need to trade on the screen,” says Kevin McPartland, head of market structure and technology research at Greenwich Associates.

Investec turns to Euroclear

Investec Wealth and Investment Ltd,  a wealth manager with responsibility for in excess of £26 billion client assets under management, has adopted Euroclear UK & Ireland’s (EUI) automated settlement and custody service, CREST, for its UK investment fund flows.

When hawks hawk

James Barrineau, co-head of emerging market debt relative at Schroders, comments on yesterday's Federal Open Market Comittee (FOMC) meeting, and ponders what a more hawkish Federal Reserve might mean for emerging markets.

A moderately more hawkish Federal Reserve -which on Wednesday opened the door wider for a December rate hike - will perhaps stall a recovery in emerging market currencies, but the global search for yield will likely keep dollar-denominated emerging market (EM) debt from retreating in price substantially.

After falling over 15% this year, EM currencies rallied in October roughly 5% as market probabilities of a 2015 Fed hike retreated, and the multi-year US dollar rally stalled as a consequence of that.  The stronger dollar and weaker EM currencies have moved in lockstep essentially since the “taper tantrum” of May 2013 when the eventuality of higher US rates began to take hold. EM currencies on average have fallen about 40% since that time, so it is difficult to argue that a modest Fed rate hiking cycle has not been well anticipated in this asset class. Some derivatives of the stronger dollar, like weaker global commodity prices, also helped to sour sentiment. Real exchange rates in EM in general are at levels not seen since the early part of this century, and countries that have historically run substantial current account deficits are seeing those shrink meaningfully as a consequence of both weaker currencies and lower import levels as growth has stalled.

The dollar-denominated side of the EM debt asset class has been a much different story. Year-to-date both corporate and sovereign debt indices are up about 3%.  Even with the positive returns and an October rally, spreads to US Treasuries remain generally wider than historical averages by at least 50 basis points. Market anticipation of lower rates for longer globally leave emerging markets as one of the last outposts available for generating income, and the stability surrounding dollar bonds even as fundamentals in larger countries in the asset class deteriorated should continue unless a more negative shock to the asset class materialises.

Though the divergence in global monetary policy in developed markets has generally meant a strong US dollar and weak EM debt, this pattern could change going forward if US economic data continues to be unsupportive of more than a few token rate hikes even if the Fed proceeds in December.  A more aggressively dovish European Central Bank, potentially more stimulus from the Bank Of Japan, and continued sporadic easing in China suggests that global liquidity will remain high. The demonstrably lower concern over a China hard landing is supportive to the asset class. One measure of liquidity - the change in foreign reserves across the asset class - has shown some recovery as risk appetite rallied this month. Additionally, debt issuance has picked up across an array of countries this month, easing re-financing risks. 

So while a first Fed rate hike being more fully priced in for December may temporarily cause a return of market jitters, we believe the small likelihood of an extended hiking cycle and substantial global liquidity from other developed central banks lower the odds for a relapse into systemic EM concerns.

 

CEINEX established as new RMB internationalisation force

Shanghai Stock Exchange (SSE), Deutsche Börse Group and China Financial Futures Exchange (CFFEX) confirm the official launch of their joint venture “China Europe International Exchange”. This new marketplace for the trading of RMB-denominated offshore products will be launched on November 18 as CEINEX.

From ARGOS to QUAERO

Geneva-based asset management company Argos Investment Managers SA is changing its name to QUAERO Capital SA.

The firm says the rebranding is driven by its continuing international expansion and a growing concern that its original name may lead to confusion with other businesses in the sector.

Founded in 2005 in Geneva, QUAERO Capital describes itself as a specialist investment management boutique that offers a range of actively managed, high-conviction funds with a commitment to fundamental research and original thinking. ‘Quaero’ – the Latin word for ‘I research’ or ‘I seek’, is consistent with that commitment, it adds.

QUAERO Capital is 100 percent employee-owned. Its founding partners, Cristofer Gelli and Philip Best, were joined in 2011 by CEO Jean Keller and, in 2014, by Head of Development Thierry Callault. 

Co-founder and chairman Cristofer Gelli said today, "We are creating an environment where talented investment professionals work in a culture which promotes investment excellence. We believe that this is the key to delivering consistent and repeatable returns over the long term.”

Jason and the Quaeronauts? Doesn't really trip off the tongue, does it??? 

BT's policy on charging for unsolicited sport is surely illegal

BT started supplying its sports channels to me as a broadband customer, for free (it wasn't in fact free as I had to sign a 12-month broadband contract as a condition). I never asked for them, never ordered them. Now it is charging for them, on the grounds that I am out of contract on broadband (I'm not, I renewed less than 12 months ago) and I am being charged for so-called champions' league football (which I virtually never watch).

I asked for a refund. The people at the other end of the line, who can barely speak English, kept repeating that is not BT's policy to refund such charges.

I pointed out that in consumer law in the UK it is illegal to charge for the supply of unsolicited goods or services (thanks to Bernard Braden and Esther Rantzen et al). Therefore, BT's policy of extorting charges (which defy all the laws of arithmetic with which I am familiar and are incomprehensible to anyone using the standard decimal system) is illegal.

Dear BT, I want my money back. I have contacted the BT press office, as I have exhausted all other possibilities (and exhausted myself in the process) but I won't get anywhere. If they can answer the question that I am asking, how does free equal £5 plus £6.75 (plus VAT of course, so the government is profiting from this theft) equal £32.97 equal £56.10 and £10.62 and £23.13 and £18.06 and £19.99 (all figures shown on pages four and five of my latest BT account) then I will yield. But not until then.

Postscript dated October 30 2015 10.59: Kathy Ward called me from the BT chairman's office this morning to apologise and say that a refund of £43.59 will appear on my next bill, and said that the company has pledged to reshore 80% of India call centre jobs to the UK by the end of 2016.

Start the day with a bacon butty

Mint – Blain’s Morning Porridge

I’m going to live life to the full. Bacon and egg sandwich to start the day as I read American Susannah Mushatt Jones, at 116 the oldest person on the planet, has a bacon butty every morning. Suck on that World Health Organisation..!

Object Trading co-locates services in ASX data centre

The Australian Securities Exchange (ASX) and Object Trading, a provider of a global, multi-asset trading infrastructure, report that Object Trading will be expanding its Direct Market Access Service Platform by co-locating its managed software, client gateways and global connectivity network in the Australian Liquidity Centre (ALC).

Hymans Robertson goes for gold

Hymans Robertson has been deemed by The Pensions Administration Standards Association (PASA), an independent body in pensions administration, to be worthy of the latter's “gold standard in administration”. 

FxPro goes for growth

The South Africa Financial Services Board (FSB) has authorised online foreign broker FxPro Financial Services Limited to operate as a Financial Service Provider (FSP; licence no. 45052). FxPro says this gives it the opportunity to expand its operations on a significant scale and to reach new customers.

I thought you came here to die

Mint – Blain’s Morning Porridge

“And I thought you came here to die.” “Well, it’s all a matter of perspective..” 

Just cancelled my Sky subscription

And feel as if I've done a triathlon...

NTAM appoints McNeilage EMEA MD

Northern Trust Asset Management has appointed Hazel McNeilage as a managing director for Europe, Middle East and Africa (EMEA).

Darkness was here yesterday

 Mint – Blain’s Morning Porridge

We live in the flicker – may it last as long as earth keeps rolling. But darkness was here yesterday.

Time and patience

Mint – Blain’s Morning Porridge

The strongest of all warriors are these two: time and patience..

Look to the future; it's already begun

To celebrate Back to the Future Day, John Culkin, Director of Information Management, Crown Worldwide Crown Worldwide provides his predictions for five ways in which technologies will change the world over the next 50 years.

Tis to glory we steer

Mint – Blain’s Morning Porridge

“Cheer up my lads, tis to glory we steer, to add something more to this wonderful year. To honour we call you, not press you like slaves, for who are so free as the sons of the waves..”

Time and again

21 October 2015 – the day to which Marty McFly and Doc Brown time-travel forward 30 years in the second instalment of the Back to the Future trilogy – is finally upon us. Below Kevin Murphy, UK Equity Fund Manager in the Value Investment Team at Schroders shares his thoughts on this.