Super Speedy Traders Wonder If They’ll Outrun Regulatory Noose Posted: 22 Jun 2012 03:00 PM PDT –Retransmitting Story Published 13:15 ET Friday By Denny Gulino WASHINGTON (MNI) – Within 13 exchanges and a few dozen dark pools, the constant blizzard of high-frequency trades ricochet around the stock markets, and increasingly other markets as well, in an unfettered free-for-all that scares a lot of people in Washington — and now Washington is returning the favor. As the defenders of high frequency trading traipsed to Capitol Hill this week to make their case, on the other side of town regulators listened industry representatives report on progress in fashioning a working definition of automated high-speed trading. It is that definition that many high-speeders see eventually becoming the noose around their collective necks, a key to regulation they could find stifling. Meanwhile, at the Labor Department, where a fever of speed-aversion appears to have already taken hold, one familiar name — Nasdaq OMX — has become the victim, cut off from breaking data. “They haven’t told us this is going to be the forerunner of regulation,” Larry Tabb, CEO of the Tabb Group capital markets consultancy, told MNI of the discussions of definition. But, he added, “It’s a CFTC subcommittee and the CFTC is a regulatory body.” He is one of those participating in the CFTC’s advisory committees on high-frequency trading and spoke from the Federation of European Securities Exchanges convention under way in Istanbul. His firm is a capital markets research and advisory consultancy with a special expertise in the area of automated trading but which does no trading. Amid the charges and countercharges about automated high-speed trading, Tabb said there is increasingly a need to make an crucially important distinction, one that makes clear the difference between speed and manipulation. “What I hope comes out of it, is that the focus becomes less about ‘fast’ and more about market abuse,” he said. “Because there are very legitimate, proper trading strategies that employ speed, including market making and index arbitrage, as well as other kinds of arbitrage. “When machines do the trading, by definition everything is fast,” he said, and yet, “We have to figure out what’s manipulated or not manipulated, not whether we’re doing it fast or not.” Some have complained that the working definition of high-speed trading being developed at the CFTC is being written too broadly and captures too much. “Some folks have seen some of our documents and said they were exceptionally broad,” Tabb said. “But if the definition’s too narrow, it will be gamed. It is intentionally broad with the anticipation that we and the other groups will define it further as we move forward.” “Our goal, our express desire,” he said, “is to try to create something that doesn’t taint all strategies that employ speed as bad, that tries to get the world to understand high frequency trading is just a fact of life, that we have to better understand the underlying strategies, determine whether the underlying strategies are good or bad.” As reported by MNI Wednesday, the House Financial Services Capital Markets subcommittee placed high-frequency trading under a spotlight. Summoned to testify on the subject of “Market Structure: Ensuring Orderly, Efficient, Innovative and Competitive Markets for Issuers and Investors,” were executives from GETCO, Invesco, Rosenblatt Securities, Knight Capital, Quantlab Financial and others. Several put on the record their defense of high-frequency trading, saying it is a valued way to improve market functioning for everyone. Their testimonies are all available on the subcommittee’s Web site. As Knight Chair Thomas Joyce said, “virtually every dimension of U.S. equity market quality is now better than ever.” Judging from their published comments afterward, as civil and courteous was the questioning of the committee, the day was still a scary one for many of those in the high-frequency and algorithmic space, unaccustomed to the glare of close attention from Capitol Hill. CFTC Chair Gary Gensler spelled it out Wednesday: “Regulators cannot assume that the algorithms in the markets are well designed, tested or supervised.” Perhaps his most chilling words, for those with a stake in the expensive pursuit of high-frequency execution of trades, were when he said the CFTC “is reviewing a rule on the reporting of ownership and control information for trading accounts. These rules would enhance the Commission’s surveillance capabilities and increase the transparency of trading to the Commission.” A Labor Department official made explicit in testimony to the House Government Oversight Committee June 6 that its data, like the monthly jobs reports, are being traded on “through algorithms, which is not the purpose of the (data) lockups.” He was referring to “lockups” that are usually half-hour sessions in which reporters view the data in advance and then simultaneously release it to the public under close supervision at a set time. Fearful that somehow automated trading operations could benefit unfairly from data releases, the Department has been in the process of imposing much higher security procedures on news firms that report the data like MNI, the Associated Press, Reuters, Bloomberg and Dow Jones. In that process, the Department has denied access to four other firms to its data lockups, including jobs and inflation numbers. One of those cut out is the 117-year old Bond Buyer newspaper and wire service that serves the municipal securities industry, including the state, county and local community treasurers who issue securities to finance public infrastructure. The Bond Buyer’s business partner, Nasdaq OMX, has been including Labor’s numbers in its package of data feeds since late last year. The Department has given no reason for the exclusions and a spokesman did not comment when asked, nor have any of the explanations for the changes to the lockups spelled out that algo providers were the subject of the tightened security. Others excluded were Need to Know News — a firm owned by MNI — RTT and Thomson-IFR. Most are attempting to appeal the cutoffs, effective July 5. As the CFTC and the SEC only slowly erect their regulatory guard rails around high-frequency trading, the exclusions of some news firms from data lockups have focused new attention on the extent — if any — to which government agencies should accommodate the information firms that have such traders as customers. As MNI reported last month, some high-frequency trading operations unleash intense trading activity moments before major data are scheduled to be made public, hoping to stir up premature volatility and trading opportunities, but at the same time giving regulators the false impression they have learned the key numbers ahead of time. As MNI has also reported, some analysts have suggested that key government data release times be made random within certain limits, to make such pre-release trading more difficult. ** MNI Washington Bureau: 202-371-2121 ** [TOPICS: M$U$$$,MAUDS$] |
ForexLive US wrap: Sharp intraday swings as market consolidates Posted: 22 Jun 2012 01:08 PM PDT - Greek PM Samaras to have eye surgery Saturday; Fin Min Rapanos admitted to hospital after fainting
- Canada CPI falls 0.1% in May, core rises 0.2%; lower than expected
- Russian central bank says has begun to buy AUD/USD for reserve account
- ECB announces expanded collateral rules; will now accept car loans as collateral
- Bundesbank critical of new collateral rules
- Spain to apply for bank bailout Monday, amount will not yet be specifid
- Monti, Merkel, Hollande and Rajoy meet in Rome, announce agreement to seek stimulus package worth 1% of euro zone GDP (EUR 130 bln)
- Germany to balance budget by 2016
- Schaeuble: Greece has to meet conditions for second bailout cash
- Reuters: Companies cutting power exports to Greece for non-payment
- Portugal’s deficit widens on higher spending, lower receipts
- France’s Hollande to meet Draghi on Monday
- Futures traders cut USD longs by 43%; EUR short cut by 27%
Erratic price action all day on Friday with the market gapping 40-50 pips at a time. Several attempts to overcome support at 1.2520 (50% of the 1.2288/1.2748 rally) were rebuffed and EUR/USD bounced to the mid-1.2580s before faltering ahead of 1.2590. USD/JPY consolidated recent gains as the technical picture improved with a break and potential close above the 100 day moving average at 81.43 We trade at that level late in the day. Equities and commodities recovered a fair bit of Thursday’s losses. The S&P ends up 0.75% on the day while oil recovered the $80.00 level. Spanish yield plunged, closing at 6.35%, down 28 bp, but the euro was unable to take advantage, a worrisome sign for longs…US yields rose 5 bp as risk aversion eased. |
Greece ties Germany early in second half Posted: 22 Jun 2012 01:01 PM PDT Stunner! Samaras with a beautiful goal. Maybe he should be PM… |
Mr. Market cut dollar longs by a lot Posted: 22 Jun 2012 12:41 PM PDT Net long dollar position on the IMM were trimmed by 43%, DJ reports, using the commitments of traders data. EUR shorts cut by 27%. Market a bit more back in balance. |
EUR/AUD, EUR/CAD selling keepin lid on EUR/USD Posted: 22 Jun 2012 12:10 PM PDT Stocks continue to recover from yesterday’s rout (up 0.75%) while US bonds give back all their gains, and then some, up 5 bp in yield to 1.67%. EUR/USD is at 1.2568. AUD at 1.0071 and USD/CAD at 1.0246. AUD/USD and CAD are outperforming at the moment while EUR/USD takes a breather. All things considered, not a very impressive week for EUR/USD. The Greek election played out as the market would have preferred, Spanish debt has rallied strongly and the US economy looked to have joined the global slowdown in earnest. Look to the familiar 1.2520 and 1.290 parameters early in the new week to set the tone. Above 1.2590, we could have some short-covering ahead of the EU summit. Below 1.250, we may test the downside ahead of the summit in order pressure the EU into taking dramatic action toward fiscal union rather than the piecemeal approach it has taken until now. |
France holding Fiscal Compact hostage? Posted: 22 Jun 2012 11:11 AM PDT If you believe this headline from Reuters…. FRANCE WANTS TO SEE EU SUMMIT AGREE ON MORE THAN JUST GROWTH PACKAGE TO RATIFY EU FISCAL PACT- FRENCH SOURCE |
Risk on afternoon Posted: 22 Jun 2012 11:10 AM PDT |
We knew this, didn’t we? Posted: 22 Jun 2012 10:40 AM PDT |
Hollande to meet Draghi Monday Posted: 22 Jun 2012 10:02 AM PDT Wouldn’t expect any major breakthroughs. Hollande will ask Draghi to ease and buy bonds. Draghi will ask Hollande to work out fiscal and banking union… |
US BudgetRecap: Hill Makes Progress On Non-Fiscal Cliff Bills Posted: 22 Jun 2012 09:50 AM PDT –House, Senate Narrow Differences On Student Loan, Highway Bills –But House, Senate Leaders Still Talk Past Each Other On Fiscal Cliff –Congress Awaits Supreme Court Ruling on Health Care Law By John Shaw WASHINGTON (MNI) – This was a week of modest progress on Capitol Hill, with signs of progress on long-stalled surface transportation and student loan interest rate bills. But Democratic and Republican leaders continued to talk past each other regarding the best way to avert the coming fiscal cliff. Sen. Chuck Schumer, the third ranking Senate Democrat, predicted Thursday that “big picture negotiations (are) coming at the end of the year.” House Speaker John Boehner, House Majority Leader Eric Cantor, and Senate Majority Leader Harry Reid offered positive assessments of efforts to craft a surface transportation bill. “Hopefully, we will have a bill to vote on next week,” Cantor said Thursday. A House-Senate conference committee has been working for weeks on drafting a compromise highway bill. The Senate passed a two-year $109 billion surface transportation bill. House Republicans unveiled a five-year $260 billion plan, but never presented it to the full House. Boehner has said that if an agreement can’t be reached by the end of this month on a surface transportation bill, he will push a stop-gap bill to fund current transportation programs until after the November elections. The current authorization of surface transportation programs ends next week. Reid has said that a good highway bill would save or create 2.8 million jobs. Reid offered an upbeat assessment Thursday regarding the talks on a compromise student loan interest rate bill. “We have great hope we can get that done,” Reid said at a briefing with the Senate Democratic leadership. Reid said he is especially hopeful because both Boehner and Senate Minority Leader Mitch McConnell seem interested in an agreement on the matter. “They are compromising as are we,” Reid said. But GOP leaders have been more guarded about their assessment of the student loan interest rate issue, declaring that an agreement could have been reached weeks ago if President Obama and congressional Democrats had wanted one. McConnell said Thursday the GOP has offered “multiple” options to resolve the funding issue for the package, but charged that Obama “has yet to offer a concrete solution.” Congress passed a bill in 2007 that was signed by President Bush to temporarily reduce the interest rate on subsidized Stafford loans to college undergraduates from 6.8% to 3.4%. That interest rate decrease is set to expire July 1. Extending the interest rate reduction would cost $6 billion for one year. Obama supports legislation extending the interest rate reduction to 3.4 percent. House Republicans passed legislation that extends the student loan interest rate reduction for another year and pays for the $6 billion cost by tapping funds from prevention and public health services that were established by the 2010 health care law. Reid has said that extending the student loan interest rate reduction is critical to seven million students and should be paid for by ending a tax break for S corporations. As the scheduled interest rate increase on July 1 nears, lawmakers from both parties are actively exploring compromise proposals to fund the package. If there were signs of progress on Capitol Hill on several issues, Democratic and Republican leaders continue to show little interest in resolving the fiscal cliff challenge before the November elections. The fiscal cliff refers to the convergence of three coming fiscal events: across-the-board spending cuts that are scheduled to begin in January, the expiration’s of Bush era tax cuts at the end of the year, and the need to increase the statutory debt ceiling at the end of this year or early next year. Reid and other Democratic leaders held a press conference Thursday to hammer congressional Republican leaders for signing an anti-tax pledge which they say impede wide-ranging fiscal negotiations. Senate Majority Whip Richard Durbin said “both sides have to be willing to give” in the coming budget talks, adding the GOP has to be flexible in securing additional revenues. But Boehner at a Thursday briefing showed no signs of compromise. He repeated his pledge that the House will vote in July to renew Bush era tax cuts. “Raising taxes in this economy is the wrong thing to do,” Boehner said at a briefing. “I’m not interested in raising taxes,” he added. Boehner said the U.S. should begin to confront budget deficits immediately through reforms on the spending side of the ledger. “We have to have controls on spending. We have an entitlement crisis,” Boehner said. Boehner also said the Senate should follow the lead of the House and pass legislation to replace the scheduled across-the-board spending cuts next year with a different package of spending savings. Republicans have passed in the House a plan to replace the $110 billion in across-the-board spending cuts in FY’13 with a package of more than $300 billion in ten year spending savings. Congressional Democrats have said the across-the-board spending cuts should be replaced by a “balanced approach” to deficit reduction that includes spending savings and additional revenues. About $1.2 trillion in across-the-board spending cuts over nine years are mandated by the sequestration process which was triggered by the failure of Congress’s Super Committee last fall. For the 2013 fiscal year, $110 billion in spending cuts are required by the sequestration process. Of this sum, $55 billion would come from defense programs and the rest from domestic programs, primarily from the discretionary portion of the federal budget. Several Senate Republicans introduced an amendment to the farm bill that would require the Department of Defense to report to Congress by August on how these looming defense spending cuts would affect national security. Democratic senators offered a different amendment that would require the White House budget office to describe in detail how the sequestration process would impact all government agencies and programs. The Senate ultimately approved an amendment that requires the White House budget office to spell out how across-the-board spending cuts in FY’13 would affect both domestic and defense programs. Finally, lawmakers from both parties are waiting for the expected Supreme Court decision on the constitutionality of the 2010 health care law. That ruling is expected next week. ** MNI Washington Bureau: 202-371-2121 ** [TOPICS: M$U$$$,MFU$$$,MCU$$$] |
Check out FXDD’s cool new platform Posted: 22 Jun 2012 09:46 AM PDT FXDD is holding a webinar to introduce its Swordfish platform, which has ForexLive built right in. Register here. |
Portugal’s deficit widens Posted: 22 Jun 2012 09:43 AM PDT - Deficit widens to EUR 1.25 bln in first 5 months of 2012
- Spending up 3.4%, revenues fall 0.8%
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Round and round we go Posted: 22 Jun 2012 09:35 AM PDT Looks like we’ll whip between 1.2520 and 1.2590 the balance of the session… |
Moody’s: Bank Downgrades Don’t Directly Affect US Govt Rating Posted: 22 Jun 2012 09:20 AM PDT By Yali N’Diaye WASHINGTON (MNI) – Moody’s concluded its review of global financial firms by downgrading major names, but its lead analyst for the United States said Friday that the firm’s action does not directly impact the U.S. sovereign rating. “The downgrade of the banks does not directly affect our rating of the U.S. government,” Steven Hess told MNI. That being said, “for all our sovereign ratings, the contingent liability from the banking system is something we assess,” he continued. And on that front, “Actions taken by many governments during the last global financial crisis to support their banking systems demonstrated that this contingent liability can end up affecting government finance,” he said. Thursday, Moody’s cut the ratings of banking heavyweights such as Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, and JPMorgan Chase. Thursday’s downgrades reflect the credit implications of capital markets operations, Moody’s said Thursday. But not only. “They also reflect (i) the size and stability of earnings from non-capital markets activities of each firm, (ii) capitalization, (iii) liquidity buffers, and (iv) other considerations, including, as applicable, exposure to the operating environment in Europe, any record of risk management problems, and risks from exposure to U.S. residential mortgages, commercial real estate or legacy portfolios,” the report added. Given the negative outlooks, Moody’s signaled the bottom might still be ahead. ** MNI Washington Bureau: 202-371-2121 ** [TOPICS: M$U$$$,MFU$$$,MR$$$$,MK$$$$,MT$$$$] |
Germany’s Schaeuble: Advise Spain To Submit Request Quickly Posted: 22 Jun 2012 09:20 AM PDT LUXEMBOURG (MNI) – Spain should submit a formal bid for aid soon and will probably do so, German Finance Minister Wolfgang Schaeuble said Friday. Briefing the press following a meeting of European finance ministers, Schaeuble stressed that he and his colleagues had advised Spain “to make the request quickly.” “We expect a request from Spain in the next days,” he said. If the permanent European Stability Mechanism is not yet in force when Spain does so, then its temporary precursor, the European Financial Stability Facility, will be responsible for providing the assistance, he said. “It’s not a matter of a preference” for the ESM or the EFSF versus the other, he said. Investors are worried that if Spain submits its request to the ESM, which in contrast to the EFSF has preferred creditor status, then loans made by the Eurozone to Madrid would have priority over private creditors in the event of a default. Schaeuble reaffirmed that Ireland and Portugal are on the right track. Cyprus, hit hard in the wake of Greek turmoil, will soon make a decision as to possible financial help, Schaeuble reported having been told by his Cypriot counterpart. He refused to address the issues being raised simultaneously in Rome, where the leaders of the four largest Eurozone economies met today, saying there was “no sense … in interpreting in any way or commenting” on possible differences of opinion there. He called again for “more Europe as a reaction to the crisis of confidence,” cautioning that this “can’t be done in the short term.” “If we initiate credible measures for the medium term and in the short term exhaust the room to maneuver that we have according to the existing treaties,” then we are on the right path, he said. As the brand new Greek government was not fully represented here, Schaeuble had little to say about that country other than to remind again that “Greece has to fulfill its obligations” while conceding that Athens has “a difficult task, no question about it.” The top financial sector jobs still to be filled in Europe were not on the agenda here, he said. – MNI Frankfurt bureau: +49 69 720 142. Email: frankfurt@marketnews.com [TOPICS: M$X$$$,MT$$$$,M$$CR$,M$S$$$,M$I$$$,M$G$$$,MGX$$$] |
Correct: Euro “Irreversible,” E130 Bln EMU Growth Plan Eyed Posted: 22 Jun 2012 09:10 AM PDT –Corrects Figure of Growth Plan in story title to E130 billion By Alina Trabattoni ROME (MNI) – Leaders of the four largest Eurozone economies agreed on the need to push through a growth package for the 17-nation bloc worth 130 billion euros, or 1% of euro area gross domestic product, at their upcoming summit meeting June 28-29, they said at a joint press conference here. Italian Prime Minister Mario Monti, who spoke first, said the four leaders also agreed that the single currency project was “irreversible.” Even so, a well-known divergence of views was in evidence as German Chancellor Angela Merkel publicly turned down a plan championed by the French, Spanish and Italian leaders to use European bailout funds to purchase sovereign debt and curb soaring bond yields in Spain and Italy. Their proposal, not a new one, was floated again last week as uncertainty and high tension continued to grip financial markets, torturing Madrid and Rome with sharply rising sovereign borrowing costs. But Germany has insisted that if the bailout fund is to buy sovereign debt, it can only be within the context of a formal country program with policy conditions attached. “Each country wants to help another country that is in trouble, but for the taxpayers, I must have the guarantee that there is control,” Merkel said here. “Responsibility and control go hand in hand.” Today’s four-way summit, hosted by Monti, follows closely on the heels of the Eurozone finance ministers’ meeting on Thursday night in Luxembourg, at which they discussed a plan to provide up to E100 billion worth of recapitalization aid to Spanish banks. At next week’s summit, EU leaders are expected to discuss long-term plans for a fiscal and banking union. “What has been done to date is not enough,” Monti said. “On June 28, we will introduce growth, employment and single market initiatives.” In a report issued on Thursday, the International Monetary Fund said the euro crisis had reached a “critical stage,” and it urged leaders to make a “strong commitment” to solve the underlying issues that are eroding confidence in the region. One of the solutions could be the issuance of common debt, the report said. The IMF also called for a banking union and increased fiscal integration. So far, European leaders have failed to produce durable solutions to the sovereign debt and banking crisis that is enveloping the region and undermining its economic growth. Germany’s IFO business sentiment declined in June for the second month in a row to the lowest level in more than two years, according to data released today. Italian consumer confidence also dropped to a record low this month. Earlier this week, preliminary purchasing manager (PMI) reports for June showed the Eurozone economy is still in retreat, with worrying weakness in Germany’s manufacturing sector. “After we have intensively dealt with budget consolidation in the form of the fiscal pact we have to deal with growth and employment,” Merkel said. “It is now necessary for the next summit to set a clear mark and I absolutely agree on the use of 1% of the GDP of the [euro] area for additional growth. That is the right signal that we need.” Monti is battling to keep Italy from becoming the next victim of the euro crisis, with the nation thrust back into the debt crisis debacle despite a E35 billion austerity package introduced earlier this year. The prime minister, appointed together with a technocrat government last November to replace the outgoing Silvio Berlusconi and his cabinet, has so far failed to muster market confidence in his ability to slash Italy’s massive public debt — at 120% of GDP, the second largest in the Eurozone — or to limit the contagion effects of the Spanish banking crisis and the chaos in Greece, which are feeding through into Italian borrowing costs. Spanish yields, which flirted with dangerously high levels above 7% earlier this week, have eased considerably to around 6.5% today. The lower yield is largely a result of market reassurance after two Spanish auctions garnered healthy demand this week, and a response to news that the European Central Bank was planning to ease collateral rules on mortgage-backed assets, which will be of particular benefit to Spanish banks. The ECB officially announced the collateral changes Friday afternoon. Italy’s 10-year yield, largely coupled with Spain’s of late, has also eased from a high of 6.2% on June 14 to around 5.65% today. Markets have been increasingly nervous about waning public confidence in Italy’s Prime Minister Mario Monti, his seeming inability to implement some of the larger structural reforms, and the potential for early elections, hinted at by political leaders in the coalition that supports his government – most recently by Silvio Berlusconi, who strongly suggested in a recent interview that he was displeased with some of Monti’s policies. In fact, today’s meeting comes in the wake of mounting concern on international markets that Italy, the Eurozone’s third largest economy, may suffer a fate similar to Spain’s, Greece’s, Portugal’s and Ireland’s. Italy is the Eurozone’s third-largest economy and the second biggest manufacturer, after Germany, and the recent spike in its borrowing costs has heightened pressure on European leaders to introduce concrete measures to combat the crisis. Spanish Prime Minister Mariano Rajoy, who also attended the press conference, said the four leaders had agreed on the need for measures to reduce deficits and debt, as well as for plans to boost growth and competitiveness. He called for structural reforms, as well as for a banking, fiscal and cultural union. “Today we have all agreed to use mechanisms that can be conducive to greater integration,” Rajoy said. “The rest of the world understands where we are heading.” Meanwhile, Greece’s new government said this week it would seek a softening of the EU bailout terms the country has accepted. Prime Minister Antonis Samaras declared his intention to do everything possible to keep Greece in the Eurozone. Samaras was appointed earlier this week following the closely-watched June 17 elections, which in effect were seen as a referendum on Greece’s euro membership. While Samaras’ conservative New Democracy party received the most support of all the parties vying in the elections, it didn’t secure a majority of the seats in parliament and was forced to form a coalition with the Socialist (Pasok) Party, its old nemesis, and with the smaller Democratic Left party. The support that Monti’s proposal has received from Spain and France reflects shifting alliances within Europe. Prior to Hollande’s recent election, Merkel usually could count on the support – at least in public – of now-former President Nicolas Sarkozy. “We need to move closer together politically, especially in the euro area,” Merkel said. “If you have a joint currency you also need to make coherent policies, and we will work jointly…towards a stronger political union.” The German Chancellor added: “I’m happy that all four of us could say today that they support the introduction of a financial transaction tax.” [TOPICS: M$S$$$,M$G$$$,M$F$$$,M$X$$$,M$I$$$,MGX$$$,M$$CR$] |
Goldman economist: Fed will have to do more–CNBC Posted: 22 Jun 2012 09:09 AM PDT - Took substantive step with extension of Twist
- Needs to push forward guidance for first rate hike into future
- Needs additional asset purchases
- Lower employment and inflation will be the catalyst
- Big drop in stocks could be a catalyst as it would signify tighter financial conditions
- Monetary policy paying diminishing returns, fiscal side must be dealt with. May be more important than monetary policy
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US DATA: OCC report says top 4 banks had of about of. Posted: 22 Jun 2012 09:00 AM PDT US DATA: OCC report says top 4 banks had concentration of about 93.2% of all derivatives. See http://www.occ.gov/topics/capital-markets/financial -markets/trading/derivatives/dq112.pdf |
Euro “Irreversible,” E30 Bln Growth Plan Eyed: 4 EU Leaders Posted: 22 Jun 2012 09:00 AM PDT By Alina Trabattoni ROME (MNI) – Leaders of the four largest Eurozone economies agreed on the need to push through a growth package for the 17-nation bloc worth 130 billion euros, or 1% of euro area gross domestic product, at their upcoming summit meeting June 28-29, they said at a joint press conference here. Italian Prime Minister Mario Monti, who spoke first, said the four leaders also agreed that the single currency project was “irreversible.” Even so, a well-known divergence of views was in evidence as German Chancellor Angela Merkel publicly turned down a plan championed by the French, Spanish and Italian leaders to use European bailout funds to purchase sovereign debt and curb soaring bond yields in Spain and Italy. Their proposal, not a new one, was floated again last week as uncertainty and high tension continued to grip financial markets, torturing Madrid and Rome with sharply rising sovereign borrowing costs. But Germany has insisted that if the bailout fund is to buy sovereign debt, it can only be within the context of a formal country program with policy conditions attached. “Each country wants to help another country that is in trouble, but for the taxpayers, I must have the guarantee that there is control,” Merkel said here. “Responsibility and control go hand in hand.” Today’s four-way summit, hosted by Monti, follows closely on the heels of the Eurozone finance ministers’ meeting on Thursday night in Luxembourg, at which they discussed a plan to provide up to E100 billion worth of recapitalization aid to Spanish banks. At next week’s summit, EU leaders are expected to discuss long-term plans for a fiscal and banking union. “What has been done to date is not enough,” Monti said. “On June 28, we will introduce growth, employment and single market initiatives.” In a report issued on Thursday, the International Monetary Fund said the euro crisis had reached a “critical stage,” and it urged leaders to make a “strong commitment” to solve the underlying issues that are eroding confidence in the region. One of the solutions could be the issuance of common debt, the report said. The IMF also called for a banking union and increased fiscal integration. So far, European leaders have failed to produce durable solutions to the sovereign debt and banking crisis that is enveloping the region and undermining its economic growth. Germany’s IFO business sentiment declined in June for the second month in a row to the lowest level in more than two years, according to data released today. Italian consumer confidence also dropped to a record low this month. Earlier this week, preliminary purchasing manager (PMI) reports for June showed the Eurozone economy is still in retreat, with worrying weakness in Germany’s manufacturing sector. “After we have intensively dealt with budget consolidation in the form of the fiscal pact we have to deal with growth and employment,” Merkel said. “It is now necessary for the next summit to set a clear mark and I absolutely agree on the use of 1% of the GDP of the [euro] area for additional growth. That is the right signal that we need.” Monti is battling to keep Italy from becoming the next victim of the euro crisis, with the nation thrust back into the debt crisis debacle despite a E35 billion austerity package introduced earlier this year. The prime minister, appointed together with a technocrat government last November to replace the outgoing Silvio Berlusconi and his cabinet, has so far failed to muster market confidence in his ability to slash Italy’s massive public debt — at 120% of GDP, the second largest in the Eurozone — or to limit the contagion effects of the Spanish banking crisis and the chaos in Greece, which are feeding through into Italian borrowing costs. Spanish yields, which flirted with dangerously high levels above 7% earlier this week, have eased considerably to around 6.5% today. The lower yield is largely a result of market reassurance after two Spanish auctions garnered healthy demand this week, and a response to news that the European Central Bank was planning to ease collateral rules on mortgage-backed assets, which will be of particular benefit to Spanish banks. The ECB officially announced the collateral changes Friday afternoon. Italy’s 10-year yield, largely coupled with Spain’s of late, has also eased from a high of 6.2% on June 14 to around 5.65% today. Markets have been increasingly nervous about waning public confidence in Italy’s Prime Minister Mario Monti, his seeming inability to implement some of the larger structural reforms, and the potential for early elections, hinted at by political leaders in the coalition that supports his government – most recently by Silvio Berlusconi, who strongly suggested in a recent interview that he was displeased with some of Monti’s policies. In fact, today’s meeting comes in the wake of mounting concern on international markets that Italy, the Eurozone’s third largest economy, may suffer a fate similar to Spain’s, Greece’s, Portugal’s and Ireland’s. Italy is the Eurozone’s third-largest economy and the second biggest manufacturer, after Germany, and the recent spike in its borrowing costs has heightened pressure on European leaders to introduce concrete measures to combat the crisis. Spanish Prime Minister Mariano Rajoy, who also attended the press conference, said the four leaders had agreed on the need for measures to reduce deficits and debt, as well as for plans to boost growth and competitiveness. He called for structural reforms, as well as for a banking, fiscal and cultural union. “Today we have all agreed to use mechanisms that can be conducive to greater integration,” Rajoy said. “The rest of the world understands where we are heading.” Meanwhile, Greece’s new government said this week it would seek a softening of the EU bailout terms the country has accepted. Prime Minister Antonis Samaras declared his intention to do everything possible to keep Greece in the Eurozone. Samaras was appointed earlier this week following the closely-watched June 17 elections, which in effect were seen as a referendum on Greece’s euro membership. While Samaras’ conservative New Democracy party received the most support of all the parties vying in the elections, it didn’t secure a majority of the seats in parliament and was forced to form a coalition with the Socialist (Pasok) Party, its old nemesis, and with the smaller Democratic Left party. The support that Monti’s proposal has received from Spain and France reflects shifting alliances within Europe. Prior to Hollande’s recent election, Merkel usually could count on the support – at least in public – of now-former President Nicolas Sarkozy. “We need to move closer together politically, especially in the euro area,” Merkel said. “If you have a joint currency you also need to make coherent policies, and we will work jointly…towards a stronger political union.” The German Chancellor added: “I’m happy that all four of us could say today that they support the introduction of a financial transaction tax.” [TOPICS: M$S$$$,M$G$$$,M$F$$$,M$X$$$,M$I$$$,MGX$$$,M$$CR$] |
US DATA: OCC says the notional amount of derivatives. Posted: 22 Jun 2012 09:00 AM PDT US DATA: OCC says the notional amount of derivatives held by insured U.S. commercial banks and savings associations fell by $3.0 trillion (or 1.2 percent) from the fourth quarter to $228 trillion. The notional amount of derivatives contracts has fallen for three consecutive quarters, due to ongoing trade compression activities. Interest rate contracts fell $3.8 trillion (two percent) to $184 trillion, while FX contracts rose five percent to $26.8 trillion. |
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