Nasdaq is aiming to shake up the exchange landscape with the launch the new Nasdaq Futures energy market. The launch of the new market, which was announced on the sidelines of the 40th Annual FIA International Futures Conference, has the support of leading participants and will offer clearing for options and futures based on benchmarks for oil, natural gas, U.S. power and other key energy commodities.

Founding participants in the new market include ABN AMRO Group, Advantage Futures, Goldman Sachs, JPMorgan, Morgan Stanley and Virtu Financial. In addition to these founders, Nasdaq Futures has the support of other major trading firms, futures commission merchants and inter-dealer brokers. The products will be cleared through The Options Clearing Corporation.

Nasdaq CEO Bob Greifeld acknowledged the move as a challenge to existing powers in the energy futures space by joking with the press pool, “What do CME, ICE and Hillary Clinton all have in common? (read more…)

Singapore Exchange plans to expand its suite of foreign exchange futures offerings in the third quarter with the addition of contracts for Renminbi crosses and the Taiwanese dollar. The additions, which were announced on the sidelines of the 40th Annual FIA International Futures Conference, are subject to regulatory approval and fall in line with the latest G20 changes affecting over-the-counter derivatives that call for a movement toward electronic exchanges.

The SGX Asian FX futures suite has hit $37 billion in aggregate notional value over its lifetime as contracts for the Indian rupee and Singapore dollar routinely break volume records. The exponential growth rate for Asian FX futures has mirrored strong, growing demand by investors worldwide for FX derivatives trades on a regulated platform that offers transparency and real-time pricing to coincide with Asian time zones.

“Global market participants can continue to draw on SGX’s unique platform to fulfill their investment needs and effectively manage their Asia-wide exposures across multiple asset classes in the Asian time zone,” said SGX CEO Magnus Böcker, who has announced he is leaving the exchange in June of this year. (read more…)

We all have heard that one of the big culprits in the credit crisis was the collateralized debt obligation (CDO). CDOs are notes backed by baskets or cohorts of different types of receivables. The notes can be backed by residential mortgages, or commercial mortgages, or student loans, or credit card receivables or auto loans, etc (or a mixture of all the above). It is the cash flows from those receivables, not some end borrower, that services the CDO notes, i.e. pays interest and amortizes the principal on the notes.

I don’t want to go into the details about CDOs here or their role in the credit crisis because many other writers have gone into this exhaustively elsewhere. Suffice to say CDOs (or asset backed financing/securitizations) are actually very important and effective ways of financing certain receivables pools (of effecting what is known as ‘non-recourse’ finance). And yet there were fairly obvious issues with many CDO structures before the crisis: their excessive structural complexity (the notes were broken into too many tranches); the questionable credit quality of the underlying assets; the use of too many different types of underlying receivables; the fact that those rating the notes (the rating agencies) were effectively in bed with the originators of the notes; the overly aggressive selling methods of CDO tranches by swarms of brokers; etc. (read more…)

With an eye on what lies ahead for the industry in 2015, SmartBrief conducted an e-mail interview with Jeffery Weaver, Chairman of the International Association of Credit Portfolio Managers. Mr. Weaver is an Executive Vice President and Group Head of CPM at KeyCorp.

The role of Credit Portfolio Managers in the management of credit exposures has evolved since the end of the Great Recession and one of the most significant changes is the expansion of regulation. How has this heightened regulatory scrutiny changed the role of risk management?

The role of credit portfolio management has become more strategic to the firm as the perpetual assessment of emerging risks and their potential impact on the credit portfolio is under taken.

In order to deliver high quality stable earnings with a sustainable growth profile, risk must be monitored across the organization in a collaborative and transparent manner. The optimally performing bank of today promotes prudent and effective decision making premised on a predefined set of strategic operating principals – while maintaining alignment with a risk management philosophy that has broad support by the firm’s Board of Directors, senior management, and its primary regulators. (read more…)

A collection of stories from SmartBrief publications and around the web…

The editor of The Economist says farewell: John Micklethwait departs The Economist bound for Bloomberg. I won’t even try to summarize his farewell message. It is too good. Read the whole thing.

How the next editor got the job: Gideon Litchfield writes for Quartz about the process The Economist employed to select Zanny Minton Beddoes as the new editor. Litchfield, who was also a candidate for the job, offers unique insight on the refreshingly straightforward way The Economist handled the search.

Food for thought from Davos: With the glitz and glam always stealing the headlines in Davos, many people overlook some of the research the World Economic Forum actually disseminates – during the conference or throughout the year. Kirill Shakhnov from the European University Institute shares some interesting research with this paper: How wealth inequality entices talent into finance. (read more…)