Tuesday, December 8, 2015

EES: Liquidity update and Turkey in focus

Elite E Services Forex system update December 8, 2015

Recently EES released a system designed to create Forex liquidity www.getfxliquidity.com which has been doing well for new clients who purchased it.

We've started a new MAM at GoMarkets and will be publishing the results here at MyFXBook.  As this is a managed account, results will be conservative, and a mix of EES systems and manual trading (not only Liquidity).

Turkey in Focus

With the world on the verge of World War 3, the impact in FX will most notably seen in the Turkish Lira (and other regional currencies, but most extreme in TRY).

Get to know the Turkish Lira!  From wikipedia 

The Turkish lira (TurkishTürk lirası) (sign; code: TRY; usually abbreviated as TL)[2] is the currency of Turkey and the Turkish Republic of Northern Cyprus (recognised only by Turkey). The Turkish lira is subdivided into 100 kuruş.
In December 2003, the Grand National Assembly of Turkey passed a law that allowed for redenomination by the removal of six zeros from the Turkish lira, and the creation of a new currency. It was introduced on 1 January 2005, replacing the previous Turkish lira (which remained valid in circulation until the end of 2005) at a rate of 1 second Turkish lira (ISO 4217 code "TRY") = 1,000,000 first Turkish lira (ISO 4217 code "TRL"). With the revaluation of the Turkish lira, the Romanian leu (also revalued in July 2005) briefly became the world's least valued currency unit. At the same time, the Government introduced two new banknotes called TRY100 and TRY50. One EU diplomat has stated that Turkey will adopt the euro if it joins the European Union.[7]
In the transition period between January 2005 and December 2008, the second Turkish lira was officially called Yeni Türk Lirası (New Turkish lira).[8] It was officially abbreviated "YTL" and subdivided into 100 new kuruş (yeni kuruş). Starting in January 2009, the "new" marking was removed from the second Turkish lira, its official name becoming just "Turkish lira" again, abbreviated "TL".
All obverse sides of current banknotes and reverse sides of current coins have portraits of Mustafa Kemal Atatürk.



Monday, December 7, 2015

BIS Warns The Fed Rate Hike May Unleash The Biggest Dollar Margin Call In History

Over the past several months, one of the biggest conundrums stumping the financial community has been the record negative swap spread which we profiled first in September,  and which as Goldman most recently concluded, "has been driven by funding and balance sheet strains, especially since August."

Today, in its latest quarterly report, the Bank of International Settlement focused precisely on this latest market dislocation.  According to the central banks' central bank, "recent quarters have witnessed unusual price relationships in fixed income markets. US dollar swap spreads (ie the difference between the rate on the fixed leg of a swap and the corresponding Treasury yield) have turned negative, moving in the opposite direction from euro swap spreads (Graph A, left-hand panel)."
Given that counterparties in derivatives markets, typically banks, are less creditworthy than the government, swap rates are normally higher than Treasury yields because of the additional risk premium. Hence, the negative spreads point to a possible dislocation. One set of factors relates to supply and demand conditions in interest rate swap and Treasury bond markets. In the swap markets, forces that can compress swap rates include credit enhancements in swaps, hedging demand from corporate bond issuers, and investors seeking to lock in longer durations (eg insurers and pension funds) by securing fixed rates via swaps.

In cash markets, in turn, upward pressures on yields stemmed from the recent sales of US Treasury securities by EME reserve managers. The market impact of these Treasury bond sales may have been amplified by a second set of factors that curb arbitrage and impede smooth market functioning. First, the capacity of dealers’ balance sheets to absorb rising inventory may have been overwhelmed by the amount of US Treasury bonds reaching the secondary market in the third quarter (Graph A, centre panel), causing dealers to bid market yields above the corresponding swap rates. Second, balance sheet constraints may have made it more costly for intermediaries to engage in the speculative arbitrage needed to restore a positive swap spread. Such arbitrage is sensitive to balance sheet costs because it requires leverage, with a long Treasury position funded in the repo market.
Meanwhile, while US swap spreads hit record negative levels, in Europe the market tensions have been of a different nature:
Ten-year swap spreads started to widen in early 2015, around the time when the Swiss National Bank abandoned its currency peg, then increased further over subsequent months (Graph A, left-hand panel). While past episodes of widening swap spreads can be attributed to credit risk in the banking sector, the most recent developments may have more to do with hedging by institutional investors. While swap rates also fell (Graph A, right-hand panel), the swap spread widened, indicating that cash market yields fell by even more. One possible explanation is that, as yields fall amid expectations of ECB asset  purchases, institutional investors with long-duration liabilities, such as insurers and pension funds, would have been under pressure to extend their asset portfolio duration by purchasing additional longer-dated bonds, possibly compressing market yields below the swap rates.
And with cash markets rapidly depleting of physical inventory as a result of central bank monetization, investors have had to rely on derivatives markets, especially swaptions.
In addition to extending portfolio duration by purchasing longer-dated bonds or entering a long-term interest rate swap as a fixed rate receiver, investors may also hedge the risk of steeply falling yields by purchasing options to enter a swap contract at a future date (swaptions). Hence, swaptions tend to become more expensive in times of stress and when investors rush to hedge duration risk.

As 10-year swap rates were compressed in early 2015, the cost of such options written on euro swap rates rose by a factor of three by 20 April 2015 (Graph B, left-hand panel). Steeply rising euro rate hedging costs preceded the actual correction in yields, which started rebounding around the weekend of 18 April culminating in the so-called bund tantrum. This suggests that this year’s turbulence in fixed income markets may have had its origins in derivatives and hedging activity, with reduced market depth in cash markets exacerbating the spillover.
Why is there reduced market depth in cash markets? Simple: because of central banks intervention and soaking up of securities. So what the BIS is effectively saying is that as a result of central bank activity, investors have been forced to transact increasingly in the derivative arena as a result of which events like the Bund flash smash from April led to major market losses for those long Bund duration in either cash or derivative markets. Since then, volatility in European government bond markets has persisted culminating with the surge in yields this past Thursday in the aftermath of the ECB's dramatic and extensively discussed here previously "disappointment."
The BIS' conclusion:
Such volatile movements in euro area interest rate derivatives markets raise questions about smooth pricing responses in the face of possibly transient order imbalances. Of question is liquidity in hedging markets and the capacity of traditional options writers, such as banks, to provide adequate counterparty services to institutional hedgers. Looking back at the events of late April, the rise in demand to receive fixed rate payments via swaps by institutional hedgers may have run into a lack of counterparties willing to receive floating (pay fixed) rates amid sharply falling market yields. The emergence of one-sided hedging demand pressures can be gleaned from the skew in swaption pricing (Graph B, centre and right-hand panels). The skew observed for euro rates approaching the bund tantrumresembled the developments in US dollar rates in December 2008, when US pension funds rushed to hedge interest rate risk via swaptions as market yields tumbled.
But while the swap dislocation in the bond market can be attributed to anything from market illiquidity, to a shortage of cash market product, to lack of willing counterparties, to HFTs, and ultimately, to encroaching central bank intervention - something we have been warnings about since 2012 - perhaps an even more important question to emerge when observing broken swap markets are recent development in FX basis swaps.
Recall our coverage of one particular and very prominent dislocation in the space, one which we covered first in March and then again in October when we noted that the "Global Dollar Funding Shortage Intesifies To Worst Level Since 2012".
This is how JPM explained most recently the phenomenon which can simply be ascribed to a global dollar funding shortage:
"continued monetary policy divergence between the US and the rest of the world as well as retrenchment of EM corporates from dollar funding markets are sustaining an imbalance in funding markets making it likely that the current episode of dollar funding shortage will persist."
The BIS also touched on this topic in its quarterly review, when it picked up the "policy divergence" torch from JPM and describing the ongoing USD funding shortage as follows:
The increased likelihood of policy divergence between the US, the euro area and other major currency areas also rippled through global US dollar funding markets.Historically, cross-currency basis swap spreads – a measure of tensions in global funding markets – were virtually zero, consistent with the absence of arbitrage opportunities. Since 2008, the basis has widened repeatedly in favour of the US dollar lender, ie there is a higher cost for borrowing in dollars than in other currencies even after hedging the corresponding foreign exchange risk – conventionally recorded on a negative basis (Graph 5, left-hand panel). As such, negative basis swap spreads indicate the absence of arbitrageurs to meet heightened demand for US dollar liquidity.
Visually:
To be sure, our readers were aware of this implication of diverging monetary policy. However, thanks to the BIS, we now can add a quantitative dimension to what until recently what mostly a qualitative problem: i.e., how much is the dollar shortage as implied by the near record negative USDJPY currency basis swap spreads.
The US dollar premium in FX swap markets widened substantially – in particular vis-à-vis the Japanese yen – after the odds of Fed tightening reached 70%. At the end of November, the basis swap spread of the Japanese yen versus the US dollar was minus 90 basis points, possibly reflecting in part the more than $300 billion US dollar funding gap at Japanese banks.
The BIS does its best not to sound the alarm at this stunning observation:
While funding continued to be available, such a large negative basis indicates potential market dislocations. And this may call into question how smoothly US dollar funding conditions will adjust in the event of an increase in US onshore interest rates. Similar pricing anomalies have also emerged in interest rate swap markets recently, raising related concerns.
Indeed, once the Fed does hike rates as it now seems almost certain it will do in 10 days time, we will find out just how profound the USD funding shortage truly is. Readers may recall that in 2009 we cited a BIS report which said that "were all liabilities to non-banks treated as short-term funding, the upper-bound estimate [of the dollar short] would be $6.5 trillion".

This time around, as a result of the dramatic increase in USD-funded debt around the globe in the past 5 years, it will certainly be far greater.
And, as a further reminder, the last time a global USD margin call was launched with the failure of Lehman, the Fed had to unleash an unprecedented global bailout by way of virtually limitless swap lines opened with every central bank that has a shortfall in USD exposure.

As a result, our only question for the upcoming Fed rate hike is how long it will take before the Fed, shortly after increasing rates by a modest 25 bps to "prove" to itself if not so much anyone else that the US economy is fine, will be forced to mainline trillions of dollars around the globe via swap lines for the second time in a row as the world experiences the biggest USD margin call in history.

Wednesday, December 2, 2015

EES: Get FX Liquidity Forex algorithm for a limited time

EES has been developing algorithms for a long time (longer than there was a Forex industry).  We've seen thousands of EAs flood the retail market.  As well, we've inspected and traded with algorithms implemented and developed by the world's leading FX banks "the usual suspects."

At the behest of a large institutional client we developed an algorithm designed not to profit, but to generate volume.  There's no question about why they would want this.  For a limited time, they have allowed us to offer this system to a select group of professional traders - but the number is limited!

For more information about this system, and to purchase, visit www.getfxliquidity.com




Tuesday, December 1, 2015

New Smoking Gun: U.S. and UK KNEW Saddam Did NOT Possess WMDs

We've reported again and again and again and again and again that everyone knew that Iraq didn’t have weapons of mass destruction (WMDs).
Today, a new smoking gun has  been disclosed.  The Guardian notes:
Tony Blair went to war in Iraq despite a report by South African experts with unique knowledge of the country that showed it did not possess weapons of mass destruction, according to a book published on Sunday.

God, Spies and Lies, by South African journalist John Matisonn, describes how then president Thabo Mbeki tried in vain to convince both Blair and President George W Bush that toppling Saddam Hussein in 2003 would be a terrible mistake.

Mbeki’s predecessor, Nelson Mandela, also tried to convince the American leader, but was left fuming that “President Bush doesn’t know how to think”.

***

The claim was this week supported by Mbeki’s office, which confirmed that he pleaded with both leaders to heed the WMD experts and even offered to become their intermediary with Saddam in a bid to maintain peace.

South Africa had a special insight into Iraq’s potential for WMD because the apartheid government’s own biological, chemical and nuclear weapons programme in the 1980s led the countries to collaborate. The programme was abandoned after the end of white minority rule in 1994 but the expert team, known as Project Coast, was put back together by Mbeki to investigate the US and UK assertion that Saddam had WMD – the central premise for mounting an invasion.

Mbeki, who enjoyed positive relations with both Blair and Saddam, asked for the team to be granted access.
“Saddam agreed, and gave the South African team the freedom to roam unfettered throughout Iraq,” writes Matisonn, who says he drew on sources in Whitehall and the South African cabinet. “They had access to UN intelligence on possible WMD sites. The US, UK and UN were kept informed of the mission and its progress.”

The experts put their prior knowledge of the facilities to good use, Matisonn writes. “They already knew the terrain, because they had travelled there as welcome guests of Saddam when both countries were building WMD.”

On their return, they reported that there were no WMDs in Iraq. “They knew where the sites in Iraq had been, and what they needed to look like. But there were now none in Iraq.”

In January 2003, Mbeki, who succeeded Mandela as president, sent a team to Washington to explain the findings, but with little success. Mbeki himself then met Blair for three hours at Chequers on 1 February, the book relates.

He warned that the wholesale removal of Saddam’s Ba’ath party could lead to a national resistance to the occupying coalition forces. But with huge military deployments already under way, Blair’s mind was clearly made up. When Frank Chikane, director-general in the president’s office, realised that the South Africans would be ignored, it was “one of the greatest shocks of my life”, he later wrote in a memoir.

Matisonn adds: “Mandela, now retired, had tried as well. On Iraq, if not other issues, Mandela and Mbeki were on the same page. Mandela phoned the White House and asked for Bush. Bush fobbed him off to [Condoleezza] Rice. Undeterred, Mandela called former President Bush Sr, and Bush Sr called his son the president to advise him to take Mandela’s call. Mandela had no impact. He was so incensed he gave an uncomfortable comment to the cameras: ‘President Bush doesn’t know how to think,’ he said with visible anger.”

***

Mbeki’s spokesman, Mukoni Ratshitanga, confirmed that Mbeki met Blair at Chequers to advise against the war and the UK’s involvement in it. Blair disagreed, Ratshitanga said, insisting that he would side with Bush.

“President Mbeki informed the prime minister that the South African government was about to send its own experts to assist and encourage the Iraqis to extend full cooperation to the UN weapons inspector, Dr Hans Blix,” Ratshitanga said. “He urged the prime minister to await the report of the SA experts before making any final commitment about going to war against Iraq.

***

Mbeki also had a phone conversation with Bush in 2003 and tried to discourage him from going to war, the spokesman said. “President Bush said he would rather not go to war but needed a clear and convincing signal that the Iraqis did not have WMDs to enable him to avoid the invasion of Iraq.

“President Mbeki informed him about the report of the SA experts which by then had already been sent to the UN secretary general, Dr Hans Blix and the UN security council. He informed President Bush that the report of the SA experts said Iraq had no WMDs. President Bush said he did not know about the report but would obtain a copy from the US ambassador at the UN, New York.”

It is not known whether Bush did obtain a copy of the report.
Mbeki later contacted Blair to ask him to find out from the US president what would constitute a “convincing signal” from Saddam, promising that he would contact Saddam to persuade him to send such a signal, according to Ratshitanga. “President

Mbeki understood from his sources and was convinced that Prime Minister Blair received his message as reported above, but did not convey it to President Bush.”

Blair’s office did not deny the meeting with Mbeki or the specifics of what was said.
But the U.S. and UK wanted war ... not peace.  They even rejected an offer from Saddam Hussein to leave Iraq and allow in weapons inspectors.
Obama and Clinton did the same thing in Libya and Syria.  They also falsely blamed those regimes of using WMDS or the like, and supported Islamic terrorists in both Libya and Syria.

Sunday, November 29, 2015

How A Secretive Elite Created The EU To Build A World Government

Voters in Britain's referendum need to understand that the European Union was about building a federal superstate from day one
As the debate over the forthcoming EU referendum gears up, it would be wise perhaps to remember how Britain was led into membership in the first place. It seems to me that most people have little idea why one of the victors of the Second World War should have become almost desperate to join this "club". That's a shame, because answering that question is key to understanding why the EU has gone so wrong.
Most students seem to think that Britain was in dire economic straits, and that the European Economic Community – as it was then called – provided an economic engine which could revitalise our economy. Others seem to believe that after the Second World War Britain needed to recast her geopolitical position away from empire, and towards a more realistic one at the heart of Europe. Neither of these arguments, however, makes any sense at all.
The EEC in the 1960s and 1970s was in no position to regenerate anyone’s economy. It spent most of its meagre resources on agriculture and fisheries and had no means or policies to generate economic growth.
When growth did happen, it did not come from the EU. From Ludwig Erhard's supply-side reforms in West Germany in 1948 to Thatcher's privatisation of nationalised industry in the Eighties, European growth came from reforms introduced by individual countries which were were copied elsewhere. EU policy has always been either irrelevant or positively detrimental (as was the case with the euro).
Nor did British growth ever really lag behind Europe's. Sometimes it surged ahead. In the 1950s Western Europe had a growth rate of 3.5 per cent; in the 1960s, it was 4.5 per cent. But in 1959, when Harold Macmillan took office, the real annual growth rate of British GDP, according to the Office of National Statistics, was almost 6 per cent. It was again almost 6 per cent when de Gaulle vetoed our first application to join the EEC in 1963.
In 1973, when we entered the EEC, our annual national growth rate in real terms was a record 7.4 per cent. The present Chancellor would die for such figures. So the economic basket-case argument doesn’t work.
What about geopolitics? What argument in the cold light of hindsight could have been so compelling as to make us kick our Second-World-War Commonwealth allies in the teeth to join a combination of Belgium, the Netherlands, Luxembourg, France, Germany and Italy?
Four of these countries held no international weight whatsoever. Germany was occupied and divided. France, meanwhile, had lost one colonial war in Vietnam and another in Algeria. De Gaulle had come to power to save the country from civil war. Most realists must surely have regarded these states as a bunch of losers. De Gaulle, himself a supreme realist, pointed out that Britain had democratic political institutions, world trade links, cheap food from the Commonwealth, and was a global power. Why would it want to enter the EEC?
The answer is that Harold Macmillan and his closest advisers were part of an intellectual tradition that saw the salvation of the world in some form of world government based on regional federations. He was also a close acquaintance of Jean Monnet, who believed the same. It was therefore Macmillan who became the representative of the European federalist movement in the British cabinet.
In a speech in the House of Commons he even advocated a European Coal and Steel Community (ECSC) before the real thing had been announced. He later arranged for a Treaty of Association to be signed between the UK and the ECSC, and it was he who ensured that a British representative was sent to the Brussels negotiations following the Messina Conference, which gave birth to the EEC.
In the late 1950s he pushed negotiations concerning a European Free Trade Association towards membership of the EEC. Then, when General de Gaulle began to turn the EEC into a less federalist body, he took the risk of submitting a full British membership application in the hope of frustrating Gaullist ambitions.
His aim, in alliance with US and European proponents of a federalist world order, was to frustrate the emerging Franco-German alliance which was seen as one of French and German nationalism.
.The French statesman Jean Monnet, (1888 - 1979), who in 1956 was appointed president of the Action Committee for the United States of Europe
The French statesman Jean Monnet, (1888 - 1979), who in 1956 was appointed president of the Action Committee for the United States of Europe
Monnet met secretly with Heath and Macmillan on innumerable occasions to facilitate British entry. Indeed, he was informed before the British Parliament of the terms in which the British approach to Europe would be framed.
Despite advice from the Lord Chancellor, Lord Kilmuir, that membership would mean the end of British parliamentary sovereignty, Macmillan deliberately misled the House of Commons — and practically everyone else, from Commonwealth statesmen to cabinet colleagues and the public — that merely minor commercial negotiations were involved. He even tried to deceive de Gaulle that he was an anti-federalist and a close friend who would arrange for France, like Britain, to receive Polaris missiles from the Americans. De Gaulle saw completely through him and vetoed the British bid to enter.
Macmillan left Edward Heath to take matters forward, and Heath, along with Douglas Hurd, arranged — according to the Monnet papers — for the Tory Party to become a (secret) corporate member of Monnet’s Action Committee for a United States of Europe.
According to Monnet’s chief aide and biographer, Francois Duchene, both the Labour and Liberal Parties later did the same. Meanwhile the Earl of Gosford, one of Macmillan’s foreign policy ministers in the House of Lords, actually informed the House that the aim of the government’s foreign policy was world government.
Monnet’s Action Committee was also given financial backing by the CIA and the US State Department. The Anglo-American establishment was now committed to the creation of a federal United States of Europe.
Today, this is still the case. Powerful international lobbies are already at work attempting to prove that any return to democratic self-government on the part of Britain will spell doom. American officials have already been primed to state that such a Britain would be excluded from any free trade deal with the USA and that the world needs the TTIP trade treaty which is predicated on the survival of the EU.
Fortunately, Republican candidates in the USA are becoming Eurosceptics and magazines there like The National Interest are publishing the case for Brexit. The international coalition behind Macmillan and Heath will find things a lot more difficult this time round — especially given the obvious difficulties of the Eurozone, the failure of EU migration policy and the lack of any coherent EU security policy.
Most importantly, having been fooled once, the British public will be much more difficult to fool again.

Wednesday, November 25, 2015

Charting The Full Impact Of Europe's Plunging Currency On U.S. Corporate Revenues

When it comes to the current round of currency war between Europe and the US, Europe is winning and the US is losing, and  nowhere is this more obvious than the revenues of the largest US corporations.
Here is FactSet showing that Dow 30 companies continued to report sales declines in Europe in Q3 as a result of the surge in the US Dollar.
“Foreign exchange impacts reduced sales by 7.4 percentage points, with notable year-on-year declines in the euro, yen, and Brazilian real. These currencies devalued versus the U.S. dollar by 15%, 14%, and 37% respectively.” –3M (October 22)
Coming into the Q3 earnings season, there were concerns in the market regarding the impact of slower economic growth and the stronger dollar relative to the euro on U.S. corporate earnings for the third quarter. With the final DJIA components (Home Depot and Wal-Mart Stores) reporting results for Q3 this past week, how did companies in the DJIA perform in the third quarter in Europe in terms of sales?
How did the revenue numbers for Q3 2015 compare to prior quarters?
Overall, 11 of the 30 companies in the DJIA provided revenue growth numbers for Europe for the third quarter. Of these eleven companies, nine reported a year-over-year decline in revenues. This number is equal to the number of Dow 30 companies that reported a year-over-year sales decrease in the previous quarter (9). For seven of these DJIA companies, the third quarter marked (at least) the third consecutive quarter of year-over-year declines in revenues from Europe.
Why? Thank the Fed that topline growth is declining as a result of the soaring dollar... even if the full impact won't be felt for a long time because for some unclear reason, earnings multiples are rising even as profitability itself is declining: "The stronger dollar appeared to be a factor in the weaker revenue performance of these companies in Europe.Of the 11 companies in the DJIA that provided revenue growth numbers for Europe, all 11 cited some negative impact on revenues or EPS (or both) for Q3 due to unfavorable foreign exchange during their earnings conference calls."
At some point the Fed will say enough, and that the time has come to give US corporations the benefit of a weak currency. It will probably come just as the Fed is stuck neck-deep in its "tightening cycle."

Tuesday, November 24, 2015

Nasdaq poised to launch FX trading platform: top executive

Nasdaq (NDAQ.O) is poised to launch a platform for foreign exchange trading which it says would make the $5 trillion-a-day global market more transparent and would diversify its own business, a top executive from the stock market operator said.
Nasdaq Co-President Hans-Ole Jochumsen, one of two presidents who are both second in command of the tech-oriented stock market operator, told Reuters the FX trading platform is ready to be tested with banks although a launch was more likely in 2016.
Authorities in the United States and Europe have fined major banks more than $10 billion for failing to stop traders from trying to manipulate foreign exchange rates on the largely unregulated forex market.
"There are two main problems in retail FX markets. How can customers be sure they receive the correct price and secondly the counterparty risk," said Jochumsen, also the head of Nasdaq's transaction business.
"The criticism of banks and the fines show the market is not transparent and compliant and it speaks for it to be organized more like a stock market," Jochumsen told Reuters at the stock exchange in Copenhagen which is owned by Nasdaq.
Stock exchanges globally have been positioning themselves to take leading roles in foreign exchange as regulatory pressures force banks to move more trading onto exchanges, which tend to be more transparent than traditional phone-based trading between brokers.
The counterparty risk became real in January when losses from the surprise move by the Swiss National Bank (SNB) to end its currency cap against euro nearly crippled brokerage FXCM (FXCM.N) while online forex broker Alpari UK was forced into administration after suffering heavy losses on the Swiss franc.
Copenhagen-based foreign exchange brokerage Saxo Bank last week said the SNB's move cost it 700 million Danish crowns ($109 million) and booked a loss of 485 million crowns for the first six months in 2015 due to that cost.
Jochumsen declined to say when exactly Nasdaq will launch the FX platform but said it was likely to happen in 2016.
"We have a system ready that banks can test in their own systems but we don't want to launch it before we have enough banks committed to secure sufficient liquidity," he said.
He did not see why most currency pairs such as EUR/USD, GBP/USD and USD/CHF could not trade on a system similar to the stock market where banks add bid and ask prices every day.
Deutsche Boerse (DB1Gn.DE) in July beat out U.S. commodities and currency exchange operator CME Group (CME.O) in an auction to buy the Germany-based foreign exchange trading platform 360T for 725 million euros ($842.4 million).
And in March, BATS Global Markets, the No.2 U.S. stock exchange operator by volume and the largest pan-European stock market operator, closed its acquisition of FX trading platform Hotspot from KCG Holdings (KCG.N) for $365 million.
But while Nasdaq's aim is the same – to enter the lucrative world of FX trading – its plan differs by building its own platform rather than buying one.
Competing electronic forex trading platforms include EBS, owned by ICAP PLC (IAP.L), and FXall, owned by Thomson Reuters Corp (TRI.TO) (TRI.N), the parent of Reuters News.
Citigroup (C.N) is the leading foreign exchange trading bank with a market share of 16.1 percent, according to the Euromoney FX Survey 2015.
Deutsche Bank (DBKGn.DE) and Barclays (BARC.L) remained in second and third spots, but their market shares fell to 14.5 percent from 15.7 percent and to 8.1 percent from 10.9 percent, respectively.
In July, Nasdaq launched the "NFX" platform for trading energy derivatives such as oil, gas and power futures.

Nasdaq is heavily exposed to the level of activity on the stock market and Jochumsen said he hopes the decision to target energy futures market and the FX market will diversify Nasdaq's business more.

The Good Ol' Days: When Tax Rates Were 90 Percent

It’s quite interesting indeed when both progressives and conservatives seem to be nostalgic for those good ol’ days in the 1950s, for different reasons, of course.Conservatives want to go back to the nuclear Leave It to Beaver family and what not while liberals like to talk about those 90-percent tax rates that we owe our prosperity to. Or something like that. We’ll focus on the latter for the time being.
Bernie Sanders noted that “When radical, socialist Dwight D. Eisenhower was president, I think the highest marginal tax rate was something like 90 percent.” Paul Krugman said the same thing as did Michael Moore in his film Capitalism: A Love Story and you’ll see this factoid repeated on countless memes floating around the Internet.
However, what a tax rate is and what is actually paid are two very different things. Indeed, in 1955, the only people paying 90 percent (actually 91 percent) were thosemaking over $3,425,766 when adjusted for inflation. And these are marginal rates, so they only paid that on any earnings above that threshold.
Tax law has changed a lot over the years. As you can see by looking at the top marginal rate versus the inflation-adjusted top income bracket for those filing jointly from 1950 until 2013:
Top marginal rate versus the inflation-adjusted top income bracket
Source: Tax Foundation.
Today, there are seven tax brackets. In 1989, there were only two. In 1955, there were an utterly ridiculous twenty-four different tax brackets.
Regardless, one should ask how much the rich were actually paying. It should be noteworthy that back in the 1950s, the government wasn’t actually collecting any more in tax revenue as a percentage of GDP. There’s something called Hauser’s Law, which basically states there is a maximum threshold on how much the government can tax out of its population. I think this “law” is no such thing. If the government really wanted to expropriate more, it could do so. But Hauser’s Law based on the fact that in pretty much every year since 1950, the government has collected between 17 to 20 percent of GDP in taxes. Here are the government tax receipts compared to the top marginal tax rate:
Total Tax Receipts vs Top Marginal Tax Rate
Sources: Tax Foundation and Tax Policy Center.
As you can see, no matter what the rate has been, the tax receipts have pretty much been the same. Whether or not you can raise the amount collected is really immaterial here, the only thing that matters is what has happened (particularly when tax rates were over 90 percent) and it’s pretty much always been the same.
Of course, there are a lot of other taxes than personal income taxes. Still, tax receipts from personal income taxes have consistently been between 7 and 9 percent. In 2014, they were 8.1 percent. Furthermore, as you can see, the chart looks pretty much the same when looking at personal income tax receipts and the top marginal tax rate.
Income Tax Receipts vs Top Marginal Tax Rate
Source: Tax Foundation.
But who is paying these taxes a liberal might retort? Has the burden fallen more on the middle and lower classes? Well, no. In fact, the percentage of taxes paid by the highest quintile of income earners has steadily gone up since 1980. In 1980, the top 20 percent paid about 55 percent of all income taxes. Today, it’s just shy of 70 percent. The same goes for the top 1 percent, which went from about 15 percent in 1980 to just shy of 30 percent today.
The first of many reasons that this was the case is that we need to look at the effective tax rate, not the top marginal tax rate. So for example, if I make $20,000, I owe 10 percent under today’s tax code, but only on any income over $18,450 (filing jointly). So I only owe 10 percent of $1550, or $155. Yes, my marginal tax rate may be 10 percent, but my effective tax rate is 0.78 percent.
A study from the Congressional Research Service concludes that the effective tax rate for the top 0.01 percent of income earners during the period of 91-percent income taxes wasactually 45 percent. Given that the top bracket is so much lower today ($3,425,766 in 1955 vs. $413,200 in 2015), the 39.6 percent top marginal rate probably yields something pretty close.
Some of this was because corporate rates have always been lower than 50 percent. And as Alan Reynolds noted, when the personal income tax rates were reduced, it “… induced thousands of businesses to switch from filing under the corporate tax system to filing under the individual tax system.” In other words, many rich people kept their money in corporate entities when personal tax rates were higher.
Another major factor was the myriad of deductions and loop holes that used to be available. Many of these were eliminated by the Tax Reform Act of 1986, which by no coincidence coincided with the biggest rate deductions. For one, interest had previously been deductible on all loans. After the act, it has only been deductible on home mortgages.
But what was probably the biggest lost deduction for wealthy individuals was the elimination of deductions on passive investment losses on real estate. Before 1986, wealthy individuals would often buy real estate with no hopes at all of it cash flowing. That wasn’t the point. The point was that real estate is depreciated every year in the eyes of the IRS. Even though in the long run, properties usually go up in value, the IRS assumes that every twenty-seven-and-a-half years a property’s value will depreciate to zero.
This “loss” can be written off. So, for example, say a man earning $100,000 a year buys a property worth $275,000. He rents out the property and breaks even on it. The tax code allows that person to write off $10,000 as a loss which he can count against his income for that year. So now he only has to pay taxes on $90,000. If he owned ten such properties, his income would be zero, at least according to the IRS.
That deduction is now gone for everyone but “active” real estate investors, or those who invest in real estate as a career.
Indeed, one former tax accountant even made the case that there were so many deductions, loop holes and the like in the pre-1986 tax code that “… there was a massive amount of tax fraud at all income levels under the old code. It was so bad and so common that most people took pride in telling others how they cheated on their taxes.”
I’ll leave how true that statement is to the reader, but from what I’ve heard, it sounds about right.
Regardless, the simple fact is that the rich never paid 90 percent of their income in taxes or anything even remotely close to that. Unfortunately though, some memes die hard.