The trading magicians of Plus500

Plus500 is an unusual member of the retail foreign exchange trading world. The London-listed group offers contracts for difference on currencies, as well as stocks, indices, exchange traded funds, and commodities, but it is unusual in the way it is structured, the way it operates and, above all, the way it is spectacularly profitable.

More on all that below, but to begin let’s focus on the recent move in the Swiss Franc versus the Euro. The decision by the Swiss central bank to remove the cap on the value of the franc prompted very large moves for the currency, blowing up some currency trading platforms and prompting unexpected losses throughout the financial system.

Plus500, however, suffered “no material impact on the Company’s financial and trading position”, an incredible result. Read more

FirstFT – Syriza victory, the first US licensed Bitcoin exchange and James Bond’s body language

“The Greek people have given a clear, indisputable mandate for Greece to leave behind austerity,” said Alexis Tsipras in his victory speech.

His leftwing anti-austerity party Syriza started coalition talks with potential partners after narrowly failing to win an outright majority. It had also clinched a coalition deal with a small rightwing party similarly opposed to Europe’s economic policy, giving it a clear majority. The result pushed the euro to an 11-year low. (WSJ, Reuters)

Although Syriza’s triumph has created uncertainty across Europe, if the example of late prime minister Andreas Papandreou is anything to go by a more pragmatic government may follow. Either way Athens will soon have to lock horns with international creditors over its mountain of public debt – 175 per cent of GDP. Ferdinando Giugliano examines Greece’s debt burden. (FT)

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Markets Live: Monday, 26th January, 2015

Live markets commentary from 

Greek austerity after Syriza

A brief collection of reaction to Sunday’s election in Greece follows. Before we hear from the professional financial crowd, however, a word from Eric LeCompte, executive director of Jubilee USA…

This election was a referendum on austerity and debt policies. The people of Greece voted and said no to austerity and yes to renegotiating Greece’s debt.

Austerity programs can be likened to trying to help a patient on life support by punching them.

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It’s not the euro that’s getting cheaper; it’s the dollar that’s getting more expensive

You may have noticed that a US dollar goes a lot further in much of Europe than it used to. In fact, it goes about 25 per cent further. From our colleagues at FastFT:

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ICYMI, China’s credit buildup was pretty damn fast

Like 97th percentile fast.

From Goldman, do click to enlarge: Read more

Further reading

Elsewhere on Monday,

- Greek games and scenarios.

- Greece’s fragile primary budget surplus is not much of a bargaining chip.

- The Swiss franc appreciation and the sorry saga of FX lending.

- An ECB QEsplainer.  Read more

FirstFT (the new 6am Cut)

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“The Greek people have given a clear, indisputable mandate for Greece to leave behind austerity,” said Alexis Tsipras in his victory speech. Read more

The Bank of Canada’s Rate Cutting Folly

The Canadian central bank surprised markets this week by cutting its base rate by 25 basis points. Jon Hartley, co-founder of Real Time Macroeconomics, argues that the Canadian central bank’s decision to cut interest rates will exacerbate the Canadian housing bubble and wasn’t needed to offset the fall in the oil price.

Early this week, the Bank of Canada unexpectedly announced a change in its key benchmark interest rate for the first time in four years. However, rather than raising its benchmark interest rate as Fed has said it intends to do later this year, Canada’s central bank has lowered its overnight interest rate by 25 basis points to 0.75%. Read more

A touch of peer-to-peer mania?

Seven months have ticked by since hedge fund Marshall Wace spun out P2P Global, an investment trust focused on lending through peer-to-peer lending platforms. About £200m was raised at flotation and, by November, with about three quarters of those initial funds deployed, P2P said it was actively considering a fresh stock offer.

Two weeks ago it said it was issuing 10m “C” shares at £10 apiece. But demand from investors immediately topped 20m, so the issue has been increased to 25m shares — raising £250m. Read more

FirstFT (late lunch wrap)

Death of Saudi king, art’s shady money, Greece to decide
Saudi Arabia’s King Abdullah has died at the age of 91, after years of poor health, elevating Crown Prince Salman to be ruler of the world’s largest oil exporter and a key US ally.

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Markets Live: Friday, 23rd January, 2015

Live markets commentary from 

Shenzhen and the art of balance sheet maintenance

Chinese real estate companies raised $5.3bn in dollar bond markets during the first three weeks of 2013 and $4.9bn over the same period in 2014.

This year, not a single deal has been completed…

“You don’t want to go hat in hand to investors when they feel they’re catching a falling knife,” said the head of debt capital markets at one investment bank.

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US shale revolution must force Davos energy rethink

This guest post is from the co-authors of UBS’s white paper for the WEF meeting 2015 in Davos, which started on Wednesday.

Note that one of the co-authors, UBS Investment Bank’s chief economist Larry Hatheway, will be fielding questions on the energy chapter on Friday at 11:30am during Markets Live. Read more

Further reading

Elsewhere on Friday,

- “Draghi’s big announcement seems to have raised expected European inflation by one-fifth of a percentage point.”

- But be very careful about extrapolating from past failures of European monetary policy to the near future.

- Of course, the real question is what’s happening with the 5y5y5y5y5y.

- Well, that and whether ECB QE is going to cause the implosion of the European banking system,  Read more

FirstFT (the new 6am Cut)

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Saudi Arabia’s King Abdullah has died, elevating Crown Prince Salman to the helm of the world’s largest oil exporter, a key US ally. Read more

European sovereign debt hypocrisy

Speaking at Davos this morning, Angela Merkel and Alexander Stubb argued that European creditors should not be held responsible for their poor lending decisions.

Well, that’s not exactly how they phrased it: Read more

25 bps in Canada = €1.1 trillion ECB QE?

The Bank of Canada cut rates yesterday and the European Central Bank announced its sovereign bond-buying scheme today. In both cases, there were sharp responses in the currency markets, but they seem to have cancelled each other out:

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Roubini Vs the so-called “art” industry

Not to be missed in the ECB news fog: John Gapper’s account of an FT Davos lunch with Nouriel Roubini in which the formerly doom-saying NY Stern economist spelled out what polite and civilised society has always known but been keen to turn a blind eye to: the art market is actually a bit of a money laundering scam.

The key quotes not to be missed:

“Whether we like it or not, art is used for tax avoidance and evasion,” said Prof Roubini, himself an art collector. “It can be used for money laundering. You can buy something for half a million, not show a passport, and ship it. Plenty of people are using it for laundering.”

Prof Roubini argued that the art market had a series of characteristics that needed regulation. “While art looks as if it is all about beauty, as a business it is full of shady stuff,” he said. “We should correct it or it will be undermined over time.”

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A right oil hotchpotch

Just a few developments to update oil watchers on. Plus one conspiracy theory.

First, John Kemp of Reuters observes on Thursday that gasoline demand is now at multi-year seasonal highs:

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2004 is calling and it wants its dollars back

The dollar euro level to watch is 1.1459, which is the 11 year low hit on Friday.

Draghi and the risk-sharers

The ECB just announced it will increase monthly buying of assets by €60 bn which will continue until September 2016, and will do so on a risk-sharing basis on 20 per cent of the assets purchased rather than on an entirely pooled based. More details: Everywhere.

For now, here’s the first comment in our inbox from Marc Ostwald at ADM Investor Services, who says the risk sharing component is limited: Read more

Markets Live: Thursday, 22nd January, 2015

Live markets commentary from 

This is nuts. When’s the revolution?

Over in Russia:

This is illegal interference with my personal life, with my information,” Yakunin told state television. “We are a natural monopoly, we live according to decisions taken by the state, so we make as much as the state allows us to make. Read more

Davos must face up to life after ZIRP

This guest post is from the co-authors of UBS’s white paper for the WEF meeting in Davos, which started on Wednesday.

Note that one of the co-authors, UBS Global Asset Management’s head of asset allocation & currency Andreas Koester, will be fielding questions on the financial policy chapter on Thursday at 11am during Markets Live. Read more

The dollar is still our currency and still your problem

For some reason, a lot of people outside the US like to borrow from and lend to each other in dollars.

A new paper from the Bank of International Settlements, which has consistently been producing some of the best research on these flows, describes how the action has shifted from banks to bond investors since 2008. Read more

ECB QE guesswork, cut out and keep edition

Guesswork from Deutsche (click to enlarge):

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Further reading

Elsewhere on Thursday,

- In which Matt Levine takes swipes at S&P parties. Also, some stuff about blended constants and Herodotus.

- Euroblunders.

- Structuring ECB QE to keep the German taxpayers (and their economists) happy.  Read more

FirstFT (the new 6am Cut)

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The ECB has been debating plans for a one to two year programme to make monthly purchases of EUR50bn in government bonds. No formal decision had been made last night but it looks set to embark on large scale quantitative easing for the first time in its history. Mario Draghi is expected to announce the decision at 1.30pmGMT today. (FT) Read more

Just how big a day was Jan 15 for FX markets?

The first numbers by way of CLS, the continuous link settlement system used by the vast majority of the FX market to settle transactions, are in.

As Nick Murray-Leslie tells FT Alphaville on Wednesday:

CLS settled a record number of transactions following the decision by the Swiss National Bank to remove a currency ceiling against the euro.

CLS settled 2.26 million transactions on 20 January, totalling USD 9.2 trillion with 99.5% of these transactions were settled within 45 minutes.”

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