Draghi pushes for unified bank-rescue fund | Office Depot and OfficeMax reportedly near merger deal | FIX issues guidelines for electronic trading of bonds
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19 February 2013
CFA Institute: Financial NewsBrief
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Abe pressures BoJ to loosen monetary policy
Japanese Prime Minister Shinzo Abe is adding pressure on the Bank of Japan to back his call for aggressive monetary easing to drive up inflation and stimulate growth. The government could rewrite the law that guarantees the central bank's independence if the bank doesn't reach a 2% inflation target, Abe said. Google/Agence France-Presse (18 Feb.), The Japan Times (19 Feb.), NHK World (Japan) (19 Feb.)
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Draghi pushes for unified bank-rescue fund
European Central Bank President Mario Draghi has called for a eurozone fund, paid for by taxes on banks and other financial institutions, that would handle distressed banks. The plan, which would separate the decision-making process from national governments, could launch as early as next year, but it is still missing critical details and support from key nations. The Washington Post (tiered subscription model)/The Associated Press (18 Feb.), Bloomberg (18 Feb.)
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Office Depot and OfficeMax reportedly near merger deal
Office Depot, the second-biggest office-supply retailer in the U.S., and smaller competitor OfficeMax are close to a stock-for-stock agreement to merge, a person familiar with the matter said. Shareholders are pressuring the companies, rivals of industry leader Staples, to boost profitability. Reuters (18 Feb.)
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FIX issues guidelines for electronic trading of bonds
FIX Protocol has outlined guidelines and best practices for electronic bond trading. The standards address matters including how traded securities are identified and how data, prices and quotes are presented. FIX has zeroed in on cash markets for corporate, government and high-yield bonds. "This market has witnessed massive change and, as it becomes increasingly electronic, the protocol is necessary," said Sassan Danesh of FIX. Bloomberg Businessweek (18 Feb.), The Trade News (U.K.) (tiered subscription model) (18 Feb.), Financial Times (tiered subscription model) (19 Feb.)
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Analysis: Europe's transaction tax could backfire
A group of European nations are moving forward with a proposed tax on financial transactions, including stocks, bonds and derivatives. However, history shows that attempts to tax transactions have forced activity to different jurisdictions and failed to meet revenue expectations. Transaction taxes "stem from the desire of politicians to punish the markets," said Bill Blain, a fixed-income strategist at Mint Partners. "But markets can always vote with their feet." Bloomberg Businessweek (18 Feb.)
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Asian-Pacific markets are mixed, with China leading declines
Asian-Pacific markets were mixed Tuesday, with China's Shanghai Composite posting some of the biggest falls, at 1.6%. Hong Kong's Hang Seng Index fell 1%. Japan's Nikkei 225 slid 0.3%. South Korea's Kospi edged up 0.2%. Australia's S&P/ASX 200 added 0.4%. India's Sensex was up 0.7%. The Economic Times (India) (26 Feb.), The Wall Street Journal (tiered subscription model) (19 Feb.)
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Small investors regain confidence and return to markets
Individual investors who have avoided the capital markets since the financial crisis are starting to overcome their fears and are trading stocks again. Financial advisers are hearing from investors who were highly risk-averse for years but want to start putting money back into equities. The Wall Street Journal (tiered subscription model) (18 Feb.)
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Funds short pound amid Carney's reputation, U.K. economic woes
The combination of a British economy stuck in the doldrums and the reputation of incoming Bank of England Governor Mark Carney as an aggressive central banker has fund managers watching the value of the pound closely. "With Carney coming in, there are interesting opportunities [either] shorting sterling or going long volatility on sterling," Permal Group Chief Investment Officer Rob Kaplan said. Financial Times (tiered subscription model) (18 Feb.), The Telegraph (London) (tiered subscription model) (18 Feb.)
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Economics
Japan will ask U.S. to allow shale-gas exports
Japanese Prime Minister Shinzo Abe will ask U.S. President Barack Obama to approve the sale of U.S. shale gas to Japan when the two meet Friday. Japan needs new sources of energy because most of its nuclear power plants have been shut down due to safety concerns. NHK World (Japan) (18 Feb.)
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Coal India reportedly restarts bid to buy overseas mines
Facing soaring demand for electricity, Coal India is relaunching efforts to buy overseas coal mines, two people familiar with the plan said. For the past five years, the state-owned company that generates more than half of India's electricity hasn't bought any mines outside India with its $12 billion of cash. The government is pressuring the company to reduce blackouts that discourage economic growth. Bloomberg (19 Feb.)
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Advisers must recruit right talent to expand, report says
During the next 10 years, the financial-advisory industry will need to add 237,000 advisers to meet surging demand for services, according to a report by Pershing. Finding and attracting the right talent to replace retiring advisers will be essential for firms to enjoy strong and sustainable growth, the report says. Financial-Planning.com (18 Feb.)
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Reining in Risk
CFA Institute report: Investors need better disclosure of derivatives and hedging activities

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Geopolitical/Regulatory
Draghi urges less discussion of currency war
European Central Bank President Mario Draghi told the the European Parliament Economic and Monetary Affairs Committee that "excessive" talk of a currency war might cause central banks to suspect exchange rates are being manipulated, even if they aren't. "The less we talk about this, the better it is," he said. The New York Times (tiered subscription model) (18 Feb.)
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Research finds little merit in EU's naked CDS ban
A pan-European ban on naked credit default swaps is unlikely to have any effect on sovereign-default risk or governments' cost of borrowing, according to research from New Imperial College. "CDS spreads are the symptoms, not the cause, of a country getting into trouble," said Paul Crean, co-founder of Finisterre Capital. Structured Credit Investor (U.K.) (15 Feb.)
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Prosecutors reach beyond fines in Wall Street cases
U.S. prosecutors, in a shift in strategy, are increasingly demanding guilty pleas in Wall Street criminal cases, rather than agreeing to fines and promises of reform. Attorneys for major banks say they are adjusting how they defend clients, sometimes recommending that banks fire employees suspected of impropriety. The New York Times (tiered subscription model)/DealBook blog (18 Feb.)
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EU prepares action against Google for violating privacy law
Data-protection regulators in Europe plan to initiate legal action against Google for failing to comply with EU law on handling customer data, according to French regulator CNIL. Representatives from EU states are scheduled to meet next week to coordinate action, CNIL says. Google/Agence France-Presse (18 Feb.), CNET (18 Feb.)
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Questions remain in Vickers implementation
Experts are voicing concern about technical questions remaining in the implementation of reform suggested by the Vickers report. The extent to which U.K. bank operations would be separated, questions about back-office functions and additional oversight rules are among unresolved issues that have left professionals dubious of a timetable that calls for regulations to be passed by 2015 and implemented by 2019. Risk.net (subscription required) (18 Feb.)
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Analysis: Tax-haven crackdown must begin with reform
If governments are to succeed in preventing companies from using tax havens, they will have to reform tax law, according to The Economist. "Governments need to make it harder for companies to use internal ("transfer") pricing to avoid tax," the magazine notes. "Companies should be made to book activity where it actually takes place." The Economist (tiered subscription model) (16 Feb.)
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Financial Products
UBS plans passive investments for U.K. retail market
UBS Asset Management is looking to bring the first in a series of passive investment funds to the U.K. retail market. The company's first passively managed fund aimed at U.K. individual investors would be a fixed-income fund. The launch, pending regulatory approval, would be in the second quarter. IFAOnline.co.uk (U.K.) (18 Feb.)
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