SWIFT backs Blockchain Ledger

SWIFT is adding a blockchain ledger to its infrastructure stack. 

It is developing this ledger with 30 financial institutions from 16 countries, including Absa, Banco Santander, Bank of America, BBVA, Citi, Deutsche Bank, BNP Paribas, Emirates NBD, Societe Generale-FORGE, Wells Fargo and Royal Bank of Canada, taking part.

SWIFT CEO Javier Pérez-Tasso (CEO since 2019) remarked: "We...are moving at a rapid pace... to create the infrastructure stack of the future".

The Global ETF Market & Focus: From Super-Cheap SCHX to Innovative EG Shares

Awesome Size of the Global ETF Market

The Global ETF Market, as reported by London's Financial Times newspaper, has invested in it a sum greater than 2 trillion dollars. It also states that nearly 70% of that figure is held by Blackrock's iShares (acquired from Barclays in 2009), State Street and Vanguard. In Europe, Lyxor, owned by Societe Generale, is also pretty big.

ETFGI is a company focused on ETF research, started by staff from Morgan Stanley, involved in investment research and strategies.

How does an investor compare ETFs?

Metrics for Comparison

One metric is the EXPENSE RATIO. One of the cheapest ETFs is the Charles Schwab US Large Cap ETF  (SCHX) which has an expense ratio of 0.04%. It is non-leveraged and holds assets of $1bn (about 18% of holdings are in the IT sector).

Morningstar is a company that gives ratings to ETFs,based on performance, adjusted for cost, and adjusted for risk.

ETF "Categories"

They also assign special categories to ETFs, depending on the asset class. For example, a US stock ETF might be classified as "Large Growth", "Large Value" or "Large Blend" or sector-based e.g. "Real Estate", "Utilities", "Technology". In the area of Alternatives they have categories like "Managed Futures", "Volatility", "Equity Precious Metals" or "Inverse Equity".

What does the "Equity Precious Metals" category consist of?

These funds invest in equities connected with precious metals, such as gold mining companies.

ETF Exchanges

NYSE ARCA has a whole range of tradable ETFs, searchable by issuer. For example, iShares have 10 ETFs on ARCA.

Indian ETFs

EG Shares has developed Indian ETFs. Once such, is NYSE:INXX, an Indian Infrastructure ETF. It has an expense ratio of 85bps. The investment is done via equities, ADRs and GDRs. The companies purchased must have a market cap of at least $200m at time of purchase.

EG Shares also produce Brazil and China infrastructure ETFs. CEO Marten Hoekstra was formely the CEO of UBS Wealth Management Americas.

CDS Curve Inversion

Probability of short-term default higher believed higher as CDS curves for Greece, Spain, Portugal have inverted as has BP CDS. Exposure to Greece for French banks is highest with Credit Agricole, through its ownership of Emporiki, and SocGen, which owns Geniki Bank. The Guardian quotes James Rickards, former general counsel of LTCM, on the morality of CDS - "Why should we have instruments where the hope is for the failure of a sovereign state?".

Kerviel defended by Noriega's lawyer to take stand on Tuesday 8 June (mardi huit juin)

The trial of JK will take place in France's medieval Palais de Justice between Oliver Metzner defending JK and Jean Veil (son of politician Simone Veil and "le complice des puissants" or "the accomplice of the powerful") defending SocGen.

JK is blamed for 4.9 billion EUR of losses of SocGen by exposing the bank to 50 billion EUR notional of unhedged futures in January 2008 (loss of 10% of the notional). It was not only the exposure but the three day sale starting Jan 21 that resulting in the realised losses.

JK claims his bosses knew about his bets and that exceeding trading limits was normal. In defending JK, Metzner was quoted as saying: "When it is a case of a man against the system, I defend the man and not the system". Metzner has formerly defended General Noriega, the Panamanian dictator (1983-89 who was removed from power by the American invasion of Panama in 1989).

Markets: P-Notes and Kangaroo Notes (The Basis Swap Story)

Aggressive SocGen has been banned from dealing in ODI (offshore derivative instruments) and P-Notes (participatory notes) in India following an inquiry by SEBI. In 2008, RBI called for ban on issuance of P-Notes, however foreign investors reacted sharply and the stock market almost crashed. For a background to central banking in India please see the RBI's website. In a nutshell, the RBI was set up in response to the Hilton Young Commission (Hilton Young was a British politician who was educated at Eton and University College London). The RBI was also the central bank for Burma but it seceded from the Indian Union in 1937. The RBI however continued to act as the central bank for Burma until Japanese occupation.

And now to the extraordinary rise in "kangaroo bond" issuance amongst stylized banks.

Bloomberg reports the EIB is seeking (update:has sought) assistance with Australian local banks to help it issue kangaroo bonds (AUD notes sold by foreign issuers in Australia). Certainly the currency has been talked about a lot recently, but why would the Luxembourg lender raise money in AUD? The reason is the extraordinary story of the basis swap (an interest rate swap involving the exchange of two floating rate instruments) and EIB is by no means isolated in their desire for kangaroo issuance (other names include KfW and Nordic Investment Bank). EIB's issuance of A$1.5bn will be the largest tranche issued by a kangaroo issuer, with April 2015 maturity (i.e. 5 year).The bonds are priced at Commonwealth government bonds + 83bps. What's the big driver behind all this kangarooing around? The USD-AUD basis swap has been up to 35bps wide for 5 years, making margins paid by the K-issuers look good, relative to LIBOR - and further issuance should stop the widening. The cause of the chasm in the basis swap is due to Ozzie banks raising debt offshore, such as ANZ bank which raised a billion EURs for three years in the Euromarket (57bps over midwaps).

For those that may not remember KfW, they gained the moniker of "Germany's dumbest bank" when they transferred 300 million EUR to Lehman on the day it filed for bankruptcy. But was it so dumb? Could the administrators have demanded that money after taking over Lehman Brothers?
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