July 28, 2011: Debt-Crisis Vote Goes Down to Wire [NEWSLETTER]

July 28, 2011

JLN Interest Rates - http://www.jlninterestrates.com


Conversation Starter

MarketAxess Reports Second Quarter 2011 Record Revenues of $45.8 Million, Record Pre-Tax Income of $19.9 Million and Diluted EPS of $0.30
Press Release
NEW YORK, July 27, 2011 /PRNewswire/ -- MarketAxess Holdings Inc., the operator of an electronic trading platform for U.S. and European
high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities, today announced results for the second quarter ended
June 30, 2011.
http://jlne.ws/oqu7Vq


Five Minutes With Richard M. McVey, Chief Executive Officer And Chairman Of The Board, MarketAxess

MarketAxess Holdings Inc. reported its second quarter earnings this week, and MarketAxess CEO and chairman Richard M. McVey told JLN Managing Editor
Christine Nielsen during a post-earnings call that credit trading conditions remain "very favorable." Investors are moving money as a result of the very steep
yield curve and, overall, the corporate bond market is active. He said the firm's healthy earnings were a sign of MarketAxess’ momentum in emerging market,
high yield and agency debt. As of late, MarketAxess has had a big focus on CDS and the technology solutions that will meet the criteria established by
Dodd-Frank.


Q: You recently released an enhanced institutional credit trading system. What does it offer that makes it significant?

A: The new enhancements to the platform were focused on adding CDS trading functionality. While CDS has been available on our platform for about five years,
with these enhancements we have significantly increased the flexibility of the platform. We now have two dealers - Credit Suisse and RBS - streaming live,
executable prices onto the MarketAxess platform for CDX and iTraxx. We are planning to add an additional six to eight dealers in the coming weeks.

The streaming markets provided by these dealers sit alongside our traditional request-for-quote (RFQ) auction-style protocol, giving customers greater pre-trade
price transparency, as well as flexibility in their means of execution. Now customers can view the live market prices even if they trade via an RFQ. We have also
increased post-trade functionality for trade affirmation and connectivity to clearing houses.


Q: Why was the system released at this point and time?

A: This technology release was originally timed to coincide with the mandated Dodd-Frank rule-making deadline, which was July 16th, 2011. However, despite
this deadline having been extended until the end of the year, we are still working closely with our dealer and buy-side customers to offer greater flexibility and
connectivity for electronic CDS trading. We are constantly making enhancements to our system, and although this was a major release for CDS, it won’t be
the last as we continuously look to improve our platform for CDS and other products.


Q: What sort of reception have you received so far to the system?

A: We’ve had very positive feedback from clients with respect to the new functionality. They feel that we have addressed many of their requirements for
execution and connectivity and we are consulting with them closely as we continue to make changes. In addition, many of the dealers in the U.S. and Europe
are also on board and looking to provide streaming prices to MarketAxess.

Q: Your firm has said that with this release, MarketAxess now has much of the core technology needed to meet the anticipated regulatory
requirements for registration as a swap execution facility (SEF) and security-based swap execution facility (SB SEF) under the Dodd-Frank Act in
the U.S. How so?

A: The new functionality is broadly in three key areas:
Pre-trade: Streaming, executable prices from dealers provide increased pre-trade price transparency. The platform now also offers the ability to designate a
clearing house and clearing member pre-trade. Execution: A variety of trading protocols - including RFQ and click-to-trade (streaming markets) available on the
same screen - increase flexibility for clients and address the anticipated regulatory requirements from both the CFTC and SEC. We have also added functionality
for single-name CDS as well as switches and rolls. Post-trade: We offer the ability to connect to available clearing houses, and enhanced functionality for trade affirmation.

Q: How does the MarketAxess offering compare with other firm offerings out there for institutional credit trading? How does this technology
position MarketAxess competitively speaking?

A: MarketAxess is the leading client to multi-dealer electronic platform for trading U.S. high grade and other fixed-income products including high yield,
agencies, emerging markets and Eurobonds. We currently have over 850 buy-side customers and 81 dealers live on our platform, and that number continues
to grow.

We think that our extensive buy-side client and dealer network for fixed income places us in a very strong position to be a key platform for electronic trading
of CDS.

Q: What will be the next steps that MarketAxess takes to prepare for Dodd-Frank? Will there be any other steps?

A: We are monitoring the progress of the Dodd-Frank rulemaking and will continue to develop our platform to respond to the regulatory requirements as they
are finalized. We do feel that we have a lot of the key functionality to comply with the rules as we currently understand them. Obviously, until the rules are final
we can’t be certain of exactly what will be required. We expect there may be additional changes needed, but for now we think we are in good shape.

Q: Is there anything that recent media reports haven't mentioned about MarketAxess that market users should know?

A: One trend that we’ve noticed is the concurrent increase in market share for our corporate bond business as discussions surrounding electronic trading in
the derivatives market have evolved. Our share of the U.S. high grade market has increased to 11.1% for this past quarter, up from 9.9% in Q1 2011, and 8.1%
a year ago. We believe that the continued focus on electronic trading as part of the broader conversation on market structure has encouraged dealers and
clients to look more closely at the ways in which they conduct their trading operations to maximize efficiency.


-- Christine Nielsen


Lead Stories

Debt-Crisis Vote Goes Down to Wire in House
BY NAFTALI BENDAVID AND CAROL E. LEE, WSJ.com
The House was headed for a cliffhanger vote Thursday on a revised debt plan from Republican Speaker John Boehner that could go a long way in determining
if the government's borrowing limit is raised in time to avoid a possible default next week.
http://jlne.ws/qH7lGq

U.S. debt crisis casts doubt on IMF power balance
How much each member of the IMF contributes to the organization is up for review in 2013 and countries like China, Brazil and India could be asked to
contribute more, given the serious fiscal difficulties of traditional large contributors, says a recent report.
http://jlne.ws/qu9vdz

Would a U.S. Credit Downgrade Matter?
BY DAVID WESSEL, WSJ.com
A prediction, widely shared in Washington and on Wall Street: One month from now, Congress will have lifted the federal debt ceiling, the U.S. government
will be paying its bills, the president will have signed a convoluted deficit-reduction law that defers decisions on benefits and taxes—and the
U.S. will have lost its AAA credit rating.
http://jlne.ws/oETsqp

Policymakers must reduce reliance on credit ratings
By Deven Sharma, Financial Times
What is the appropriate role of independent credit ratings in the financial system? That is the question raised by recent events in the eurozone and one
that has prompted a flurry of suggestions from European policymakers, from intervening in ratings methodologies to suspending certain sovereign ratings.
http://jlne.ws/n2YFlA

Republican debt plan faces close vote in Congress
By Andy Sullivan, Reuters
A bill to cut the deficit faced a nail-bitingly close vote in Congress on Thursday as the top Republican lawmaker sought to quell an internal revolt and
push his plan to avoid a ruinous default.
http://jlne.ws/r11ZVA

Debt ceiling debate risks double-dip recession
CNNMoney
Economists say the debt ceiling debate has already damaged the U.S. economy, and many worry that a deadlock could send the country hurtling into a
double-dip recession.
http://jlne.ws/p4xVUg

US debt limit: Rival plans unveiled as deadline nears
BBC News
Senate Democrats and House Republicans have unveiled competing plans to cut the US budget deficit and raise its debt limit to avoid a default.
http://jlne.ws/pO9KnJ

House Leaders Call for Short-Term Rise in Debt Ceiling
The New York Times
House Republicans intend to push for a vote this week on a two-step plan that would allow the federal debt limit to immediately rise by about $1 trillion
and tie a second increase next year to the ability of a new joint Congressional committee to produce more deficit reduction.
http://jlne.ws/oE30Lv

Boehner Fights Internal Strife Over Debt Plan
By Julie Hirschfeld Davis and James Rowley, Bloomberg
House Speaker John Boehner, battling resistance from within his own party as he intensifies a debt-ceiling standoff with President Barack Obama,
worked to salvage his plan to tie the nation’s borrowing power to spending cuts and budget controls.
http://jlne.ws/pnXo3a

Companies Bracing for U.S. Default
BY KATE LINEBAUGH AND VIPAL MONGA, WSJ.com
The unthinkable is finally becoming reality for U.S. companies, who are beginning to take real steps to prepare for the possibility of a U.S. debt default.
While companies generally expect Washington to resolve the debt-ceiling impasse at the last moment, they are lining up extra sources of financing, and
carefully husbanding cash just in case a deal falls through.
http://jlne.ws/qHg9bw

Fed under fire over default talks
By Tom Braithwaite and Michael Mackenzie in New York and Robin Harding in Washington, Financial Times
Wall Street bankers, from senior executives to traders, are complaining that the Federal Reserve is refusing to engage in scenario planning for a US
downgrade or default. With days until the Treasury’s August 2 deadline to raise the debt ceiling, bankers say they are not getting a response to efforts to
discuss the market impact of a failure to reach a deal in Washington or if credit ratings agencies cut the US triple A rating.
http://jlne.ws/oLeraw

Chinese Officials ‘Appalled’ by U.S. Impasse: Roach
Senior Chinese officials are “appalled” by the impasse among U.S. politicians on raising the nation’s debt ceiling to avoid a default, said Stephen Roach,
non-executive chairman of Morgan Stanley Asia Ltd.
http://jlne.ws/qJGV2Z

U.S. Credit Swap Trading Soars 80% as Deadline Nears
By Abigail Moses, Bloomberg
Trading of credit-default swaps insuring U.S. Treasuries soared almost 80 percent as the deadline nears for plans to cut the nation’s budget deficit and
raise the $14.3 trillion debt limit to avoid default.
http://jlne.ws/oh9tPT

U.S. Contingency Plan Gives Bondholders Priority
Bloomberg
The U.S. Treasury will give priority to making interest payments to holders of government bonds when due if lawmakers fail to reach an agreement to raise
the debt ceiling, according to an administration official.
http://jlne.ws/pAoTTK

U.S. Credit Rating Rests On S&P’s London View of Washington
By Brian Faler, Bloomberg
David Beers may be the most influential political commentator in the U.S. right now, even though he’s hardly a household name,
that isn’t technically his job and he’s only visiting.
http://jlne.ws/pdi7T9

The debt ceiling deadline: The downgrade option
By Julie Hirschfeld Davis and James Rowley, Bloomberg
House Speaker John Boehner, battling resistance from within his own party as he intensifies a debt- ceiling standoff with President Barack Obama,
worked to salvage his plan to tie the nation’s borrowing power to spending cuts and budget controls.
http://jlne.ws/rhtXhi

Why the credit rating agencies are keeping a close eye on the US
The Telegraph
The switchboard at Congress almost crashed on Tuesday as Americans voiced their anger at the stalemate in Washington over raising the country's
$14.3 trillion (£8 trillion) debt ceiling. Here is the verdict of the ratings agencies on the US debt problem.
http://jlne.ws/qbCkAA

Would a U.S. Credit Downgrade Matter?
BY DAVID WESSEL, WSJ.com
A prediction, widely shared in Washington and on Wall Street: One month from now, Congress will have lifted the federal debt ceiling, the U.S.
government will be paying its bills, the president will have signed a convoluted deficit-reduction law that defers decisions on benefits and taxes—and the
U.S. will have lost its AAA credit rating.
http://jlne.ws/oETsqp

Treasury May Have 3 Days To Fix A Default Before CDS Trigger
TeleTrader
If the U.S. fails to raise its borrowing limit by Aug. 2, when the Treasury Department says it will exhaust its supply of tricks to avoid defaulting on federal
debts, it may take a few days for the full shock wave to hit the credit-derivatives market. A panel of derivatives experts would likely declare a "credit
event," triggering payouts on $4.77 billion in credit-default swaps, or CDS, on U.S. Treasurys, should the government default on $90 billion of debt
maturing Aug. 4 and not make investors whole by the close of business Aug. 9, swaps executives told Dow Jones Newswires on Monday.
http://jlne.ws/nua9aX

S&P Stays Mum on Rating for U.S.
By JEAN EAGLESHAM And JEANNETTE NEUMANN, WSJ
Standard & Poor's Ratings Services left the threat of a downgrade hanging over the U.S., declining to tell anxious lawmakers on Wednesday whether
rival tax and spending plans floated in Washington would save the U.S.'s triple-A credit rating.
http://jlne.ws/qRjadG

Moody's Cuts Greek Debt Rating Further
By NATASHA BRERETON-FUKUI And MARCUS WALKER, WSJ.com
European bond markets fell on Monday after Moody's Investors Service cut Greece's credit rating three notches deeper into junk territory, warning that
the country's latest bailout deal implies a default.
http://jlne.ws/ow2pJH

S and P sees 2nd Greek debt haircut, new downgrade
Reuters
A new and bigger restructuring of Greek debt is likely within the next two years, an official from credit ratings agency Standard & Poor's said on
Tuesday, adding a further downgrade of Greece's sovereign debt rating was "pretty certain."
http://jlne.ws/pcoXxV

Banks stock up on cash amid US rating fear
By Justin Baer, Tom Braithwaite and Michael Mackenzie in New York
US banks are holding on to more cash and locking in longer-term financing as they brace themselves for the consequences of a potential downgrade of
the US’s triple A credit rating. Washington remains deadlocked over the nation’s budget, edging the US closer to a pivotal August 2 deadline to extend
its borrowing authority – and prompting financial institutions to plan for a set of scenarios that once seemed remote.
http://jlne.ws/r160Hj

Fitch downplays downgrade fallout
By Peter Schroeder, The Hill
A credit-rating agency said Wednesday that Treasury bonds likely would remain the gold standard for secure investments, even if Treasury’s reputation
were tarnished with a credit downgrade.
http://jlne.ws/pyfP1K

SEC Adopts New Short Form Criteria to Replace Credit Ratings
Press Release
Washington, D.C., July 26, 2011 – The Securities and Exchange Commission today voted unanimously to adopt new rules in light of the Dodd-Frank
Wall Street Reform and Consumer Protection Act to remove credit ratings as eligibility criteria for companies seeking to use “short form” registration
when registering securities for public sale.
http://jlne.ws/pPOaVA

Moody's Shakes Downgrade Stick at 177 Muni Issuers
By Mark Gongloff, WSJ.com
This isn’t all that unexpected, but it’s never fun to get the news: Moody’s has warned it could downgrade 177 muni issuers if the US loses its AAA rating.
http://jlne.ws/pw3Ihr

Moody's reaffirms Canada's triple-A rating
CBC News
Bond rating agency Moody's Investor Services is maintaining Canada's debt rating at triple-A, the highest possible. The firm said Thursday the AAA rating
was warranted, citing among other things, the country's "high degree of economic resiliency" and deficit-cutting efforts by the federal and provincial governments.
http://jlne.ws/nLKiYy

Moody’s Sees Benefits for Banks From Consumer Bureau
By BEN PROTESS, NY Times
The new Consumer Financial Protection Bureau has ignited fear on Wall Street. But many banks may eventually benefit from the regulator’s careful watch,
according to a new report by Moody’s Investors Service.
http://jlne.ws/oniyVd

**CN: Finally, some good news.

ISDA: CDS On US Sovereign Debt Q&A
Press Release
http://jlne.ws/orxxRa

Heading for a 'Haircut' in Repo Market
BY MATT PHILLIPS, BEN LEVISOHN AND SERENA NG, WSJ.com
The debt stalemate in Washington is creating stress in a little-known but vital corner of the bond market, increasing the risk that banks, hedge funds and
other investors will have to pay billions of dollars in additional costs if the U.S. defaults or is downgraded.
http://jlne.ws/mX3F3a

CME CEO Sees Migration From Swaps To Futures
By Jacob Bunge, Of DOW JONES NEWSWIRES
The top executive of CME Group Inc. (CME) said Thursday that investors are showing signs of embracing futures trading in place of more complex
swap products as stricter rules for such off-exchange derivatives loom on the horizon. A second-quarter surge in interest-rate-futures trading at CME got
a lift from anticipated regulations that will bring higher capital requirements for banks and evolving accounting standards, making the swaps market more
futures-like, said Craig Donohue, chief executive.

The 'Bond Vigilantes' and the Debt Ceiling Crisis: No Need to Panic or Lying in Wait?
PBS
Harvard's eminent trade economist, Robert Lawrence, gave a talk in Greece this month. Among his slides was this image with the headline: "The
Vigilantes are Asleep!" That would be the so-called "bond vigilantes" - the investors in the world's bounteous supply of IOUs, with specific reference to
the IOUs of the United States - our Treasuries (bonds, notes and bills).
http://jlne.ws/of3VMy

Treasury May Have 3 Days To Fix A Default Before CDS Trigger
By Katy Burne Of DOW JONES NEWSWIRES
If the U.S. fails to raise its borrowing limit by Aug. 2, when the Treasury Department says it will exhaust its supply of tricks to avoid defaulting on federal
debts, it may take a few days for the full shock wave to hit the credit-derivatives market.
http://jlne.ws/nua9aX

Cost To Insure Treasurys Sets Record As Debt Debate Drags On
By Katy Burne, DOW JONES NEWSWIRES
The cost to insure U.S. sovereign bonds against non-payment soared to a fresh record Wednesday as the debt-ceiling standoff in Washington continued
and the government moved inexorably closer to a potential debt default. The price of one-year protection sold in the form of derivatives called
credit-default swaps, or CDS, is now above the cost of five-year protection--a sign that confidence in the government reaching an eleventh-hour deal is
waning.
http://jlne.ws/oz4FK4

Infographic: Where America Spent All of Its Money
Forbes
The White House posted the following infographic on its website today explaining how America accumulated its national debt over the past decade,
shifting fiscal forecasts from projected surpluses to elephantine deficits.
http://jlne.ws/nGhoKb

Infographic on Dodd-Frank
Clarke Camper - Inside the Beltway
In the Atlantic, I just came across this chart by Deloitte that provides a fascinating visual representation of progress in implementing Dodd-Frank: Chart
of the Day: The Sluggishness of Financial Regulation.
http://jlne.ws/q70qOd

Collateral Rules Criticized
BY AARON LUCCHETTI, WSJ
Some lawmakers and financial firms are resisting rules being written to implement last year's Dodd-Frank law that could require banks to set aside more
collateral when they make certain trades in the derivatives market.
http://jlne.ws/q7Wd33

Inflation Expectations Matter
By Michael S. Derby, WSJ.com
An axiom of central banks these days holds that what consumers reckon future inflation will be is an important driver of prices now. Put another way, if
the public expects prices to rise in the future, inflation will start to rise now. So Federal Reserve officials have decided understanding, measuring and
controlling inflation expectations is a critical part of its mandate to keep inflation stable.
http://jlne.ws/mRKTA7

Free-marketeers and inflation: Missing Milton Friedman
The Economist
TIM LEE asks an important question: why are conservatives and libertarians so uniformly hawkish about inflation? Mr Lee (a friend and former
colleague) notes that this regularity is far from inevitable. Milton Friedman, a revered figure in right-of-centre circles, famously pinned the severity of the
Great Depression on contractionary monetary policy. Scott Sumner, a professor of economics at Bentley University who identifies himself as a
"neo-monetarist", has argued that Friedman would have supported monetary stimulus. And he has argued, on neo-Friedmanite grounds, that tight
monetary policy both precipitated and exacerbated our recent recession.
http://jlne.ws/rsSeJI

Gold hits record as U.S. debt talks grind on
By Claudia Assis and Virginia Harrison, MarketWatch
Gold futures traded in record territory Monday as U.S. debt-ceiling talks to avert a default continued, with little to indicate progress toward a deal, and
as a debt-ratings agency further downgraded Greece.
http://jlne.ws/qh0KOS

Beware of perceived safe havens
By Richard Milne, Financial Times
Risky assets do not cause crises. It is those perceived as being safe that do. Such a statement might sound counter-intuitive. However, it reveals much
about the current crisis as well as the recent past. The subprime crisis of 2007-08 was exacerbated by the fact that so many of the mortgage-backed
securities spewed out by banks were rated triple A. That meant they could essentially be considered “risk-free” for banks, when, of course, they were
anything but.
http://jlne.ws/nlVGFO

Fitch: U.S. Treasuries Expected To Remain Global Benchmark
http://jlne.ws/rjU1Jt

Global Commission Management Update: No Credit Too Small
Press Release
London, 21 July, 2011 – A new report from Aite Group examines the key trends that have developed in the commission management industry since the
2006 implementation of new regulation in the United States and U.K. The report also explores the adoption of commission management in the European
and Asian markets, and major commission management initiatives provided by full-service and agency brokers.
http://jlne.ws/oJ4dH7

Soros Returns Client Money to End Four-Decade Hedge-Fund Career
By Katherine Burton, Bloomberg
George Soros, the billionaire best known for breaking the Bank of England, is returning money to outside investors in his $25.5 billion firm, ending a
career as hedge-fund manager that spanned more than four decades.
http://jlne.ws/p82XB9



Events

Credit Risk in Emerging Markets
August 1, 2011
www.theIFM.org

Making Sense of Credit Default Swaps
August 10, 2011
www.theIFM.org

FIA Treasury & Rates Forum
September 14, 2011
FIA Program On Growing Role Of Treasury Futures - New York City
http://jlne.ws/fQFQXP






Economic News

Growth slows as labor markets ‘soft’
By Steve Goldstein, MarketWatch
Soft labor markets and weak real estate offset a slight boost to consumer spending and an encouraging start to the tourism season, the Federal Reserve
reported Wednesday in its Beige Book of anecdotal evidence on the U.S. economy.
http://jlne.ws/pb3uhy

Beige Book: District-by-District Summary
http://jlne.ws/nSKHwM

German Inflation Rises
BY WILLIAM LAUNDER AND TODD BUELL, WSJ.com
Preliminary consumer-price inflation in Germany rose in July, exceeding economists' forecasts on higher energy prices, the German Federal statistics
office said Wednesday.
http://jlne.ws/nB00rU





Exchanges, Clearing Houses & MTFs

CME Globex Enhancements for Interest Rate Products
Press Release
Effective August 2011, a number of CME Globex enhancements for CBOT and CME Interest Rate futures products will be introduced. The changes to
our CBOT interest rate products will take place on Sunday, August 7, 2011 (trade date August 8) and to CME products on Sunday, August 21, 2011
(trade date August 22).

CME Group Collateral Haircuts
As per the normal review of market volatility to ensure adequate collateral coverage, CME Clearing will implement the following collateral haircuts
effective with the close of business on Thursday, July 28, 2011.
Asset class: TBILL Current haircut: 0.0% New haircut: 0.5% ...
http://jlne.ws/ovU2XH

Cost of Treasury futures set to rise
By Michael Mackenzie, Financial Times
The cost of trading US Treasury futures was set to rise on Monday, as the CME Group adopted defensive measures given the impasse in Washington over raising the Federal debt ceiling.
http://jlne.ws/ngGGtH

Tradeweb Launches Electronic European Repo Marketplace
PR Newswire
Tradeweb Markets LLC, a leader in building and operating financial markets, today announced the launch of a European repo marketplace. The
electronic dealer-to-customer platform mirrors the existing voice and message-based trading process, while enabling efficient trade execution and
substantially simplifying the post-trade complexities of collateral assignment and allocation.
http://jlne.ws/oaxxuO







Firms & Banks

HSBC may cut more than 10,000 jobs: report
Reuters
Banking group HSBC Holdings Plc may cut more than 10,000 jobs as part of its plan to slash costs by up to $3.5 billion a year, Sky News reported
Thursday.
http://jlne.ws/pCmvCG

RRP Eligibility Criteria: Banks and Savings Associations
Federal Reserve Bank of New York
This document sets forth the criteria for acceptance of a bank or savings association as a counterparty eligible to participate in reverse repurchase
transactions (RRP) with the Federal Reserve Bank of New York (FRBNY). FRBNY may engage in RRP, if at all, at the direction of the Federal Open
Market Committee (FOMC).
http://jlne.ws/oyytnC

Fed orders RBS to improve U.S. operations
By Glenn Somerville, Editing by Chizu Nomiyama, Reuters
The Federal Reserve on Wednesday ordered the Royal Bank of Scotland Group to develop a plan for improving oversight
of its U.S. operations and tightening its risk-management practices.
http://jlne.ws/qzALYn

Five Banks Have $6.8 Billion of Derivatives With Italy, EBA Says
Bloomberg
Five European banks have a total of 4.8 billion euros ($6.8 billion) of derivatives contracts with the Italian government, according to data released for the
first time by European regulators.
http://jlne.ws/oNruap

Investors Get Win In a Lehman Case
By Patrick Fitzgerald, Dow Jones
Britain's Supreme Court on Wednesday dismissed an appeal by units of Lehman Brothers Holdings Inc. and Bank of New York Mellon, a win for
investors in a high-stakes legal dispute involving complex derivatives transactions that has divided courts on both sides of the Atlantic. The U.K.'s
Supreme Court, the nation's highest, ruled unanimously in favor of investors represented by Australia's Belmont Park Investments over Lehman's
Specialty Finance unit -- the heart of the bank's derivatives business -- and BNY Corporate Trustee Services Ltd., now part of Bank of New York
Mellon, in a battle over so-called flip clauses in credit derivatives contracts. These provisions "flipped" the payment priority order when Lehman filed for
bankruptcy, allowing the investors to move ahead of the investment bank to grab assets backing the derivatives deals.

Goldman Sachs CMBS Trading Head Salem Said to Leave the Bank
By Sarah Mulholland and Jody Shenn, Bloomberg
Matthew Salem, head of commercial- mortgage bond trading at Goldman Sachs Group Inc., has left the bank, according to a person familiar with the
situation.
http://jlne.ws/p0pPFI

MF Global Hires Heads of Structured Mortgage, CMBS Trading
By Matthew Leising, Bloomberg
MF Global Holdings Ltd., the futures broker that’s transitioning into an investment bank, hired Christopher Belhumeur and Chris
Lau to expand trading in structured products and commercial-mortgage backed securities. Belhumeur, 40, previously co-head of agency collateralized
mortgage obligations and derivatives at Jefferies Group Inc., began yesterday as head of structured mortgage trading, said Tiffany Galvin, MF Global’s
spokeswoman. Lau, 38, who led Gleacher and Co.’s CMBS trading and started at MF Global last week, will assume that role for the company.
They will report to Jon Bass, global head of institutional sales and fixed income, Galvin said.

Deutsche Names Two as Co-CEOs
German Bank Will Pair Indian-Born Jain With German Head Fitschen; Ackermann Moves to Board
BY LAURA STEVENS - WSJ
Straddling its twin roles as a global investment-banking powerhouse and huge German lender, Deutsche Bank AG on Monday resolved months of
indecision over its leadership by appointing two top executives to succeed CEO Josef Ackermann.
http://jlne.ws/njOqpt

Deutsche Eyes Jain for Co-CEO Post
By LAURA STEVENS, WSJ.com
Anshu Jain, Deutsche Bank AG's Indian-born, London-based head of investment banking, looks set to take over as joint chief executive and become
the real power at Germany's most powerful bank, according to people familiar with the matter.
http://jlne.ws/nSJ1Gq

UBS to cut costs and rethink fixed income unit
Reuters
Switzerland's UBS will slash jobs and review the future of its fixed income business after the underperforming unit hit second-quarter profits and forced it to push
back targets.
http://jlne.ws/r0h71E

Goldman Succession May Be Hurdle for Cohn
By Max Abelson and Christine Harper, Bloomberg
Michael Ovitz, the former Hollywood agent whose company was said to have created enemies “the way a hurricane produces raindrops,” first met Gary
Cohn over lunch at Goldman Sachs Group Inc. (GS)’s headquarters in June 2009.
http://jlne.ws/pDmkXP

NCUA Gives Voice to Credit Unions as FSOC Releases First Emerging Risks Study
Matz Signs Attestation for FSOC Annual Report
ALEXANDRIA, Va. (July 26, 2011) – National Credit Union Administration (NCUA) Board Chairman Debbie Matz attested to Congress her
approval of the Financial Stability and Oversight Council’s (FSOC) annual report with recommendations. The FSOC released its first annual review of
emerging risks in the financial system today. During the past year, NCUA has worked with other regulators on the FSOC to implement the initiatives
mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to restore integrity in the markets and strengthen the public’s trust in the financial
system. “Our combined FSOC activities, independent actions, and joint rulemakings are correcting many of the weaknesses laid bare by the
financial crisis,” said Matz at the FSOC’s July 18 meeting. “Together, on the FSOC, we have made significant progress in issuing a number of important
studies, proposed and final rules, and establishing a venue for identifying and analyzing emerging risks.”



Regulators

U.S. Regulators Seek Public Input for a Joint CFTC-SEC Study on International Swap Regulation
Press Release
The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have approved for publication in the
Federal Register a request for comment that is expected to assist in conducting a joint study on international swap regulation.
http://jlne.ws/ngnKPN

CFTC Chairman Gary Gensler Announces Appointment of Tony Thompson as Executive Director
Press Release
Washington, DC – The Commodity Futures Trading Commission (CFTC) today announced the appointment of Tony Thompson to serve as the agency’s Executive
Director. Mr. Thompson is the Deputy Administrator for the Office of Management at the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection
Service (FSIS). Mr. Thompson will replace Madge Bolinger Gazzola, who recently retired after almost 35 years at the CFTC.
http://jlne.ws/nSxpf7

IMF External Relations Department Director Caroline Atkinson Notifies Management of Intention to Leave the Fund
Ms. Caroline Atkinson, Director of the International Monetary Fund's External Relations Department (EXR), has notified IMF Managing Director Christine
Lagarde of her intention to leave the Fund following her appointment to a position at the White House as Special Assistant to the President for International
Economic Affairs. Ms. Atkinson, who was named to her current IMF post in November 2008 (see Press Release No. 08/194), will relinquish her responsibilities
immediately and will resign from the Fund effective August 5, 2011. The IMF will begin shortly the process of selecting a new EXR Director; Mr. Gerry Rice will
serve, effective immediately, as Acting Director.
http://jlne.ws/mRV89d

Financial Stability Oversight Council Releases First Annual Report
Press Release
On the heels of the first anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Financial Stability Oversight Council
released its 2011 Annual Report. The report – the first of its kind issued by the U.S. government – was produced collaboratively by the members of the
Council and their staff, and unanimously approved by the Council.
http://jlne.ws/qeEwf9

FINRA Warns Investors About Chasing Returns in Structured Products, High-Yield Bonds and Floating-Rate Loan Funds
Press Release
The Financial Industry Regulatory Authority (FINRA) today issued an Investor Alert warning investors about putting their assets into riskier and
sometimes complex products that promise higher returns than more traditional investments. With yields on many fixed-income investments at historically
low levels and a volatile stock market, investors may be tempted to chase returns by investing in structured notes with principal protection, high-yield
bonds, floating-rate loan funds and leveraged products.
http://jlne.ws/ocb0Wd





Global News

U.K. Treasury to Stick to Fiscal Tightening, Minister Insists
By ALISTAIR MACDONALD And DAVID ENRICH, WSJ
The U.K. Treasury is digging in its heels when it comes to its deficit-reduction plans, insisting it won't reconsider them even if Europe's financial crisis
significantly intensifies, a U.K. Treasury minister said Thursday.
http://jlne.ws/rhAT3q

Barnier seeks to soothe UK over banks
By Brooke Masters and Patrick Jenkins in London - Financial Times
The UK would still be able to ringfence its retail banks and impose extra capital requirements on them under the proposed European Union regulations
that seek to harmonise capital rules across the 27-member bloc, Michel Barnier, EU’s internal market commissioner, told the Financial Times.
http://jlne.ws/qHLaRw

Investors to Buy Into Bank of Ireland
BY EAMON QUINN, WSJ
DUBLIN—Investors plan to buy a large stake in Bank of Ireland PLC, helping to keep the country's largest lender out of majority government
ownership, Irish Finance Minister Michael Noonan said Monday.
http://jlne.ws/nh2IFj

Bank of China a likely buyer for RBS jet unit: report
Reuters
Bank of China is a leading contender in the race to acquire the aircraft leasing business being sold off by Royal Bank of Scotland , the Sunday Times
reported without citing sources.
http://jlne.ws/rfdm2s

China's urban unemployment rate stands at 4.1% at June end
People's Daily Online
China's registered urban unemployment rate stood at 4.1 percent at the end of June, with 9.08 million people being registered to be unemployed, the
Ministry of Human Resources and Social Security said on Monday.
http://jlne.ws/raQqgl

Santander Profit Tumbles On UK Charge; Delays IPOs
By Christopher Bjork, DOW JONES NEWSWIRES
Spanish banking giant Banco Santander SA (STD) Wednesday reported a 38% drop in second-quarter net profit, after it set aside EUR620 million to
cover potential claims for customers in the U.K. who were miss-sold payment protection insurance policies. Net profit for the largest bank in the
euro-zone by market valuation plunged to EUR1.39 billion from EUR2.23 billion a year earlier. Analysts had on average expected profit of EUR2.07
billion, however they hadn't factored in the surprise U.K. charge.
http://jlne.ws/n2QGz1

Emerging markets warn IMF over fresh Greek loan plan
By Alan Beattie in Washington, Financial Times
Representatives of leading emerging market countries at the International Monetary Fund have warned the fund’s management against pouring more
large sums of money into another Greek bail-out with uncertain prospects.
http://jlne.ws/nlIKk7

Bank plan for Greece won't cause CDS payout: ISDA
Reuters
International bank plans for a voluntary program of debt swaps and buybacks to help rescue Greece won't trigger a "credit event" and payment of CDS
contracts, derivatives body ISDA told Reuters on Friday, limiting the fallout of any default rating.
http://jlne.ws/rlBTKy

Moody's Cuts Greek Debt Rating Further
By NATASHA BRERETON-FUKUI, WSJ
Moody's Investors Service Monday slashed the Greek government's debt ratings three notches deeper into junk territory, warning that
the nation's newest bailout deal implies a temporary sovereign default and sets a bad precedent in the 17-country euro zone.
http://jlne.ws/paxPw5

Central Bank May Be Winner in Europe’s Debt Talks
By JACK EWING, NY Times
Chancellor Angela Merkel of Germany and other European leaders appeared to act in defiance of the European Central Bank when
they insisted that banks contribute to the latest rescue plan for Greece. But the central bank president, Jean-Claude Trichet, may consider himself the real
winner of the week.
http://jlne.ws/p9bN2C

Big banks to attend eurozone summit: report
DW-World
Deutsche Bank CEO Josef Ackermann and other European banking sector heavyweights have been invited to the latest eurozone summit to discuss new
strategies for handling the Greek debt crisis.
http://jlne.ws/qnGkuF

EU leaders agree E109bn Greek bail-out
By Peter Spiegel and Quentin Peel in Brussels, and Patrick Jenkins and Richard Milne in London - Financial Times
European leaders have agreed a new E109bn bail-out of Greece under which private bondholders will be called on to participate for the first time, contributing
a target of a further E37bn.
http://jlne.ws/pT8wJl




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