Greek political system – how does it work?
http://harveyorgan.blogspot.com/2012/05/record-deposits-at-ecblower-pmi-in.html
We have this report from the CME to raise margins which probably caused some softening in the metal prices today. It looks like margin calls will be huge and it starts on this Monday, the day after the two big elections. These guys are the biggest crooks on the planet.
(Courtesy Bloomberg)
CME Raises Margins for Non-Hedged Accounts to Meet CFTC Rule
Jeff Wilson and Phoebe Sedgman, ©2012 Bloomberg News
Thursday, May 3, 2012
May 3 (Bloomberg) -- CME Group Inc., the world's largest futures exchange, is raising futures margins for non-hedged accounts from May 7 to comply with new regulations.
Members will be treated as speculators for outright positions, paying a higher margin, said the exchange, which trades everything from energy, agriculture and metals to interest rates and equity indexes. Members are currently treated as hedgers rather than speculators even if they are entering into a speculative position.
President Barack Obama last month urged Congress to bolster federal supervision of oil markets, including bigger penalties for market manipulation and greater power for regulators to increase the amount of money traders must put up to back their bets. Regulators are seeking to limit speculation in commodities and ban so-called proprietary trading at banks.
"Guys that are highly leveraged would have to find more capital or they've got to bring their position-size down," Adam Davis, a commodity trader at Merricks Capital Services Pty, said from Melbourne today. "You can reduce a position-size in two seconds. Finding more capital might take you two months."The change in so-called performance-bond requirements reflects the new Commodity Futures Trading Commission rule for all speculative trading accounts that are regulated as futures or swaps, the Chicago-based exchange said in a statement yesterday. This will affect members that have speculative positions, including traders who lease trading privileges, said spokeswoman Laurie Bischel.
CFTC Rule
"The CFTC rule takes away the implicit hedge status of members, forcing them to pay a higher margin to take flat price and spread positions home overnight," said Roy Huckabay, the executive vice president for the Chicago-based Linn Group, a CFTC-registered futures clearing firm for individual traders, hedgers and funds. "This would by nature reduce the number of contracts they trade unless they put up additional collateral."
The CFTC approved regulations last year that would cap the number of contracts a derivatives trader can have. European regulators are also seeking limits on derivatives after French President Nicolas Sarkozy demanded steps to curb speculation, which he blames for driving up world food prices.
Trade associations representing companies including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley have sued to overturn the CFTC regulation, one of the financial industry's highest-profile challenges to the 2010 Dodd-Frank law that bolsters regulation of derivatives.
More Funds
Obama has asked Congress to fund a six-fold increase for surveillance and enforcement staff at the CFTC to put "more cops on the beat" overseeing oil markets. He is seeking to give the CFTC authority to raise margins for traders' positions and stiffen civil and criminal penalties for businesses guilty of manipulation to $10 million from $1 million."Basically, we don't see any impact on the market from the latest revision," said Richard Gorry, a Singapore-based director at JBC Energy GmbH, an energy research company. "There might be some smaller players that could be forced out of a trade more quickly, but we don't think that it will have any type of meaningful effect on the 'big boys.'"
Oil for June delivery fell 0.3 percent to $104.88 barrel on the New York Mercantile Exchange today.
end
However the CME should be cognizant of this development as we now have a competitor to the COMEX:
(courtesy Marketwire)
China Receives Approval to Start Trading Silver Futures -- Silver Companies Look to Benefit
NEW YORK, NY -- (Marketwire) -- 05/03/12
Silver prices rebounded after Ben Bernanke commented that the Federal Reserve was prepared to take action if the economy required additional support. Silver spot prices ended last week at $31.27 after dipping below $30. Silver's rally will look to continue in 2012 as China has recently received approval to begin trading silver futures.
Access to the full company reports can be found at:
The China Daily newspaper on April 26th reported that China had received approval to start trading silver futures on the Shanghai Futures Exchange. "There has been an absence of a means of trading in silver in China," Wang Ruilei, an analyst with precious metal trader CGS Co Ltd, told China Daily. "The market will be bigger and more liquid with the advent of these futures contracts." Allowing Chinese investors access to the silver market will provide an influx of investment dollars into the commodity, and make it more difficult for American speculators to manipulate the markets in their favor. Also Phillip Klapwijk of GMFS expects fabrication demand for silver, which makes up 80 percent of total demand for the metal, to rise as much as 5% this year.
Five Star Equities releases regular market updates on the Silver Industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at www.FiveStarEquities.com and get exclusive access to our numerous stock reports and industry newsletters.
Some Swiss gold out of the country; refineries see 'massive' demand
Submitted by cpowell on 10:14AM ET Thursday, May 3, 2012. Section: Daily Dispatches
1:13p ET Thursday, May 3, 2012Dear Friend of GATA and Gold:
GoldCore's Mark O'Byrne today relays a report that the Swiss National Bank, while refusing to specify the location of its gold reserves, acknowledges that they are held both domestically and internationally, the latter locations providing "access to a gold market where stocks could be liquidated if necessary." Presumably "necessary" includes the sort of surreptitious currency market intervention seen against gold simultaneously with the Swiss franc's devaluation last September. O'Byrne's commentary is headlined "Swiss Gold Stored At 'Decentralised Locations' -- SNB Does Not Disclose Where" and it's posted at GoldCore here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
Overnight we witnessed weak service PMI numbers coming from China as its level is back to the low levels during January. The UK also saw its Service PMI drop from 55.3 to 53.3 signalling trouble over there. The Spanish auction for 5 yr bonds was well bid but a much higher yield which of course is unsustainable if high yields continue. However the real worrisome data came from the ECB which announced that its banks deposited a record 803 billion euros, a rise of 14 billion euros overnight as Northern European banks took their Southern European that matured and instead of rolling it over, took the euro cash and deposited it with the ECB. Thus, as we indicated to you last week, the only ones who are buying the Spanish sovereign bonds will the Spanish bonds through the LTRO and this goes for Italy as well.
(courtesy zero hedge)
Overnight Sentiment: Bad News Means Green Futures
- Across the Curve
- Blue Chips
- Crude
- Crude Oil
- Equity Markets
- European Central Bank
- Initial Jobless Claims
- Monetary Policy
- United Kingdom
Welcome to another morning which saw weak news out of Asia (Chinese Services PMI declining to lowest level since January), weak news out of the UK (Services PMI down to 53.3 from 55.3 previously), and weak news out of Europe where a Spanish auction once again paid well into the unsustainable levels to give the market the illusion that it is well funded. Completing the picture is the ECB which announced that yesterday banks deposited for the first time since early March a total over €800 billion (primarily as Northern European banks see their holdings of Southern paper mature and not get rolled over), or €803 billion to be precise, a €14 billion increase overnight, as one can make the argument that liquidity is once again starting to freeze up. However, despite all the ugly news, US futures are of course up, with the only question the headline scanning algos care about is whether initial claims will once again miss the consensus of 380K solidly (thus making sure tomorrow's NFP print is QE enabling). Our guess it that last week's print of 388K is revised as usual upward, into the low 390K region, with the number missing Wall Street forecast but posting a "decline" from last week's revised number. After all this scheme has worked for so long, why end now?
ECB deposit facility usage:
Full summary from BofA:
Market action
Yesterday, the S&P 500 dropped sharply following the worse-than-expected ADP employment report. At around 10:30 am, the index had fallen roughly 0.9% from the prior day's close. However, over the course of the trading day, the market slowly recovered finishing a smaller 0.3% lower.
Overnight, Asian equity markets finished mostly lower, as they reacted to the weak ADP report. The worst-performing market was the Indian Sensex, down 0.8%. The Hang Seng lost 0.3%, while the Korean Kospi finished 0.2% lower. On the flip side, the Shanghai Composite managed to finish 0.1% higher.
In Europe, equities are enjoying a solid rally, up 0.6% in the aggregate, as several of the region's biggest companies posted better-than-expected earnings for the first quarter. Not surprisingly the region's blue chips are up 1.1%. French and German listed firms are also outperforming the overall market, climbing 1.0%, while shares listed in London are lagging, up only 0.3%. At home, futures are pointing to a moderately higher open for the S&P 500.
In bondland, Treasuries are flat across the curve. The 10-year yield is currently trading at 1.93%. In Europe, the German bund is 1bp higher, at 1.62%, while yields on the UK, Italian and Spanish 10-year notes are bid.
The dollar is stronger against a basket of other major currencies. The DXY index is 0.1% higher. Commodities are selling off. WTI crude oil is down 46 cents, to $104.76 a barrel, and gold is $7.45 an ounce cheaper, at $1,645.83.
Overseas data wrap-up
China's non-manufacturing industries grew at a slower pace in April. The country's PMI service index came in at 56.1, compared with 58.0 for March. That is the lowest level since January, but still well above the 50-breakeven level that marks the boundary between expansion and contraction. The decline in China's service PMI today indicates that the country's service sector is expanding, but at a slower pace.
The service sector also slowed in the UK. The UK's service PMI moderated to 53.3 in April, down from 55.3 in the prior month. The country's services PMI had been surprisingly strong - close to its pre-crisis average - and so this fallback in April potentially brings it back to more underlying levels.
Late yesterday, French presidential candidates Nicholas Sarkozy and Francois Hollande faced off in a debate before the country heads to the polling stations on Sunday. There were no major surprises, as both candidates stuck with their political platforms. Polls suggest that Mr. Hollande will be elected President on Sunday; at that point, the focus will shift to the parliamentary elections in June.
Too late for this report, but later today, the ECB will announce any changes to their monetary policy stance. Our European team expects no changes in interest rates or announcements of further LTRO programs. The ECB is likely to mark down their growth rate, however.
Today's events
We have initial jobless claims and non-farm productivity both scheduled for release today at 8:30 am. Initial jobless claims are expected to drop modestly, to 380,000 for the week ending April 28 from 388,000 the week prior. Meanwhile, non-farm labor productivity is expected to decline -0.9% annualized in the preliminary release for Q1 - the first decline at a quarterly annualized rate since Q2 of last year. At 10:00 am, we expect the ISM non-manufacturing index to moderate to 55.5 in April from 56.0 in March - a four-month low.
EU Ministers Fail to Reach Deal on Bank Capital Rules
By Rebecca Christie and Patrick Donahue - May 3, 2012 5:11 AM ET
European Union finance ministers failed to reach an agreement to toughen bank capital rules in the face of British resistance and now aim for a deal at their next meeting on May 15.
Sixteen hours of talks in Brussels that ended early today snagged on when countries can tighten domestic banking regulations and add to EU minimum requirements on how much capital banks must hold. A compromise proposal from Denmark, which holds the EU’s rotating presidency, would allow governments to force their banks to add risk buffers of as much as 5 percent against their domestic and non-EU exposures.
U.K. Chancellor of the Exchequer George Osborne was one of the loudest voices calling for member states to gain the additional flexibility. He said the U.K. will also press for discretion on so-called macro-prudential oversight tools, such as when regulators can rein in housing markets.
Ministers will try to bridge differences during the next two weeks, defying a warning yesterday by German Finance Minister Wolfgang Schaeuble that failure to reach decision at this meeting “will be dangerous.” If no consensus is achieved, a decision could be taken through a majority vote.
Agreement among finance ministers will serve as a basis for negotiations with the European Parliament, which could begin later this month. The EU faces a Jan. 1, 2013, deadline for adopting rules agreed on by the Basel Committee on Banking Supervision.
HIGHER THRESHOLDS
Nations have been divided over proposals by Michel Barnier, the EU’s financial services chief, to fix banks’ core capital requirements at 7 percent of their risk-weighted assets, with limited exceptions for national regulators to set higher thresholds.
“We have made real progress,” Barnier said in an e-mailed statement today. Barnier said he is “convinced” that the May 15 meeting will achieve agreement on a mandate to start negotiations with parliament.
The latest proposal on EU implementation of Basel rules says that member states can impose a capital surcharge of as much as 3 percent on banks’ exposures in other members of the 27-nation bloc. If an EU country is “specifically targeted” by another country’s additional requirements, it could go to the European Banking Authority for binding mediation.
RECENT REVISIONS
The most recent revisions clarify when binding mediation is applicable. They also offer a procedure for countries to justify their decision when they want to impose an additional buffer on banks in the 3 percent to 5 percent range, and it adjusts the procedure required for countries that want extra buffers of more than 5 percent and must seek EU approval.
Technical work on these and other elements of the proposal will continue, Danish Economy Minister Margrethe Vestager told reporters after the meeting. Denmark has been leading efforts to strike a deal based on Barnier’s proposal, put forward in 2011.
“What we want at the end of this process is to implement the Basel agreement,” Osborne said yesterday during the meeting’s public debate. “I’m not prepared to go out there and say something that is going to make me look an idiot five minutes later.”
and....
Previewing The First Of Many Greek Elections
This weekend the Greeks will go to the polls - and with support for the two main parties (New Democracy - center-right; and PASOK - socialist) at historical lows (and the share of protest and extremist votes at historical highs) - is Greece about to become Belgium. This is likely exactly what the bankers want - a relatively ungoverned nation to pilfer - but as the WSJ reports, against a backdrop of economic crisis, a 'failed' election is expected to usher in such political instability that officials from the country's major parties are planning for another possible election within months. Can they break Belgium's record-breaking run of not having an official government or will the Greeks transform their economy with Greek Fries, Greek Beer, and Greek Chocolate? At the moment, New Democracy is widely expected to win the elections, without however securing the majority in parliament and even in the case of a coalition with PASOK the two parties would not have a majority in parliament. The problem, of course, is that many of the extreme-left and extreme-right minority parties (who are likely to get seats) advocate the renegotiation of agreements with official sector creditors, a rejection of austerity measures, or even leaving the euro altogether. Credit Suisse provides a succinct preview of the Greek elections and three scenarios (bad, badder, baddest) that the post-election EU/IMF-dependent nation faces.
From UBS:
Both main parties have campaigned on the idea that they will renegotiate the Memorandum of Understanding (MoU) with the IMF. In our view, that suggests a degree of liberty they do not have; we think there is little, if any, appetite at the Fund or at the EC to renegotiate the agreement. Rather, the new government’s task will be daunting: €3bn of spending cuts to implement immediately and an additional €12bn to be detailed for 2013-14. Risks have risen around Greece’s ability to implement austerity measures, against a backdrop of increasingly frustrated and impatient official sector lenders.
Credit Suisse: Preview of the Greek elections
Greek political system – how does it work?
The Greek parliament has 300 members, elected by a system of “reinforced proportionality”. “Reinforced” because the party that has the most votes is awarded 50 additional seats (irrespective of its share of the votes) and for a party to be represented in parliament, it has to get at least 3% of the votes. “Proportional”, because the remaining 250 seats are allocated proportionally to those parties that meet the 3% threshold. Based on the above, for a party to secure a majority of the seats (151 MPs), without having to rely on a number of parties not meeting the 3% threshold, needs to get at least 40.5% of the votes (i.e. 40.5% of 250 = 101 seats, plus the 50-seat majority premium). In practice, this percentage is lower, since it is unlikely for all parties participating in the election to make it into parliament.
Main political parties
Exhibit 3 provides an overview of the main political parties in Greece and their stance towards euro membership and the EU/IMF programme.
Where things stand at the moment?
At the moment, New Democracy is widely expected to win the elections, without however securing the majority in parliament, despite the 50-seat premium. If a coalition government was decided upon, the PASOK party would be the most likely candidate, given their common stance on the EU/IMF programme and their coexistence in the latest interim government. However, some opinion polls, suggest that even in such a scenario, the two parties would not be in a position to have a majority in parliament, or have a weak majority at best. Adding to the complexity, the leader of theNew Democracy party, Antonis Samaras, is strongly against the idea of a coalitiongovernment with PASOK. If an additional member for the coalition was to be looked for, Democratic Alliance – a liberal party in favour of the reforms – would be a likely candidate, however it is unclear whether it will reach the 3% threshold needed to get into parliament. From the remaining parties, the Democratic Left – a pro-European party in favour of some reforms – would be a possible candidate, however its rejection of the EU/IMF programme as it is and its refusal to participate in a New Democracy-PASOK coalition complicates the situation.The protest vote in this election is high, with up to ten parties getting into parliament – five of which for the first time – and ranging from far-right to far-left. Also the number of undecided at 15-20% remains at high levels and would largely determine the outcome of the election. Political analysts suggest, that as the election date is approaching, the New Democracy and the PASOK party will manage to get back part of their traditional voters and hence their support would be slightly higher than what the latest opinion polls imply.It is worth noting that no coalition of parties without the participation of New Democracy seems likely, mainly due to the 50-seat premium that the New Democracy party will get and due to the fact that the rest of the votes are split among a collection of parties with strong ideological differences, ranging from far-right to far-left.
Timeline after the elections
The election result will be known late at night on Sunday 6 May. Following that, if no party has the majority of the votes (which is the most likely scenario), the president will ask the leader of the first party in votes to try to form a government (e.g. through a coalition) that enjoys the confidence of the parliament. If this fails or the party withdraws from its right, then the second party is asked to do the same and so on. The process is repeated for the three largest parties and each one has a three-day deadline. If these attempts fail, the president calls the parliamentary leaders of the parties on a last attempt to form a broad coalition government. If that is also unsuccessful an interim government is formed that would lead the country to a new election within a month.Post-election scenarios Given that it is unlikely that after the elections a single party will have a clear majority, there are several scenarios that could play out. In the list below, we highlight those scenarios that in our view are the most likely ones.
- Scenario 1: New Democracy – PASOK coalition. This is the most likely scenario, in our view. Despite their pre-election announcements – in light of the international pressure and the lack of other alternatives – the two parties are likely to form a coalition government. Based on the poll numbers – if nothing fundamentally changes – this would be a rather weak coalition. It is expected to implement the EU/IMF programme, however frictions between the coalition members are likely. It is also expected to face strong opposition by the anti-bailout parties, especially if it does not have the majority of the votes (lack of strong popular mandate). It would be a rather fragile government, whose stability would be largely determined from the economic outlook and the progress of the reforms, in our view.
- Scenario 2: Broader coalition with the participation of other parties as well. Either due to a lack of parliamentary majority of the above coalition or the need to enlarge the popular base, a smaller party might be asked to join the coalition, e.g. the Democratic Left or the Democratic Alliance. This will allow for a stronger parliamentary majority, but the dynamics are not as straightforward. Taking into consideration the different programme goals of the members of the coalition – especially in the case of the Democratic Left – the government might not be flexible enough to implement the agreed reforms and a lot of the measures might have to be watered down, in order to be passed in parliament.
- Scenario 3: New elections. If there is unwillingness from the New Democracy party to form a coalition government or attempts to do so fail, then new elections will follow suit. This outcome would be disruptive, at least in the short term, and questions regarding the implementation of the EU/IMF programme and Greece’s existence in the euro will emerge.
In the new election it is possible that, in fear of an ungoverned country, part of the protest vote will be shifted towards the main parties, resulting in a stronger government/coalition, that would be in a position to implement its mandate. However, if this is not the case, the risk of a disruptive development will materially increase.As UBS notes, "We believe that the Greek situation is far from resolved and that a further restructuring of the debt is quite likely."
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