Liquidity is a key factor in all markets. And it is often more elusive and fragile than it appears, as recent events in the commodity markets have emphasised. “Obviously liquidity is a very relevant subject,” says Peter Billington, Head of FX Trading at Commerzbank. “We’ve had a timely reminder of the importance of liquidity in the markets, when you look at what happened to silver on the CME [Chicago Mercantile Exchange] after they changed the margin calls, and how quickly positions can be forced to be liquidated or squeezed. And certainly with some of that spill-over, we have seen the dollar impacted in the FX markets.” The decision by the CME to raise margin requirements for silver futures four times in just a couple of weeks meant traders had to sell positions to raise cash for margin calls – the commodity price falls, and a cycle of further calls and price falls ensues, impacting the amount of available liquidity. However, it is not just silver: CME has raised the margin requirements on energy futures too. Fortunately, when it comes to foreign exchange trading, the forex market is the most liquid in the world. Nevertheless, service providers such as Commerzbank are acutely aware of the importance of liquidity, and how changes in the foreign exchange markets can (and are) affecting its provision. Gerald Dannhaeuser, Head of FX Sales at Commerzbank, aptly states how this translates for market participants: “You only feel liquidity, when its not there.” A changing marketAs well as […]

Europe’s leaders agreed late on Thursday to release a fresh €12bn bailout for Greece provided it passes an austerity package before its parliament.
 Greece is expected to introduce strict measures of €28bn in tax rises and spending cuts and in addition will have to commence a €50bn programme in privatisations of state assets.
 “Greece must finalise the package as a matter of urgency in the coming days to qualify for the new bailout,” a statement read.
The bailout contributions will come from 17 eurozone countries and the IMF but will not include direct aid from the UK.

Kuwait Investment Company (KIC) is a public shareholding company, incorporated under the laws of the State of Kuwait on 25 November 1961 and listed on the Kuwait Stock Exchange. The company has been a leading player in the investment industry in Kuwait and the GCC over its 50 years of operation, passing through numerous economic cycles and lasting through a host of crises. For example, the 1982 Al-Manakh crisis brought the national economy to a standstill and helped to push the whole region into recession; while the 1990 Iraqi invasion had a similarly disastrous and long-term effect. Despite these local seismic economic shifts – and global trends such as the 2007 crisis – KIC’s sustainable management and innovative strategies have ensured its position as a sustainable leader in the investment sector. High diversificationKIC’s processes and focus on training have been key to its success – not least of which has been the company’s ability to strategically restructure and rehabilitate itself to cope with the continuously changing and developing national economy. The company has ensured that its performance and profits are market-proof, relying on real profits that result from operations and effective performance, as opposed to speculations and market fluctuations. This means variations in stock prices and market volatility do not affect the company’s performance or rating. This is accomplished through the sheer power of diversification. KIC carries out a wide range of investment and financial activities, providing a diversified package of local and international investment and financial products to a […]

It is now 18 months before Solvency II, the new solvency regime for European insurers and reinsurers, is due to come into force. Insurers have been preparing for a long time, in some instances many years, to implement the regime which will come into effect on 1 January 2013 and which will have far-reaching consequences for those trading in Europe. Financial institutions will also be indirectly affected as they will need to adjust their businesses to meet the changing needs of their insurance clients. At its heart, Solvency II aims to implement solvency capital requirements that better reflect the risks insurers face, encouraging them to implement appropriate risk management systems and sound internal controls and introduce improved transparency through consistent public disclosure of capital and risk information. It also delivers a supervisory regime that is harmonised across all members of the European Economic Area, providing a consistent level of policyholder protection. Its impact will also be felt beyond the EEA, as similar models are being implemented or considered elsewhere, such as in Bermuda and South Africa, because of the perceived benefits in having a regime that is equivalent to Solvency II. The rules are still being finalised and it is likely that a number of Solvency II’s provisions will be phased-in over a number of years to allow an orderly transition into the new regime. But forward planning for capital adequacy and risk management will be vital in order to satisfy the new regime. Investment banks and asset managers should […]

Chinese iron ore trading developer Sinosteel Midwest suspended work on its $2.1bn Australia-based Weld Range iron ore mining project due to uncertainty surrounding the proposed Oakajee port and rail project.
 The $5.2bn joint venture between Mitsubishi and Murchison Metals has been inundated by delays recently and Sinosteel, one of the largest investors by a Chinese company in Australian mining, said it will halt the project until certainty surrounding the port development is resolved.
Continuous delays saw the completion date for the port move from its forecast in 2012 to 2015 and have cost an estimated $100m a year, Sinosteel said.
 The COO of Sinosteel, Julian Mizera, said: “We are certainly not closing the door on Weld Range, however we must make the right business decisions in order to protect our assets and ensure a realistic future for our organisation.”