Credit default swaps? They’re complicated – and scary! The receipt you get when you pre-order your Thanksgiving turkey? Not so much. But they have a lot in common – they’re both derivatives. Paddy Hirsch explains. #MarketplaceAPM #EconomicExplainers
By Joe Rennison October 16, 2019, Financial Times
Money market funds that are among the largest holders of U.S. Treasury bills say they are reluctant to sell them to the Federal Reserve, presenting an obstacle to the central bank as it seeks to increase the amount of cash in short-term lending markets.
The Fed announced last Friday that it would begin monthly purchases of roughly $60bn of Treasury bills, which have a maturity of less than 12 months, in an attempt to inject money into the financial system following a cash squeeze that sent overnight “repo” lending rates surging in September.
By Emily Barrett and Alex Harris October 15, 2019, Bloomberg
JP Morgan Chase & Co. had the cash and willingness to calm short-term funding markets when they went haywire in mid-September, but the banking giant said regulations held it back.
The firm has what Chief Executive Officer Jamie Dimon on Tuesday called a checking account at the Federal Reserve. When rates on repurchase agreements spiked to around 10% a month ago – roughly four times more than what JP Morgan earns at the Fed – the bank could’ve profited by shifting the money into repo.
By Jenna Lomax October 11, 2019, Securities Lending Times
The repo market is large and stable and still presents counterparty credit risk reduction, yield enhancement and funding resilience, according to Michel Semaan, board and chair of the International Capital Market Association (ICMA) European Repo and Collateral Council (ERCC) and committee.
Semaan, also global head of secured funding and G10 non-euro rates at Crédit Agricole Corporate and Investment Bank, made the comment in ICMA’s Q3 report.
By Samuel Wilkes October 15, 2019, Risk
European regulators are divided on easing capital charges for balance sheet synthetic securitizations that earn the label ‘simple, transparent, and standardized’ (STS), market sources reveal.
Since 2019, true sale securitizations have been able to qualify for the STS label. In a draft report published on September 24, the European Banking Authority now proposes to extend the label to balance sheet synthetic securitizations. These are used by banks to transfer the credit risk of a portfolio of loans to an investor without transferring ownership of the underlying assets.
By Karry Lai October 14, 2019, Practice Insight from IFLR
Despite the looming 2021 deadline for interbank offered rates (IBORs), Asian firms are far from ready for the transition and are yet to shift away from the world’s most widely-used benchmark rate, according to speakers at the Asia Securities Industry & Financial Markets Association (ASIFMA)’s annual conference in Japan.
The individual renegotiation process to alternative rates, whether it be for bonds, cash products or syndicated loans, remains a gargantuan task for firms. “It’s an enormous and costly task because there’s not a one-size-fits-all approach,” said Hannah Cassidy, partner at Herbert Smith Freehills. “There’s a litigation risk for those not ready for the transition because lots of contracts will be frustrated.”
By Victoria Guida October 15, 2019, Politico
As the global financial system braces for the death of Libor — the benchmark for interest rates on trillions of dollars in loans and other contracts — some banks are getting increasingly jittery about its replacement.
The banks warn that tying their loans to the Secured Overnight Financing Rate, the official alternative to dollar-based Libor, could squeeze their bottom line when the U.S. economy inevitably enters a downturn.
By Jonathan Garber October 15, 2019, Fox Business
The Fed’s recent rate cuts will be in the spotlight when the big banks kick off the third-quarter earnings season this week.
Citigroup, Goldman Sachs, JP Morgan, and Wells Fargo are set to report ahead of Tuesday’s opening bell while Bank of America and Morgan Stanley will release their results in the days that follow.
By David Milliken and Huw Jones October 15, 2019, Reuters
Bank of England Governor Mark Carney said on Tuesday that currency dealers should face the same tough market-abuse rules that govern share and bond trading, adding to scrutiny of London’s $5 trillion-a-day foreign exchange market.
Carney also struck a sanguine tone on hedge funds and other investors taking bets on the value of the pound as the Oct. 31 Brexit deadline nears, arguing that the stability of the financial system was the BOE’s main concern.
By Andrew MacAskill, Sinead Cruise, and Huw Jones October 15, 2019, Reuters
From the pinnacle of the City of London’s largest skyscraper, Stuart Lipton is wagering a $1.2 billion bet that the British capital remains a master of the international financial universe no matter what happens with Brexit.
The 76-year-old property developer is not alone. Bankrolled by a host of global investors, including France’s Axa, his big-ticket gamble in London’s financial district is – so far – on the money.
By Huw Jones and Andrew MacAskill October 15, 2019, Reuters
Britain’s vast financial services industry will lose more jobs to Europe over the coming years because of Brexit, the City of London’s policy chief told Reuters, warning people not to be duped by the low number of job moves to the continent so far.
The City of London, home to global foreign exchange, bonds and fund management operations and to more banks than any other financial center faces upheaval as firms decide whether to shift jobs to continental Europe to keep serving customers there after Britain is scheduled to leave the E.U. in two weeks.
By Maddie Saghir October 14, 2019, Securities Lending Times
The International Securities Lending Association (ISLA) is looking to redefine its role as an industry representative in a post-regulatory implementation framework that the securities lending market will find its self in, come 2021.
At ISLA’s Post Trade event on 01 October, ISLA’s CEO, Andrew Dyson, gave an update to members to explain that the association is evolving to reflect the changing needs of its members and broader stakeholder community.
By Hayley McDowell October 14, 2019, The Trade
The U.K. financial watchdog has said it will take a ‘pragmatic’ approach to the supervision of MiFID transaction reporting and EMIR trade reporting requirements upon the advent of Brexit.
In a statement providing market participants with an update on the Financial Conduct Authority’s (FCA) latest expectations for firms ahead of October 31, the regulator outlined steps firms should be taking to prepare for Brexit and a possible no-deal exit.
By Emma Olsson October 11, 2019, bobsguide
Once feared by traders and regulators alike, attitudes towards algorithmic trading have changed. The development of more sophisticated algorithms, advances in artificial intelligence (AI), and an increasingly regulated market have shifted perspectives on the strategy. But tension lingers, as fear of the unknown has been replaced by anxieties around predictability and control.
Here are just some of the trends and insights shaping the impact of algorithmic trading in 2019.
By Joice Alves October 14, 2019, Reuters
Fewer analysts are covering British companies and the quality of their reports has declined since the introduction of European Union regulations aimed at increasing transparency in financial markets, according to a survey published on Monday.
More than half of U.K. companies reported a year-on-year decline in the number of analysts covering them and 38% said there had been a fall in the quality of research, Citigate Dewe Rogerson’s annual survey of nearly 500 investor relations officers at global companies.
By Paulina Pielichata October 14, 2019, Pensions&Investments
A need for greater flexibility given market uncertainty, increased volatility and intensifying regulatory scrutiny is creating demand for ETFs from European investors.
Assets in European Union-domiciled ETFs grew to €741 billion ($842 billion) as of June 30, according to a European Securities and Markets Authority Sept. 11 report, up 14% from €649 billion a year ago, and increasing from €568 billion in 2017 and €441 billion in 2016.
By Nick Timiraos and Paul Kiernan October 11, 2019, The Wall Street Journal
The Federal Reserve said it would buy short-term Treasury debt beginning next week to avoid a recurrence of the unexpected strains experienced in money markets last month.
The Fed will buy Treasury bills beginning next Tuesday at an initial pace of $60 billion a month and continue those purchases into the second quarter of 2020.
By Steve Marlin October 11, 2019, Risk
A long-simmering debate in the clearing world on who should swallow losses that have nothing to do with defaults received a jolt as two U.S. clearers proposed ways of divvying up part of those costs among their members.
On August 21, Options Clearing Corporation (OCC) filed for a rule change that would distribute part of operational losses – cyber, fraud, theft and others – to its members. The very next day, Ice Clear Credit (ICC) went in a completely different direction: it filed to have its members cover part of the cost of investment and custodial losses, but excluded plain vanilla operational risk.
By Hayley McDowell October 11, 2019, The Trade
The surge in trading activity occurring at the end of the day in closing auctions in recent years has not deteriorated the price formation process, according to France’s financial watchdog.
The Autorité des Marchés Financiers (AMF) conducted a study after stating earlier this year that a concentration in volumes at the end of the trading day could undermine price formation due to declining liquidity during the trading day. The study, however, did not find an increase in drastic price swings, which the regulator said would have been a clear sign of a deterioration in price formation.
- Top 50 publishers (last 24 hours)