An unusual surge of short-term lending by cash-rich companies is raising concerns on Wall Street that a period of unrest may lie ahead.

Investors such as money-market funds and banks are parking over $1 trillion in spare cash overnight at the Federal Reserve. That is the most on record since the Fed opened its facility for these reverse repurchase agreements in 2013.

The scale of the moves has some analysts warning that the markets for short-term funding are vulnerable to disruption. The cause for this summer’s rush into the Fed’s reverse repo facility appears to be the central bank’s decision in June to nudge up the amount of interest it pays, from 0% to 0.05%—though usage had already been rising in the spring.

Repurchase agreements, or repos, are the market’s main mechanism for moving cash from those who have it to those who need it. The Fed also uses them to influence short-term interest rates; the flood into reverse repo means banks and investors...

In the game of rugby, there is a feat known as a hospital pass. The ball is thrown to a receiver who isn’t ready for it. Who probably didn’t want it. Who is immediately a target for a hefty tackle.

Brexit is looking like the Financial Conduct Authority’s hospital pass from the government. The watchdog already had its hands rather full with the host of new powers it has been granted since its incarnation in 2013.

It...

WASHINGTON--The Securities and Exchange Commission brought and settled its first case against a firm in the so-called decentralized-finance or DeFi sector, the latest sign of intensifying regulatory scrutiny for cryptocurrency markets.

The SEC said Friday it had charged two Florida men, Gregory Keough and Derek Acree, and their company, Blockchain Credit Partners, with making materially false and misleading statements in selling more than $30 million of unregistered securities using smart contracts, which are digital consent agreements, and DeFi technology.

Messrs. Keough and Acree agreed to a cease-and-desist order, which includes returning $12.85 million in profits and paying penalties of $125,000 each, the agency added. Under the terms of the settlement, they didn’t deny or admit wrongdoing. Efforts to reach the two men by phone and through the Institute for Blockchain Innovation, a think tank they co-founded, weren’t immediately successful.

The...

Not long after Archegos Capital Management collapsed, the phones started ringing.

Prepare to stump up more margin for single-name equity swaps, a UK hedge fund was told by its prime brokers at Bank of America and Morgan Stanley.

JP Morgan’s prime brokerage division warned hedge fund clients they could be required to post additional variation margin if their swap positions lost value intraday.

A US hedge fund manager was surprised when bank risk managers he’d never spoken to before called “a

The global asset management industry is emerging from the pandemic performing far better than most people expected. Whether or not their success is attributable to the years of planning the top firms have done to face down pre-Covid headwinds like declining fees, asset managers have done everything from developing lower cost products to reach new clients to implementing cost-cutting technologies to better compete during the Covid-19 pandemic, according to Cerulli Associates’ annual global markets report.

In fact, since 2020, managers have dealt effectively with existing challenges, like fee compression, macroeconomic uncertainties, international relations, and a volatile regulatory environment. On top of that, they’ve managed pandemic-induced hurdles, including market volatility, low interest rates, inflation, and changing work environments. Overall market growth and the expanding middle class, which is becoming much more financially literate, in...

A red-hot housing market is enabling banks to sell a new kind of bond that shares the risk of mortgage and loan defaults with institutional investors.

Texas Capital Bank recently sold $275 million of securities to investors looking to cash in on the pandemic-fueled boom in home prices. The bonds are backed by short-term loans the bank makes to mortgage lenders. When those lenders’ borrowers default, the investors in the bonds effectively cover the loss.

The transfers are a product of the effort to shield Fannie Mae and Freddie Mac from the risk of a mortgage-market reversal. Banks are now using them to raise capital and otherwise shore up their balance sheets, a process that ultimately adds to their lending capacity, analysts said.

Banks including JPMorgan Chase & Co. and Citigroup Inc. have recently increased sales of risk-transfer securities tied to mortgages, auto loans and corporate debt. However, the entry of regional banks marks a new phase in...

The London Interbank Offered Rate, better known as LIBOR, is being phased out and replaced after years of scandals, billion-dollar bank fines and a jail sentence or two. Life After LIBOR will take a look at the various instruments replacing LIBOR in the US, the UK, and around the world, as well as the pretty complex issues the process involves. The Bloomberg Short-Term Bank Yield Index, BSBY, an alternative to dollar LIBOR, is administered by a subsidiary of Bloomberg LP, the parent of Bloomberg News.

Lydie Hudson, chief executive officer for sustainability, research and investment solutions at Credit Suisse, discusses the role of financial services in the green transition. She speaks with Bloomberg’s Anna Edwards on “Bloomberg Markets: European Open.” (This interview aired June 28, 2021).

By Steve Johnson May 10, 2021, Financial Times BlackRock has hit back at suggestions from the Bank for International Settlements that bond exchange traded funds might have short-changed market makers during the March 2020 market sell-off.

The BIS paper suggested that large price dislocations opened up last year between bond ETFs and the prices of their underlying securities because ETF managers deliberately handed authorised participants baskets of low-quality bonds. This would have discouraged underlying trading and jammed the arbitrage mechanism designed to bring the share price of an ETF back into line with its net asset value.full article

By Michael Mackenzie May 10 2021, Financial Times Higher capital gains taxes on wealthy investors proposed by the Biden administration could hasten a shift out of mutual funds and into exchange traded funds, US asset management executives are predicting.

The tax plan has focused attention on a structural advantage of ETFs over mutual funds, namely that they generate fewer capital gains tax bills for investors.full article

By Dave Michaels and Alexander Osipovich May 9, 2021, The Wall Street Journal The electronic-trading firms Citadel Securities and Virtu Financial Inc. have become pillars of the stock market in recent years, rivaling the role played by stock exchanges.Wall Street’s new top regulator is putting pressure on them by questioning a key service they provide: executing the orders of millions of ordinary investors whose trades go to their black boxes, instead of being routed to public exchanges.full article

By Hazel Bradford May 7, 2021, Pensions&Investments A long-awaited repository for data on security-based swaps has been approved, the Securities and Exchange Commission said Friday.

SEC approval allows DTCC Data Repository LLC to accept transaction reports on security-based swap transactions in the equity, credit and interest rate derivatives asset classes.full article

By Silla Brush May 7, 2021, Bloomberg One of the biggest Brexit battlegrounds between the European Union and the U.K. now has a price tag: at least $2.4 million a day.

That’s how much any move by the European Union to cut off access to London’s dominant clearinghouses for derivatives could cost traders in euro interest rate swaps, net of buying, according to an estimate from Albert Menkveld, professor of finance at Vrije Universiteit Amsterdam, who has sat on advisory panels to European regulatory authorities.full article

(Bloomberg) -- Senate Finance Committee Chairman Ron Wyden is looking to overhaul how derivatives are taxed as Democrats beginning crafting a giant spending bill funded in part by levies on the richest American businesses and taxpayers.

Wyden’s proposed legislation, which he has been refining for years, would require derivatives investors to pay tax annually on unrealized gains. It would also tax any appreciation at income-tax rates; President Joe Biden has proposed boosting the top marginal rate to 39.6% from 37%. Investors would be able to deduct losses.

The legislation would upend longstanding rules that require many investors to only pay taxes when they sell their holdings. Some derivatives trades are currently eligible for the preferential 20% capital gains rate.

Wyden said in a statement that the bill would make it more difficult for investors to “exploit complex tax rules to make these bets risk-free by avoiding, deferring or minimizing...

Securities and Exchange Commission Chairman Gary Gensler this week declared war on what he called the Wild West of crypto trading, promising a vigorous attack on fraud and misconduct. But progress is likely to be more piecemeal and incremental than wholesale and sudden.

Mr. Gensler outlined his desire to regulate digital assets such as bitcoin and other crypto products to the same extent as stocks, bonds and commodity-related trading instruments. He told the Aspen Security Forum on Tuesday that his priorities include newer innovations such as stablecoins and decentralized finance, products that are beginning to draw more mainstream investors.

The impulse to regulate these markets is growing more evident around the globe. Japan’s top financial regulator said Wednesday that plans to combat money laundering would also include digital currencies.

Mr. Gensler’s mission faces several obstacles, including the cryptocurrency industry’s historical resistance to...

(Bloomberg) -- A few days ago, U.S. Securities and Exchange Commission Chair Gary Gensler signaled that regulators may be more open to a Bitcoin ETF if it was based around futures rather than the cryptocurrency itself. Fund managers are already putting that to the test.

Within the past 24 hours both ProShares and Invesco have registered plans with the SEC for funds based on futures.

The filings for the ProShares Bitcoin Strategy ETF and Invesco Bitcoin Strategy ETF could well be the first of many. As regulators drag their feet on allowing a U.S. cryptocurrency exchange-traded fund, applications have been piling up. ProShares and Invesco are among more than a dozen issuers who have filed for ETFs investing in digital assets directly.

“With Gensler indicating the SEC is more likely to approve a futures-based Bitcoin ETF over a physical one, the race is on to offer such products,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA....

Inflation is forecast to hit 4% this year as Britain’s robust recovery from the pandemic accelerates at a blistering pace, the Bank of England has said, hinting that a modest increase in interest rates next year might be needed to keep rising prices in check.

With most of the economy open and businesses reporting strong sales, the central bank’s monetary policy committee (MPC) said the economy would grow by 8% in 2021 – up from a forecast in May of 7.25% – to regain its pre-pandemic level of activity by the end of this year, rather than spring 2022.

(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak’s quest to repair the U.K.’s pandemic-battered public finances just got an added impetus after the Bank of England began a countdown to the end of rock-bottom borrowing costs.

The central bank’s announcement on Thursday that officials will need to tighten monetary policy modestly in coming years points toward a slow-burning headache for the British finance minister.

It means a gradual increase in interest rates and eventually unwinding holdings of nearly 900 billion pounds ($1.3 trillion) of government bonds bought under a program of quantitative easing to stimulate the economy.

That would put a stop to support Sunak has relied on to limit the cost of debt taken on to soften the blow of Covid-19. While investors don’t expect any BOE move until next year -- and even then only by small increments -- the scale of U.K. borrowing has left the public finances six times more sensitive to interest-rate...