David at Deus Ex Macchiato = disturbed:
I went to a conference yesterday which started very well, but ended up about as scary as Romney’s economic policy. Why? Because a regulator from a minor European country (but who nevertheless is apparently influential at ESMA) suggested that it was official policy to substantially reduce the size of the OTC markets in general, and the inter-dealer market in particular.
Take a moment to imagine what it must be like to be an American regulator. There are plenty to imagine being: the OCC, the Fed, the CFTC, SEC, FDIC, and that thrift one, until it subsumed into the OCC. Got one?
Attention over-the-counter (OTC) energy traders who think there’s no prominent high frequency trading (HFT) presence in their section of the market.
A Tabb Group research piece on how HFT practices are likely to creep into credit default and interest rate swaps once the market becomes centrally cleared, automated and standardised has made a striking discovery over the course of its data gathering. Read more
… a swirling, shifting sea of over-the-counter trading.
On Monday, Zero Hedge pointed to recent trade data from Goldman’s dark pool platform — SigmaX — which appeared to show a pronounced fascination with Italy recently. Italian banks such as Banca Monte dei Paschi di Siena, Unicredit and Intesa Sanpaolo were the top-traded names by volume. Read more
Silver prices rose by over 60 per cent between the start of the year and April 25.
They’ve now fallen by over 30 per cent — unwinding some 80 per cent of the upward move in the space of two weeks, according to Société Générale figures. Such violent swings have lead to margin call hikes on the precious metal (along with other commodities) at the Chicago Mercantile Exchange, and have also unleashed a wave of debate about just how much margin moves may have attributed to price falls. Read more
All hail the Depository Trust and Clearing Corporation
The DTCC has provided an updated and more in depth version of its market “snapshot” of CDS trade — six-month data for the top 1,000 CDS single-named reference entities. It’s aimed at “informing” market participants and regulators which names might have sufficient liquidity to be cleared through a central counterparty. Read more
You may have heard that the signing of financial reform in the US wasn’t just the end of a long and difficult process but also the beginning of another, with a host of federal agencies given discretion to study and define the rules for the areas they oversee.
Thursday’s FT includes a comprehensive article looking at the unresolved issues for derivatives, and we think it’s worth highlighting a few of its main points. Read more
The world’s biggest banks will continue to trade over-the-counter derivatives in much the same way as they did before the financial crisis, in spite of the recently enacted legislation on US financial reform, the CME Group said on Thursday. As the FT reports, the opacity of OTC derivatives such as credit default swaps – which offer insurance against banks, companies and governments defaulting on debt – was widely blamed for aggravating the financial crisis. An important impetus for financial regulatory reform was to bring transparency to the OTC markets.
TriOptima, a European securities post-trade specialist owned by ICAP, has made data showing details of interest rate swaps contracts publicly available for the first time, the FT reports. The move would appear to be a sign that regulators’ demands for more transparency in the over-the-counter derivatives markets are being met.
Michel Barnier, the EU official driving reform of financial regulation in Europe, has told US Treasury secretary Tim Geithner that EU regulators will need “unfettered access” to data on swaps trading held in “trade repositories” as they tighten scrutiny of the over-the-counter derivatives market. His comments came in a letter to Mr Geithner, a copy of which has been seen by the FT.
Happy tenth anniversary, European exchange-traded funds. Prepare for a blow-out.
Blackrock’s ETF division iShares marked this week’s big birthday with the publication of its ETF landscape report, predicting a robust future for ETF asset growth in Europe. Read more
Regulators are to unveil tough rules in the coming weeks that will require trading information in over-the-counter derivatives – including the identity of investors – to be easily passed on to global financial watchdogs. The rules, being formulated by the 40-member OTC Derivatives Regulators’ Forum – which includes the Federal Reserve and the SEC from the US, the UK’s FSA and European banking regulators – will apply to credit, interest rate and equity derivatives traded off exchange.
We cautioned a few weeks ago that a little perspective was probably needed when discussing the “everyone is shorting the euro” story.
The CFTC data on which the stories were based, we argued, only reflected of a small sliver of the OTC forex market. Read more
Flying somewhat under bankers’ radars on Thursday, obfuscated as they are by new bonus taxes, are the maneuverings of the Basel Committee.
The Committee met on Tuesday and Wednesday to discuss a package of potential reforms to the global banking system. Under discussion were issues such as living wills, liquidity buffers, possible leverage ratios (the three `L’s if you like). And if the below story, from Risk.net, is anything to go by it looks like they’ve made some early progress on the draft reform — which is due to be published by the end of January. Read more
Leveraged, inverse and commodity ETFs have drawn criticism of late on account of their tendency to incorrectly track the indices and benchmarks they are at first-sight structured to follow.
While professional investors might understand and even expect this sort of mis-performance due to a better understanding of ETF methodologies, the thinking is that retail investors might not be financially sophisticated enough to see beyond the initial marketing point. Read more