The Securities and Exchange Commission wants to know.
In a letter to the Financial Industry Regulatory Authority, the SEC’s markets division draws attention to a handful of trading rules that either don’t apply to Treasuries, or aren’t clear about whether they do. The group requested that Finra review its rulebook, and then either justify or remove any exemptions for US government debt.
See, if you’re a logical person who doesn’t know much about Treasuries, you’d assume the exemptions and unclear rules would be about minor stuff. But what’s truly bewildering is how serious the rules on that list are. Read more
Regulators’ plan to collect data on trading in Treasuries is starting to take shape. Of course, what’s still unclear is whether the public will be able to see that data as well.
This month, a Wall Street self regulator proposed a rule that would require broker-dealers to report Treasury-market trades to regulators daily on its corporate-bond data-collection engine, known as TRACE. The Securities and Exchange Commission needs to approve the rule before it’s adopted, and there’s a comment period until August 15. You can find the proposed rule here, and a nice summary from Davis Polk here.
We continue to find it absolutely baffling that, for decades, the US government (you know, the guys with the surveillance drones?) had no ability to see transaction-level data in the market for its own debt. The Federal Reserve publishes high-level positioning and volume data weekly, which is how we know that more than $400 billion trades in that market each day. Traders on dealer-only platforms run by ICAP and Nasdaq — less than half of the market’s overall volume — can see those platforms’ trading in real time. Regulators can’t. Read more
Obvious statement: Banks are crucial for the transmission of monetary policy into the US economy.
Not-so-obvious theory: Bank lending might become more important in that transmission because of post-crisis liquidity requirements. This one is interesting because it comes straight from the blog of the New York Fed, the guys in charge of US monetary policy implementation.
But if reserves do return to normal levels, that means even more credit risk could be pushed off of banks’ balance sheets. And that could leave an even bigger role for non-bank lenders and asset managers. Read more
The FT’s Gillian Tett reports from Davos that the Powers that Be may finally have noticed how — while they were busy regulating the banks — the technology companies quietly moved into what was once their unregulated turf.
Via Wednesday’s Davos dispatch:
Large technology companies will experience the same collapse in reputation as banks have endured in recent years unless they rapidly change their policy approach, business leaders cautioned in Davos. Their warning was directed at the influential heads of technology companies, such as the Silicon Valley giants, who were told they needed to recognise that self-regulation will not be sufficient to stave off mounting public alarm about issues such as privacy.
“Self-regulation, no matter what you do, is just not going to be good enough [for tech companies],” said Paul Achleitner, chairman of the supervisory board of Deutsche Bank. He pointed out that a self-regulatory approach had been previously employed by banks — but notably failed to quell a political backlash against their over-reach.
It takes a bold and courageous man to go against the consensus, especially when the consensus view equals “evil manipulative trader types got what they deserved with that $4.3bn fine for fx rigging!”
In this case that bold man is Matt Levine, columnist at Bloomberg and long-time communicator of logic and sense, who made the brave assertion on Wednesday that commentary surrounding this entire rigging episode may be losing sight of the core fundamentals of the case. Namely, that in terms of money made, there’s no escaping the fact that this was possibly the least successful manipulation attempt of recent times. Read more
Since it’s curiously hard to find on the NY Fed’s home page, given the prominence of Bill Dudley’s recent firebreathing speech warning against complexity and cultural dysfunction in US banks…
Click for the Federal Reserve inspector general’s account of how the NY Fed failed to follow up on the early signs it had uncovered of risks in JPMorgan’s Chief Investment Office. Read more
The Group faces legal, competition and regulatory challenges, many of which are beyond the Group’s control. The extent of the impact on the Group of these matters cannot always be predicted but may materially impact the Group’s results of operations, financial results, condition and prospects…
There’s not much that’s actually new in a base prospectus published by Barclays on Thursday, covering a future $60bn debt programme. But what the document does offer is a compendium of all the litigation and regulatory action the bank faces around the world. Read more
Don’t ask a European regulator. Or, if you do, don’t expect an answer any time soon.
We’ve written about the feud between the European Commission and the new-ish fangled ESMA before. Last time it was about the fact that no one seemed to be able to agree what constituted an “alternative investment.” This time it’s over a failure to agree a common definition of what constitutes a “derivative.” Read more
To regulators, naysayers and haters, the hedge fund industry has had one trump card to play for years: hey, we didn’t cause the financial crisis.
Cause the crisis? Maybe not. But a staff report lands from the New York Fed which suggests hedge funds did at least make it worse, adding to disruption in the credit markets that helped to seize up funding for US companies after Lehman Brothers collapsed. Read more
Not surprisingly, and as Financial Policy Committee external member Martin Taylor predicted, his comments on the housing market have got plenty of attention.
Reading his speech from Monday though, we think there was another comment in there worth keeping an eye on.
It’s clear that the safety of the banking system is an absolutely central objective, and one which the FPC has already worked on and will continue to address. But is that enough?
There’s an oft-quoted number in the debate raging over liquidity in the bond market.*
It is, depending on the week, 75-78 per cent — the amount by which dealer banks’ inventories of corporate bonds are said to have declined since their peak of $235bn in 2007, according to Federal Reserve data. Read more
Received wisdom has it that the implementation of new financial regulation in the wake of the crisis has been held back, or watered down, by furious behind-the-scenes lobbying by the investment industry.
But it’s pretty clear, in Europe at least, that the technocrats, be they in Paris or Brussels, have their own particular ways of making sure that nothing much actually gets done. Read more
Now here’s a sign of the times…
The Network aims to promote collaboration in international financial matters to help facilitate cost-effective resolution of disputes and avoidance of duplicative and inconsistent adjudication of the same matters in different jurisdictions, thus increasing the likelihood of resolving financial disputes in a way that all market participants will find to be substantively and procedurally fair… Read more
We suggest watching this story…
It looks like EU competition regulators paid some unannounced visits to oil company offices around Europe on Tuesday — note the reason: Read more
From the London Stock Exchange on Monday…
As part of a reorganisation of London Stock Exchange Group’s (“LSEG”) Italian legal entities earlier this year, a valuation report was prepared for the specific purposes of the reorganisation and was filed with the Companies Register of the Milan Chamber of Commerce and has recently been made public. This report included a LSEG revenue projection for the year ending 31st March 2016 of €1.4Bn with 12% annual LSEG revenue growth from the start of FY14. It also included 5 year (FY14 to FY18) financial projections for the Italian legal entities together with historic information for such entities for the 9 months to 31 December 2012.
Yes yes, the FSA had trouble passing the Wall Street Journal around the office in mid-2008.
They all come from this Stefan Ingves speech given on Thursday — in which the Basel Committee chair addresses “some concerns… that banks are not calculating risk weighted assets” – the denominator in a bank’s regulatory capital ratio – “consistently”.
Basel is about to release results of a probe into banking and trading books… Read more
On Friday, the FSA has published its feedback and responses to a review of the Financial Services Compensation Scheme funding model issued back in July. It’s long. Lucky for us then that we were looking for one thing and one thing only — the stance on “pre-funding”.
The revised Liquidity Coverage Ratio of course! Read more
The Basel Committee on Banking Supervision has finalised rules for bank liquidity. Some of the changes had been anticipated in recent weeks, particularly after the US banks ramped up their lobbying efforts. That said, they’re still quite a big departure from the 2010 draft rules, especially on what qualifies as a high quality liquid asset.
The complete set of changes is on the BIS website, but here are some highlights. Read more
“A judgmental structure of supervision that emphasises the big issues has to be matched by proper transparency . . . or it won’t work.” Andrew Bailey, head of prudential regulation at the Financial Services Authority, told that to parliamentarians on Monday.
Too bad there’s seemingly no tradition of transparent supervision in the UK, especially when it comes to banks. Read more
We’re developing a soft spot for that Keith Horowitz at Citi. Ne’er did a man express so much joy at an interest rate sensitivity disclosure. That’s our kinda cute.
This time Horowitz has gone to meet Matt Zames, JPMorgan’s new co-chief operating officer and operating committee member. They talked pendulums: Read more
No doubt the California buyside was up early this morning… checking whether they had any disclosures to make under the new short-selling regulation which affects them.
That would be the European one. Read more
What do you get when you reveal two new regulatory investigations as part of your slightly disappointing quarterly results? Answer: a 4.4 per cent drop in share price, as Barclays is finding out on Wednesday morning.
From the FT (our emphasis):
Barclays has warned investors that it is facing another fine in the US, this time over its conduct in power trading.
It has also disclosed that it is under investigation by the US Department of Justice and the US Securities and Exchange Commission over whether its relationships with certain third parties breached corruption rules.
UPDATE: A Treasury official got in touch with us after reading this post to explain a little more clearly what happens next.
First a bit of background. Dodd-Frank section 120 authorises the FSOC “to provide for more stringent regulation of a financial activity by issuing recommendations to the primary financial regulatory agencies to apply new or heightened standards and safeguards… if the Council determines that the conduct, scope, nature, size, scale, concentration, or interconnectedness of such activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, financial markets of the United States.” Read more
SEC slams NYSE for sending market data to proprietary customer feeds before the one for the wider public (“the disparities ranged from single-digit milliseconds to, on occasion, multiple seconds”).
And it does a diagram. Read more
Via Marc Ostwald at Monument Securities on Friday, credit factoid du jour (if not de l’année):
Total dealer positions in corporate bonds fell to $58.5b as of Aug 29 vs $60b the previous week. It was the lowest level since $55.1b March 13, 2002. Read more
It’s no secret that we’re big fans of Andy Haldane on this blog.
Exhibit A — a paper given to this year’s Jackson Hole conference by the Bank of England’s executive director for financial stability, and Vasileios Madouros (also of the Bank). Read more
Peter Eavis over at Dealbook notes an underrated aspect of the big M&T/Hudson City regional banking deal — regulatory capital:
To do well in annual Federal Reserve stress tests, M&T Bank may want to increase its Tier 1 common ratio substantially. Read more
Click to enlarge:
It’s the product of all those Select Committee hearings, including appearances by Messrs. Diamond and Tucker. It is only a preliminary report. But it does not have kind words for the authorities who failed to stop the attempted manipulation of Libor before and during the financial crisis. (Barclays management is of course completely coruscated.) As jaded as we’ve all become by the Libor scandal, it’s pretty damning. Read more