A June 24th article in the ISDA blog derivatiViews “A MIFID brainteaser: define liquidity” caught our eye. It explains how the European Securities and Markets Authority (ESMA) is thinking about what is…Read More
Often people taking about collateral management gloss over that most collateral held against OTC derivatives is cash. We wonder if there are reasons for this that go beyond systems and…Read More
Earlier this month there was an article in Bloomberg “Shadow Bank REITs Draw Regulator Scrutiny Over Financing” by Heather Perlberg and Jody Shenn. We had heard rumblings of REITs accessing cash from…Read More
Last week there was an interesting post in the New York Fed’s Liberty Street Economics blog. Entitled “What’s Your WAM? Taking Stock of Dealers’ Funding Durability” by Adam Copeland, Isaac…Read More
Last week we wrote about an FT article that looked at the Fed’s Flow of Funds numbers. The article had concluded that REIT repo was bigger than broker/dealer repo activity,…Read More
FT article on repo market “Big Investors replace banks in $4.2tn repo market” — the data doesn't make sense
An article that appeared on May 29th in the FT “Big Investors replace banks in $4.2tn repo market” by Tracy Alloway caused a bit of a stir. Some good reporting…Read More
OTC Derivatives Market Notional Tops $700 trillion. But Gross Credit Exposure — the number to watch — drops to $3 trillion.
The global derivatives market is undoubtedly large. In the BIS “Statistical release: OTC derivatives statistics at end-December 2013” (May, 2014) the total derivatives market, as of the end of December,…Read More
An article in IFR “Pension funds begin clearing swaps” by Christopher Whittall was primarily about OTC derivatives but had some important side comments on LCH.Clearnet and cleared repo. We take a look…Read More
NY Fed Governor Dudley on the Reverse Repo facility: a good tool to manage short rates but not without its risks
William C. Dudley, President of the New York Fed, gave a speech on May 20th to the New York Association for Business Economics called “The Economic Outlook and Implications for…Read More
The procyclicality and margin debate is one of those topics that reads like a damned if you do, damned if you don’t. Earlier this month the Bank of England published an…Read More
The fall in corporate bond liquidity has been well documented. Dealer inventory and market liquidity has plummeted in spite of enormous issuance. All that paper seems to be getting put…Read More
On May 9th Crane Data released their May Money Fund Portfolio Holdings report. There were some interesting numbers. Continue readingRead More
A May 5th Wall Street Journal article, “Banks Revive Role in Complex Debt, Lenders Had Eschewed Loan-Bond Leverage Since Crisis, but New Rules Spur Them to Seek Buyers” by Katy…Read More
About a month ago we looked that National Futures Association published data on required collateral for cleared derivatives. We were pretty surprised how small the numbers were. We have a…Read More
Tri-party repo is back in the news. Most of the coverage was driven by a recent FRBNY paper “A Primer on the GCF Repo® Service” (Staff Report 671) authored by…Read More
Can hedge funds get a break? It looks like they are not getting much love from LCR or NSFR.Continue readingRead More
Last week we wrote about the recent ISDA margin survey and the rehypothecation of collateral. We noted that 99% of the cash & 85% of government securities received as margin…Read More
This is our second post on the recently published ISDA 2014 Margin Survey. The part of the ISDA survey on collateral rehypothecation was really interesting. It all comes down to…Read More
A look at the new ISDA Margin Survey: cash vs. securities and who is doing the collateral optimization
ISDA has just published their 2014 Margin Survey. There is plenty to look at and discuss. In this post, we focus on the use of cash as collateral and who…Read More
The Q1 Fed’s Senior Credit Officer Opinion Survey (SCOOS) just came out. We take a look. Continue readingRead More
“Matching Collateral Supply and Financing Demands in Dealer Banks” in the NY Fed’s Economic Policy Review. They really don’t like repo netting.
A fascinating article appeared in the NY Fed’s March 2014 (Volume 20, Number 2) Economic Policy Review. “Matching Collateral Supply and Financing Demands in Dealer Banks” by Adam Kirk, James…Read More
Is the talk of enormous collateral needs — and an impeding collateral shortage — based on reality? We are starting to wonder…and have some interesting numbers to look at. Continue…Read More
Apropos of our post last week in CCP default insurance, a March 5th article in Risk by Viren Vaghela “Korea clearing structure in question after HanMag trading error” is worth…Read More
A March 11th article in Bloomberg, “Catastrophe Prevention Drives Insurance Pitch to Clearinghouses” by Matthew Leising caught our eye. It reports on an effort to provide an additional layer of default…Read More
An article in Institutional Investor dated February 10, 2014 “Outsourcing Collateral Management Can Be a Mixed Blessing,” by David Turner was interesting. It got us thinking….Continue readingRead More
Deutsche Bank announced they plan to cut their US balance sheet by 25% to comply with capital rules levied on foreign banks operations in the US (see our write up…Read More
Tri-party equity repo jumps up 40% yoy as repo desks shift to more volatile collateral in search of P&L. But will the Fed look kindly?
There have been a couple articles recently about the tri-party fire sales and higher market share of equity tri-party repo. Lets connect some of the dots. Continue readingRead More
So what are CCPs charging to hold collateral? For ICE Clear U.S., the answer on cash is 6bp plus a cut to ICE and 5bp on US Treasury balances.Continue readingRead More
The Liberty Street Economics Blog takes a look at the funding crisis of 1763. Is it déjà vu all over again?
The Fed’s Liberty Street Economics blog had a thought provoking post the other day, “Crisis Chronicles: The Commercial Credit Crisis of 1763 and Today’s Tri-Party Repo Market“ by James Narron…Read More
ISDA published on February 5th a research note “Interest Rates Derivatives: A Progress Report on Clearing and Compression”. It is an interesting analysis on the progress made in clearing interest…Read More
“The roots of shadow banking” by Enrico Perotti: placing the blame for market collapse on repo's safe harbor provisions.
An article published in December 2013 by the Centre for Economic Policy Research “The roots of shadow banking” by Enrico Perotti of the University of Amsterdam, ECB and CEPR grabbed…Read More
A paper from the Peterson Institute for International Economics argues to set IOER and RRP at the same rates. It make a lot of sense.
A recent paper from the Peterson Institute for International Economics “Monetary Policy with Abundant Liquidity: A New Operating Framework for the Federal Reserve” (January, 2014) is absolutely worth reading. The…Read More
The issue of how to deal with repos to maturity is still bouncing around. A January 16, 2014 article in Compliance Week by Tammy Whitehouse “FASB Readies Final Standard on…Read More
The Bank of England announces details of the Indexed Long-Term Repo facility. Is this a more evolved version of the LTRO?
The Bank of England released details on their new Indexed Long-Term Repo (ILTR) and Contingent Term Repo Facility (CTRF) programs. This is part of the Bank of England Governor Mark Carney’s…Read More
The BIS published their long awaited update to capital rules and the securities financing world is cheering. “Basel III leverage ratio framework and disclosure requirements” (January, 2014) permits netting of…Read More
The BIS just released the Regulatory Consistency Assessment Programme (RCAP) – Second report on risk-weighted assets for market risk in the trading book (December, 2013). It looks at the variability…Read More
The BIS released ”The OTC interest rate derivatives market in 2013” last week, authored by Jacob Gyntelberg and Christian Upper. There are some interesting things in the report on macro trends. The information…Read More
The Volcker Rule was finally approved and the full text released. We take a look at how it impacts repo and securities lending.Continue readingRead More
An article from last week (Dec. 2, 2013) in the NY Fed’s blog Liberty Street Economics is worth a closer look. Entitled “Who’s Lending in the Fed Funds Market” by…Read More
New York Portfolio Clearing to be consolidated into ICE Clear Europe…Is there more to it than cost savings?
A November 29th press release from ICE and DTCC “IntercontinentalExchange Group and DTCC announce plans for Interest Rate Futures listed on NYSE DTCC” grabbed our attention. Is this just about…Read More
Fed Governor Tarullo’ November 22 speech “Shadow Banking and Systemic Risk Regulation” at the Americans for Financial Reform and Economic Policy Institute Conference in Washington, D.C. had a lot of…Read More
Zoltan Pozsar: "Shadow banking and the global financial ecosystem". A thoughtful new take on shadow banking.
We came across an article “Shadow banking and the global financial ecosystem“ (Nov. 7, 2013) by Zoltan Pozsar of the Institute for New Economic Thinking. This is one of the…Read More
The CFTC, as reported in a Nov. 15th article in Bloomberg “CFTC Passes Collateral Rule to Backstop Treasuries in Swap Trade” by Matthew Leising, followed through on their proposal to…Read More
A November 6th article in the FT “Regulators urge rewrite for derivatives contracts” by Sam Fleming caught our eye. The article is behind the pay wall, but we urge you…Read More