The Big Short: ancient history or modern warning on derivatives?
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The movie The Big Short, based on Michael Lewis’s book of the same name, tells the story of three early short sellers of the US housing market running up to…
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Finadium announces 2016 annual conference date, releases agenda
Finadium’s 10th annual conference will be held on March 15, 2016 in New York City. This program features leading participants in the securities finance and collateral management markets and is…
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Should we be worried about equity ETFs as the next big potential crisis? (Premium)
The press has been abuzz about potential systemic risk concerns stemming from ETFs of all sorts, and this crept into our holiday conversations as well. The events of August 24,…
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4Sight Collateral Management: Benchmarking Your Systems and Processes
Collateral management is changing rapidly to meet the demands of the new post-crisis environment. It can be difficult for firms to know where to start when defining a target operating…
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Extending the 48 hour collateral liquidation stay to financing trades: cash lenders won’t be happy
ICMA, FSB, ISDA and Bloomberg are talking about the extension of the 48 hour rule in derivatives – where if a counterparty goes bust, liquidating the collateral is subject to…
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Mind the gap: building evergreen style portfolios throughout the operational value chain
Evergreen financing structures are gaining popularity as a way to manage the complexity of Liquidity Coverage Ratio (LCR) funding requirements. However, most trading and post-trade systems are not set up…
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Derivatives, Securities Financing and the Law of Conservation: Transforming Counterparty Risk into Liquidity Risk
A former physicist, now Wall Street risk and regulation quant, said at a recent conference that when thinking about regulation, he is reminded of the Law of Conservation. That is…
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Should we stop talking about collateral optimization now in favor of something bigger? (Premium Content)
Big Data, Blockchain, Collateral Management, Credit Exposure, Featured, Liquidity Management, Market infrastructure, Operations, Technology
We’ve had several discussions over the last two weeks about collateral optimization and its role in the market. One result of these conversations is that maybe collateral optimization is largely…
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The FSB takes on fund leverage and liquidity
Featured, Financial Stability Board, Fixed Income, Investments, Liquidity Management, Risk Management, SEC, Securities Lending, Shadow Banking
The Financial Stability Board (FSB) issued a press release outlining what they discussed at their Sept. 25th meeting in London. Leverage and liquidity is still on their mind. Securities lending…
Read More Finadium: Can the Blockchain Work for Securities Finance, OTC Derivatives and Other Collateralized Transactions?
Blockchain, Collateral Management, Credit Exposure, Derivatives, Liquidity Management, Operations, Repo, Securities Lending, Technology
Finadium has released a new research report on blockchain, a potentially exciting new technology in financial markets. Blockchain promises to be revolutionary, disruptive and a way to fundamentally change financial…
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Five reasons why prime brokers say different things about balance sheet scarcity to their hedge fund clients (Premium Content)
Basel III, Credit Exposure, Featured, Hedge Funds, Investments, Liquidity Management, Prime Brokerage, Regulatory
We were recently asked why prime brokers are reporting different information to their hedge fund clients on why balance sheets have been tightening. The “balance sheet is scarce” story might…
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How the Fed will really raise rates, and immediate impacts on securities finance and rates businesses (Premium Content)
An excellent article in the New York Times this week detailed the mechanics of how the Fed will raise rates in this post-Quantitative Easing environment. The main point of the…
Read More Two solutions to the Hot Cash / operational deposits problem (Premium Content)
The problem of prime brokers and custodians holding hedge fund cash and other operational deposits is becoming acute. We are now seeing two sets of solutions emerge to solve this…
Read More The NY Fed’s Liberty Street Economics blog: is there evidence of UST liquidity in decline?
Earlier this month there was a series of five articles on market liquidity in the Federal Reserve Bank of New York’s Liberty Economics Street Blog. So much has been written…
Read More Utilities in securities finance: taking an old dog for a new walk (Premium Content)
This is no slight on utilities – they are a very good idea to share industry resources with a pay as you go model. Rather, this article looks at the…
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BNPP: what’s next in risk management for asset owners? Its a Big Data problem.
BNP Paribas released a survey of asset owners and risk management last week. We read from back to front for what asset owners expect will be the next phase of…
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Measuring the impact of LCR and other liquidity regulation on banks – a new study by the Bank of England
The Bank of England has released a first-of-its-kind study on the empirical impact of liquidity regulations (LCR, and in the UK, Individual Liquidity Guidance or ILG) on bank activities. In…
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Report: what really happened to Treasury Bond liquidity on October 15, 2014? (Premium Content)
The US Treasury, CFTC and others have released their findings on what happened to US Treasury Bond trading on October 14, 2015 that resulted in an unheard-of spike in prices…
Read More Regulators make work plans on market liquidity but to what end?
Regulators worldwide now recognize that market liquidity in fixed income is a Problem with a capital P. The interesting part is that in spite of the evidence, there is a…
Read More Why has liquidity decreased in the markets? Daniel Tarullo says he isn’t sure.
An interview last Thursday with Federal Reserve Board Governor Daniel Tarullo, discussing possible reasons for the October 15, 2014 Flash Crash in US Treasuries, shows regulatory uncertainty for why, at…
Read More Securities Finance Monitor Magazine Edition 1 is now online
We are pleased to announce the launch of Securities Finance Monitor Magazine. Hard copies were distributed at ISLA and to subscribers who completed their registration information. Download your free copy…
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Central banks as market makers: an incredibly bad idea
Reuters reported that Jose Vinals, director of the IMF’s capital markets department, said last week that central banks may need to become market makers to counteract very low liquidity in…
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T2S launches today: our podcast series on T2S, collateral and liquidity with Clearstream
Finadium and Clearstream have produced a series of podcasts on T2S, collateral and liquidity. Need to get smart about today’s launch of T2S and what it means for your collateral…
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LCH.Clearnet is running out of repo capacity. Maybe they can join LCH.Repoclear?
In the June 16, 2015 FT there was an article by Joe Rennison and Philip Stafford, “LCH.Clearnet sounds alarm over declining use of repo” (sorry behind the pay wall) that…
Read More What we learned at our Clearing and Market Infrastructure for Repo, Funding and Liquidity event (Premium Content)
Last week we held a panel and reception in New York City, “Clearing and Market Infrastructure for Repo, Funding and Liquidity,” co-sponsored by the Options Clearing Corporation and DTCC-Euroclear Global…
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T2S, the ECB and Quantitative Easing
The European Central Bank’s recent Quantitative Easing (QE) program is putting a squeeze on European repo markets. QE takes securities out of the market. T2S will help repo by aggregating…
Read More Can bank financial statements tell us anything about collateral efficiency? (Premium Content)
We recently undertook a study of US bank SEC filings to learn if anything could be said about how efficient banks are with their in-house collateral. Our thesis was that…
Read More T2S, Equities and Collateral
T2S opens many doors in the world of collateral and liquidity. At its simplest, financial intermediaries will soon be able to open up one account for settlement purposes and one…
Read More T2S, Collateral and Business Model Change
Despite a common currency, Eurozone securities do not have a single settlement system. That will soon be changing. TARGET2-Securities (T2S), the European Central Bank’s (ECB) settlement initiative, tackles the fragmented…
Read More Finadium: T2S, Collateral and Liquidity: Building a Strategy for Growth
Collateral and liquidity management under TARGET2-Securities (T2S) is an emerging work stream that requires attention from market participants. Settlement mechanisms under T2S are now generally understood, including how settlement will…
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Do US Treasuries need dealers or is there enough liquidity already?
We’ve seen a few news items that revisit the conversation about whether US Treasuries, the most (theoretically) liquid product in the markets, need credit intermediation. That is to say, should…
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Finadium announces June events on clearing for repo and funding; T2S, Collateral and Liquidity
Finadium is pleased to announce four events coming up in June. We’re coming to New York, Frankfurt, London and Paris, with compelling programs on new and innovative topics in securities…
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Event recap: Collateral Management and Craft Beer in Chicago (Premium Content)
CCP, Collateral Management, Featured, Liquidity Management, Market infrastructure, Securities Lending, US
Finadium held its first panel and reception event in Chicago last Thursday, April 23, with our colleagues from SunGard and the Options Clearing Corporation (OCC). The audience was primarily buy-side…
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Good to see central bankers looking closely at their own role in the collateral markets
We’ve had central banks on the brain lately, so a new paper from the Bank for International Settlements, “Central bank operating frameworks and collateral markets”, was right up our alley.…
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The Systemic Risk Council publishes an interactive tool for looking at bank stats. We especially like “Short Term Noncore Funding as a Percent of Total Assets”.
The Systemic Risk Council recently came out with a “Systemic Risk Council Interactive Tool”, an interesting way to look at banks. Continue reading
Read More The IMF on non-leveraged asset manager risk: for heaven’s sake, where can people safely invest?
The IMF released a chapter of their April 2015 Global Financial Stability Report “The Asset Management Industry and Financial Stability”. We read this with interest and dismay. On the one…
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Its time to build a collateral and liquidity strategy
Financial market participants of all sizes have moved out of the tactical phases and now need to focus on creating a long term collateral and liquidity strategy. This will require…
Read More How far will the market go for centrally cleared funding products? (Premium Content)
Panelists at the March 19 Finadium Conference in New York brought up an interesting concept: the demand for bilateral vs. cleared funding products isn’t one or the other but really…
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The FDIC rejects living wills from the U.S. units of BNP, HSBC and RBS. The Fed was not very happy either.
The FDIC turned back the living wills for three foreign banks: HSBC, RBS, and BNP, saying they found the plans “not credible”. Had the Fed also made a similar finding,…
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Monday regulatory roundup: asset managers as SIFIs; CCP stress tests; two from the Bank of England (Premium Content)
Bank of England, CCP, cover 2, cover all, Featured, Financial Stability Board, Investments, IOSCO, Liquidity Management, Regulatory
While some spent the winter hiding under the covers trying to keep warm, regulators clearly had a busy and productive season. This regulatory roundup provides highlights of new and revisited…
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The Bank of England as the international source of last resort liquidity
Zoltan Pozsar’s recent paper on the macro view of Shadow Banking pointed out an important connection in financial markets – that the Bank of England is now the global backstop…
Read More We need simple new names for financial market institutions (Premium Content)
Credit Exposure, Featured, Hedge Funds, Investments, Liquidity Management, Securities Lending, Shadow Banking, Systemic Risk
We argue for better language to describe various functions in financial markets. There are banks and bank holding companies that offer a wide variety of credit intermediation and agency services.…
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SEC Chair Mary Jo White on seclending transparency for asset managers, and our recommendations on specifics
On December 11, 2014, SEC Chair Mary Jo White gave a speech at a New York Times conference in New York, “Enhancing Risk Monitoring and Regulatory Safeguards for the Asset…
Read More Debevoise & Plimpton publishes a guide to NSFR — providing some clarity to a confusing topic
Basel III, Featured, Liquidity Management, Market infrastructure, Primary Dealers, Prime Brokerage, Regulatory, Repo, Securities Lending
Last month Debevoise & Plimpton published a nice guide to the Net Stable Funding Ratio (NSFR), “Client Update Basel Committee Adopts Net Stable Funding Ratio: How Much Liquidity Is Enough?”.…
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CCP files to creates a committed non-bank liquidity facility (Premium Content)
A US CCP has filed a request with the US SEC to create a US$1 billion committed liquidity facility using a bilateral repo transaction with a non-bank counterparty. This is…
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Part II: The Fed releases rules on capital for GSIBs, includes extra requirements for securities financing trades
Basel III, Dodd-Frank, Featured, Federal Reserve, Liquidity Management, Market infrastructure, Regulatory, Repo
This is part II of our post on the Fed’s new capital rules. We look at the calculation methodology and some observations about the rules. Continue reading
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Part I: The Fed releases rules on capital for GSIBs, includes extra requirements for securities financing trades
Basel III, Dodd-Frank, Featured, Federal Reserve, Liquidity Management, Market infrastructure, Regulatory, Repo, Securities Lending, Systemic Risk, Uncategorized
The Fed has released the latest capital rules for Global Systemically Important Bank Holding Companies (GSIBs). One critical part of this set of rules is the inclusion of a second…
Read More Finadium launches Finadium for Investors, a new subscription series
Finadium for Investors is a new service from Finadium designed for asset managers, hedge funds, plan sponsors and other purchasers of bank services, equities and fixed income products. This subscription…
Read More The impact of Europe’s banking reforms; liquidity will take a big hit
PricewaterhouseCoopers has published a monster of a report, “Impact of bank structural reforms in Europe,” sponsored by the Association for Financial Markets in Europe (AFME). This beast is a big…
Read More Fed releases request for public comment on regulating GE Capital. These rules will keep GECC busy for a while.
Basel III, Dodd-Frank, Featured, Federal Reserve, Financial Stability Board, Liquidity Management, Regulatory, Systemic Risk
The Federal Reserve just came out with a request for public comment on the regulation of General Electric Capital Corp (GECC) as a Sifi, “Application of Enhanced Prudential Standards and…
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