Friday, April 17, 2015

Asset managers meet with FSB at NY Fed

Day-long session on G-SIFI designation

(Apr. 14) One day after the Financial Stability Board launched their second peer review on resolution regimes, the New York Fed held a meeting for U.S. asset managers to discuss their Non-Bank Non-Insurer G-SIFI status with

FSB officials. The international body that monitors and makes recommendations about the global financial system said in March that the failure of a large asset manager "could cause or increase disruption to the global financial system" a premise the firms challenge.

ETFs gain popularity worldwide

More liquid than bonds now, but....

(Apr. 15) Unprecedented demand for bond exchange-traded funds in the U.S. is spreading, as European investors buy into one of the longest bull runs in credit-market history. While it's simple to purchase an ETF, concern is growing that investors are underestimating how difficult it may be to get out. An IMF report last week said the dynamic may pose a risk to financial stability. The FSB said last year it was examining whether ETFs based on assets that trade in less-liquid markets would be able to sell their holdings and honor all their obligations during a large withdrawal.

Central clearing in repo market

Financial firms moving closer

(Apr. 13) Financial institutions in the almost $2 trillion a day market for borrowing and lending debt are close to unveiling centralized trade clearing systems to minimize risk in the essential wholesale funding mechanism. The resilience of central counterparties to withstand extreme stresses has been the focus of regulators scrutiny this year. One of the main concerns about setting up a CCPs for repo is whether it is possible to ensure that clearinghouses would have sufficient resources to meet a sudden surge in demand for cash upon a member default.

Bond traders having flash rally flashbacks

Debt investors still not sure why it happened

(Apr. 13) Six months ago, benchmark Treasury yields swung the most relative to overall yields since at least 2000. The reason why the unexplained flash rally in Treasuries sent markets reeling is a matter of opinion but, as the Fed prepares to raise interest rates for the first time since 2006, bets on market swings suggest traders expect prices to fluctuate the most of any year since 2011, raising the risk of another flash move. A market that's more prone to gyrations has the potential to boost borrowing costs for taxpayers, consumers and companies, and make it harder for the Fed to exit from its record stimulus.

Binge Reading Disorder

A little something to take our minds off all of the above

The Unflattering Chart Jamie Dimon Forgot to Put in His Letter to JPMorgan Shareholders (Quartz)
Deconstructing ShadowStats. Why is it so loved by its followers but scorned by economists? (EconoMonitor)
Brainstorming with Marc Andreessen: Bubbles, delayed gratification and his firm's efforts to hire a female partner (Fortune)
Fighting the Bubble in Bubbles (Bloomberg View)
The Beauty and Logic of the Million-Dollar Car (Bloomberg Business)

Transparency. Inclusiveness. Consensus.