Week InReview | Why do regulators think spoofing is harmful? | Regulators closing repo-market data gaps | RMBS: Treasury official sees progress in benchmark deal dream | World's biggest investors only need one dark pool | Binge reading disorder
Friday, April 24, 2015
Why do regulators think spoofing is harmful?
Spy vs. spy? Spoofers vs. front-runners?
(Apr. 22) Regulatory lapses at all levels aside, one reaction to this week's flash crash arrest a lot of people have is: Tough luck on them! If you're making your trading decisions based on the trading decisions that you think other people have made, you are a bad guy, and you deserve to be tricked. Do spoofers only harm front-running high-frequency traders who try to profit by trading ahead of other legitimate orders?
(Apr. 23) U.S. regulators are making progress addressing data gaps in repurchase agreements and securities lending market, an Office of Financial Research analyst said in a brief, adding that lack of data and "limited understanding" of structure of repo and securities lending markets prevented regulators from responding during the financial crisis. More work is needed, the analyst said, and "the risk of asset fire sales before or after a counterparty default remains largely unaddressed."
(Apr. 23) Industry discussions yielding "broad consensus around the role and duties" of proposed "deal agent" is evidence that Treasury's effort is "bearing fruit," Treasury official Michael Stegman said. Credit rating agencies should consider whether deal agents will help reduce losses sustained by investors "and consequently, merit reduced subordination requirements."
(Apr. 20) Norway's $890b wealth fund says institutional investors, and the savers they represent, are wasting money paying multiple fees amid a fragmentation of anonymous trading venues over the past decade; the dark pools have become associated with the phenomenon of front-running, in which bid and offer information is used by high-frequency traders to preempt transactions and make a profit at the expense of investors.
