Week InReview | Asset transfer, recruitment pay disclosure get scaled back in FINRA's rule reproposal | Leveraged loan market asked to stop pretending rates aren't low | Europe should consider alternatives to government benchmark oversight: Massad | Bond traders uncover secret to rates that Fed just doesn't get | Binge Reading Disorder
Friday, May 29, 2015
Asset transfer, recruitment pay disclosures scaled back
FINRA's rule reproposal
(May 27) Broker-dealers that hire a stockbroker who brings along his or her existing clients would have to send those clients an "educational communication," under a rule reproposed by the Financial Industry Regulatory Authority. The new proposal drops the requirement to disclose recruitment compensation to investors. The rule is a scaled-back version of an earlier proposal that attracted nearly 200 comments - mostly negative - before FINRA withdrew it in June 2014.
Leveraged loan market:
Stop pretending rates aren't low
(May 27) When the Fed cut borrowing costs to almost zero back in 2008, the leveraged-loan market came up with a solution to ensure that yields on the debt didn't follow: it set its own benchmark. So were born "Libor floors," which established a minimum interest level the floating-rate debt pays lenders regardless of how low the benchmark falls. Today, floors average 1 percent even though three-month Libor is less than 0.3 percent. In all, rates on about 90 percent of leveraged loans remain fixed as long as the London interbank offered rate stays below that floor.
CFTC's Massad has advice for Europe
Consider alternatives to government benchmark oversight
(May 26) European officials should recognize alternatives to government oversight of internationally recognized, widely used financial benchmark indexes such as Libor, Commodity Futures Trading Commission Chairman Timothy Massad says. Legislation in the European Union governing oversight of critical benchmarks could prohibit European banks and asset managers from trading products in the U.S. and other markets that are tied to benchmarks, unless the European Commission determines that the benchmarks are overseen in those markets by a functionally equivalent supervisory body.
Forget 2015. The real play for bond traders is 2016.
Bond traders uncover rates secret that Fed just doesn't get
(May 26) For years, the $12.6 trillion U.S. Treasury market has signaled - correctly - that the Federal Reserve was too optimistic in its outlook for the economy and interest rates. That's no different now even though policy makers have moved closer to how traders view the world, which is to say that it wouldn't be surprising if the central bank failed to lift borrowing costs this year.
Binge reading disorder
Hand-curated, chosen with love
  • Michael Lewis on Dick Thaler, the Economist Who Realized How Crazy We are (Bloomberg View)
  • Dear Buy-Side. You seem very concerned about liquidity. Can I suggest paying for it? (Medium)
  • Why the Rich Get Richer (Fox Business)
  • Hedge funds' conspiracy of mediocrity keeps fees high, returns low (Fortune)
  • Can Algorithms Form Price-Fixing Cartels? (New Yorker)
Transparency.
Inclusiveness.
Consensus.