In Focus

  • Week InReview: August 18, 2017

    • Friday, August 18, 2017

    Someone told Matt Taibbi how Libor works. "I mean, he's not exactly sweating the details -- 'If LIBOR rates are high, it means bankers are nervous about the future and charging a lot to lend' -- but he did read a Bloomberg article about how Libor is not really based on market transactions, and had a downright existential panic: 'Think about this. Millions of people have been taking out mortgages and credit cards and auto loans, and countless towns and municipalities have all been buying swaps and other derivatives, all based on a promise buried in the fine print that the rate they will pay is based on reality. ' Since we now know those rates are not based on reality -- there isn't a funding market -- that means hundreds of trillions of dollars of transactions have been based upon a fraud. Some canny law firm somewhere is going to figure this out, sooner rather than later, and devise the world's largest and most lucrative class-action lawsuit: Earth v. Banks.' Matt Levine BloombergView

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  • Week InAdvance: August 14, 2017

    • Monday, August 14, 2017

    Wed Aug 16 FOMC releases July meeting minutes. NAFTA talks begin. | Thu Aug 17 Noon deadline to register for FINRA T+2 exercises. | Sat Aug 19 FINRA T+2 exercises.

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  • Week InReview: August 11, 2017

    • Friday, August 11, 2017

    On Bond Market Liquidity "In corporate bond markets, trading activity and average transaction costs have generally improved or remained flat. More corporate bond issues traded after regulatory changes than in any prior sample period. In the post-regulatory period, we estimate that transaction costs have decreased (by 31 basis points (bps), to 55.4 bps round-trip) for smaller trade sizes ($20,000) and remain low for larger trade sizes relative to the precrisis period (estimated at 5.7 bps round-trip for trades of $5,000,000, compared to 5.8 bps pre-crisis)." "Dealers in the corporate bond markets have, in aggregate, reduced their capital commitment since the 2007 peak. This is consistent with the Volcker Rule and other reforms potentially reducing the liquidity provision in corporate bonds. It is also consistent with alternative explanations, such as an enhanced ability of dealers to manage corporate bond inventory, shorter dealer intermediation chains associated with electronification of bond markets, crisis-induced changes in dealer assessment of risks and returns of traditional market making, and the effects of a low interest rate environment. These alternative explanations are not mutually exclusive or necessarily fully independent of regulatory reforms, so distinguishing between these potential explanations from the market trends data is not possible." From a 315-page report on access to capital and market liquidity issued by the SEC's Division of Economic and Risk Analysis

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