Briefings

Archive February 2017

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Week InReview: February 24, 2017

On bond market liquidity... "We present a model of market makers subject to recent banking regulations: liquidity and capital constraints in the style of Basel III and a position limit in the style of the Volcker Rule. Regulation causes market makers to reduce their intermediation by refusing principal positions. However, it can improve the bid-ask spread because it induces new market makers to enter. Since market makers intermediate less, asset prices exhibit a liquidity premium. Costs of regulation can be assessed by measuring principal positions and asset prices but not by measuring bid-ask spreads." Banking Regulation & Market Making, Bank of Canada - Staff Working Paper

Week InAdvance: February 21, 2017

Tue 2/21 EU finance ministers meet in Brussels. | Wed 2/22 INVESTORS Cyber Security and Monthly Members Meetings (available via telecon). Fed releases FOMC minutes. | Thu 2/23 OFR panel meets on financial stability via webcast. | Fri 2/24 Day 1 of SEC Speaks forum in DC (available via webcast).

Week InReview: February 17, 2017

As of January this year, 128 bond trading platforms were available to fixed income market participants as traders seek new technology to improve connectivity and electronic trading. | This boom in innovation has seen traders readily embrace electronic trading and a variety of alternative protocols offered to meet bond market needs. | However, IOSCO explained this has led to fragmentation and difficulties for those trading the bond market, highlighting the importance of connectivity.

Week InAdvance: February 13, 2017

Mon 2/13 Cybersecurity conference in San Francisco. Senate vote on Treasury secretary. | Tue 2/14 Day 2 of world government summit in Dubai. Yellen in the Senate. House panel meets on cybersecurity. | Wed 2/15 SEC emerging companies advisory panel meets. Yellen in the House. | Thu 2/16 G20 meetings in Bonn. INVESTORS CMBS Council telecon. | Fri 2/17 Security summit opens in Munich.

Week InReview: February 10, 2017

"...Dodd-Frank is an act of Congress that can't be repealed by executive order or regulation; all the Treasury Secretary can really do is come up with a list of laws that don't meet [the 'Core Principles for Regulating the United States Financial System' issued by executive order on Feb. 3], and then try to persuade Congress to repeal them. Congress, though, seems to be amenable; on Friday, the Senate voted to repeal a small part of Dodd-Frank, a rule that 'requires oil companies to publicly disclose payments made to governments when developing resources around the world.' That doesn't have much to do with any principles, core or otherwise, of financial regulation, though I suppose 'it should be easier for companies to make undisclosed payments to government officials' could be a core principle of some sort." Matt Levine - Matt Levine's Money Stuff Fiduciaries, Rules and Progressives Feb 5, 2017

Week InAdvance: February 6, 2017

Mon 2/6 SGCCI (BCBS-CPMI-FSB-IOSCO) meets in DC (thru Tue). | Tue 2/7 25th anniversary of the Maastricht Treaty. | Wed 2/8 INVESTORS Mortgage Securitization Council meets with Fannie, Freddie, FHFA. OECD Parliamentary Days in Paris (thru Fri). | Thu 2/9 INVESTORS Market Practices Council meets.

Week InReview: February 3, 2017

"Open-end mutual funds face redemptions by investors, but the sale of the underlying assets depends on the portfolio decision of asset managers. If asset managers use their cash holding as a buffer to meet redemptions, they can mitigate fire sales of the underlying asset. If they hoard cash in anticipation of redemptions, they will amplify fire sales. We present a global game model of investor runs and identify conditions under which asset managers hoard cash. In an empirical investigation of global bond mutual funds, we find that cash hoarding is the rule rather than the exception, and that less liquid bond funds display a greater tendency toward cash hoarding." Excerpt from BIS Working Paper No. 608 Redemption risk and cash hoarding by asset managers by Stephen Morris, Ilhyock Shim and Hyun Song Shin
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