Briefings

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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 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 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"...Dodd-Frank is an act of Congress that can't be repealed by executive order or regulation; all the Treasury Secretary can really do is come up with a list of laws that don't meet [the 'Core Principles for Regulating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 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

Week InReview: January 27, 2017

Starting today, the Chinese New Year holiday shuts down the world's second-largest economy for a week, with markets closed from Jan. 27-Feb. 2.

Week InReview: January 20, 2017

Caveat Investor? The "Fiduciary Rule" and Unintended Consequences | "In what instances might we now hold an advisor liable for 'not acting in a client's best interest' but wouldn't have under the old suitability standards? More important to my argument, in what ways might upping and broadening the standard instead create other problems for investors? I can think of four prominent possibilities. First, judging investments too much by ex post performance. Second, not judging investments in a portfolio context. Third, over-emphasizing low fees as always being in the client's best interest. Fourth, judging innovative investing approaches more harshly than conventional ones.

Week InReview: January 13, 2017

Question of the Week: Did the global elite's devotion to borderless capitalism sow the seeds of a populist backlash? "For the 3,000 people who will convene in the small Swiss town from Jan. 17 to 20, the 2017 event could be a moment of reckoning. At speakers' podiums, coffee bars, and the ubiquitous late-night parties, they'll be asking themselves whether Davos has become, at best, the world's most expensive intellectual feedback loop - and, at worst, part of the problem."

Week InReview: January 6, 2017

The INVESTORS staff looks forward to working with you again this year. If you would like information about membership on INVESTORS' Councils, have colleagues who might enjoy these mailings, or have questions or concerns about issues addressed in our newsletters, please reach out to our staff director Matthew Jones, at (202) 712-9050 or mjones@association.institutionalINVESTORS.org

Week InReview: December 30, 2016

Where Goest Thou, Title VII? | Global Bank Regulators Take the Gloves Off | CLOs Face Daunting Prospects | Restorative Cocktails in Binge Reading Disorder

Week InReview: December 23, 2016

Barclays to face off against U.S. over 'craptacular' loans - U.S. sues over defaults on billions in securitized mortgages; investors were deceived about risk of securities, DOJ says; two individuals named; summary of the complaint (Dec 22) | Red flag on recession crops up in NY Fed's coincident economic index - Last time the index declined was in November 2009 (Dec 22) | Who owns blockchain? Goldman, BofA amass patents for coming wars Established firms seek exclusive rights in threat to startups; beyond techno-utopian roots, blockchain seen reshaping finance (Dec 21) | SEC maintains stance on regulatory audits for advisers - Since Chair Mary Jo White announced she was leaving the SEC in January, registered investment advisers have speculated whether this signals a change in SEC enforcement trends (Dec 20) | The $12 trillion credit risk juggle - After the financial crisis, regulators were worried about too much risk being concentrated in too few hands; they are still concerned, but the hands have changed (Dec 16)
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