A Bank of England 'Bank Underground' blog post indicates that exchange-traded products - whether they bet for or against volatility - magnify the effect of volatility:
"When volatility spikes, issuers of leveraged VIX ETPs have to rebalance at the end of the day by buying large amounts of VIX futures. Perhaps somewhat counterintuitively, rebalancing flows are procyclical regardless of whether the ETP benefits from rising or falling volatility - issuers of both types of ETPs have to rebalance in a way which amplifies initial moves in volatility."
The Commodity Futures Trading Commission chair laid out his vision for loosening the litany of swaps rules his agency approved after the 2008 financial crisis, following years of complaints from Wall Street and other industries.
In one key element, Giancarlo called for easing some restrictions on SEFs (swaps execution facilities) that were meant to increase transparency and bring more order to a market that is widely blamed for fueling the meltdown a decade ago. (Bloomberg Markets | Apr 26)
This week's Department of Labor Field Assistance Bulletin on environmental, social and governance investing seems to have caught everyone by surprise and has caused confusion among a good many. This is unfortunate, because ESG, with its various connotations, already eludes some. (Fiduciary Governance | Apr 26)
Plenty of study has gone into asset price bubbles and we know from the experience of the past two decades that they can have deeply damaging effects on the world economy. And what exactly is an investor to do about them? (Financial Times | Apr 24)
Concerns about the soundness of the entire ecosystem of VIX-linked trading rising. It is unclear if there is any nefarious trading activity going on, and it is difficult to prove. But at least nine lawsuits alleging VIX manipulation have been filed since February. (The Wall Street Journal | Apr 22)
Cybersecurity news every Friday
The young and the reckless
A gang of teen hackers snatched the keys to Microsoft's videogame empire. Then they went too far, even worming into military networks. One would become an informant, one would become a fugitive, and one would end up dead.
Kaspersky's products have already been barred from federal systems as an alleged security risk, with reports the company's computer security software had been hijacked by Russian intelligence operatives to steal U.S. secrets. The firm still employs American researchers in the U.S. and has an American headquarters in Massachusetts.
Regulating Facebook merely nips at the edge of a bigger problem
Quickly conceived conventional wisdom is a terrible side-effect of the age of high-speed media. Storylines develop rapidly, as news organisations chase the most clickable themes. Subtlety and nuance about complex issues are the casualties.
Facebook says there may be more Cambridge Analytica-sized leaks
Facebook said it expects to discover and announce more "instances of misuse of user data or other undesirable activity by third parties," according to a filing Thursday with the Securities and Exchange Commission.