Week InReview

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 .'

Fri Aug 18, 2017
Let's recap
In case you missed it . . .
While DC deregulates, states step in as Wall Street's watchdog
Massachusetts investigates how big U.S. brokers handle customer orders;  Nevada has a new fiduciary standard for brokers even as a federal rule is partially delayed by a Trump administration review; California lawmakers urge the U.S. Senate to reject attempts to roll back consumer protections under the 2010 Dodd-Frank reforms (Aug 16)

Securitization can be a sturdy ally for investors
Asset class given bad name during financial crisis when it fell into wrong hands (Aug 15)

We're still not ready for the next banking crisis
One chart says everything about how well the financial system will cope (Aug 14)

Survival of brokers' morning notes in balance as MiFID looms
Notes intended as marketing may have to be paid for from 2018; rules put onus on buyside to block receipt of free research (Aug 14)

MiFID II transparency puts stress on data architecture
With only four months to go until the MiFID II's Jan. 3, 2018 implementation date, buy-side firms are facing huge changes in disclosure and transparency requirements, which could upend their data management architectures (Aug 14)
The Cyber Cafe
Cybersecurity news every Friday.
Anonymous pledges nationwide 'Day to Denouce' cyberattacks against white supremacists
The group said the cyberattacks against white supremacists will take place on Friday.

This new squad of internet experts will try to bring order to global cyber conflict
The United Nations has failed to get countries to agree how international law applies to cyberspace, so a new group is stepping up.

NIST publishes updated cyber & privacy guidance draft
The government's cybersecurity standards agency published a draft version of a major revision to its guidance on security and privacy controls for government and industry.
(Aug 17) -- Is today's low volatility a sign of calm or a threat to financial stability - or both? An Office of Financial Research (OFR) report investigates the volatility paradox: the possibility that low volatility leads investors to behave in ways that make the financial system more fragile and prone to crisis. Key findings:
  • Volatility for most asset classes across the world fell below historical averages during the second quarter. In some cases, volatility is near all-time lows. Drivers of low volatility may include expectations that the long U.S. economic expansion and still-easy funding conditions will persist.
  • Some institutional investors have adapted by increasing leverage and the use of yield-enhancing strategies.
  • Shocks could produce procyclical responses if market participants use measures of realized volatility to manage the risk of their portfolios.
Binge reading disorder
Hand-curated, chosen with love.
To come up with a good idea, start by imagining the worst idea possible
There are many creative tools a designer uses to think differently, but none is more counter-intuitive than "wrong thinking," also called reverse thinking.

How AI can help advisers with Mifid II
To understand what Mifid II is going to bring in.  To learn what hidden obstacles might lurk in the legislation.  To learn what sort of strategies can help ensure compliance.

You've never heard of HNA Group. Here's why you will.
The $53 billion Chinese conglomerate already owns a company near you.