Week InReview

"Can you imagine if that works? If Goldman Sachs could cure years of accumulated distrust with a hipster-y name for its online retail bank? 'You know,' young people will say, 'back when I associated Goldman Sachs with the last names of two guys, I thought it was a shadowy monstrosity that made money by cheating and gambling and that probably caused the financial crisis. But now that I associate it with the first name of just one guy, I realize how sweet and earnest it actually is, and I've opened a savings account.'"

Matt Levine (Bloomberg View)  on Goldman Sachs branding its   retail banking operation " Marcus "
Friday, August 26, 2016
Let's recap
In case you missed it . . .
Derivatives Users Hit as Negative Rates Raise Collateral Costs Major European clearinghouses include Eurex, ICE and LCH; RBS is passing the collateral costs along to customers (Aug 24)

Urging a Fed Rethink Doesn't Require Ditching 2016 Hiking Bias When Fed officials challenge the conventional wisdom, it doesn't make them doves (Aug 23)

The Absurd Fight Over Fund Documents You Probably Don't Even Read: Mutual funds argue SEC proposal would save millions of trees; paper companies say going digital would harm elderly investors (Aug 23)

Opaque Assets at Europe Investment Banks Fuel Capital Doubts Deutsche Bank holds most Level 3 trading assets, derivatives; investors should be 'more circumspect' on values, analyst says (Aug 21)

Freddie Mac: CPS Nearly Ready:  By the end of this year, Freddie Mac may be the first company to issue fixed-rate mortgage-backed securities  through the Common Securitization Platform (Aug 22)
FSB looks at correspondent banking
Reports progress to G20
(Aug 25) In advance of the Sept. 4-5 G20 leaders meeting in Hangzhou, China the Financial Stability Board published a progress report to the Group of 20 nations on its plans to assess and address the decline in correspondent banking.  "The ability to make and receive international payments via correspondent banking is vital for businesses and individuals, and for the G20's goal of strong, sustainable, balanced growth," the FSB said in a statement. "A decline in the number of correspondent banking relationships is a source of concern for the international community because it may affect the ability to send and receive international payments, or drive some payment flows underground, with potential consequences on growth, financial inclusion, as well as the stability and integrity of the financial system." The  FSB plans a more comprehensive progress report by year-end.
Treasury securities market rules
SEC asks FINRA for a review
(Aug 24) The Securities and Exchange Commission's trading and markets division, in a letter to FINRA, asked for a "comprehensive review" to identify existing FINRA rules that exclude or may not apply to Treasury securities. The l etter stated that the "identification of potential gaps" in Treasury securities market regulations is an area of focus for the division. Rules identified in the for letter included "front running of block transactions," "prohibition against trading ahead of customer orders," and "trading ahead of research reports."
Pension funds' large lending footprint
OFR shares data from pilot survey
(Aug 23) Data collected for a working paper - "A Pilot Survey of Agent Securities Lending Activity" - shows pension funds and endowments had an average of $2.5 trillion of securities available for lending, the second largest behind the $3 trillion from investment firms. Noting that existing  legal restrictions may overstate value of securities investment firms could actually lend, the OFR indicated that: 
  • Pension funds / endowments also had $332 billion in market value of securities on loan, the most of any securities owner type; government entities had second largest volume, ~$327 billion
  • Over three reporting days, lending agents reported an average $9.4 trillion securities available for lending, $1 trillion in securities loans outstanding - 11% of lendable assets; collateral received about equally split between cash, $532 billion, and non-cash, $487 billion
  • Pilot participants provided snapshot of securities lending book at close of each of three reporting days: Oct. 9, Nov. 10, Dec. 31; data collected included inventory of securities available for lending; transaction-level detail for outstanding securities loans; and cash, non-cash collateral information
Binge reading disorder
Hand-curated, chosen with love
They're taking all the fun out of hedge funds: It's getting harder to charge clients for all sorts of operational costs, including lavish travel and entertainment

The Bubble in Fintech Doesn't Look Much Like One: Banks' investments are affordable bets with limited risk.

Top Fed Officials Meet Protesters on Sidelines of Jackson Hole: Fed's George: 'We are pleased to have this conversation'; Fed Up coalition speakers urge central bank not to raise rates

These Nine Charts Show Just How Quiet the Market Is Right Now: Should have just gone to the beach

Why 4 a.m. Is the Most Productive Hour: Tackle personal tasks before sunrise; find focus before distractions begin