When short-term borrowing costs spiked in September, it marked the culmination of long-term stresses that the Federal Reserve is now working to tame. The repo blow-up of 2019 set markets on edge and prompted the Fed to pump billions of dollars of emergency funding into the financial system. Here, we break down what went wrong, what happens next, and whether markets can avoid another cash crunch. (Financial Times | Nov 26)
NY Fed injects short-term liquidity into financial system
Only two out of the 12 regional Federal Reserve banks wanted to lower the rate commercial banks are charged for emergency loans ahead of the U.S. central bank’s last policy meeting, minutes from the discussion of the discount rate showed on Tuesday.
(Reuters | Nov 26)
Spoofing, market manipulation, false reporting, and commodities fraud dominated CFTC enforcement over the past year, as the derivatives regulator filed a record number of parallel cases with the Justice Department. Nearly two-thirds of the Commodity Futures Trading Commission’s 69 enforcement cases in fiscal 2019 focused on those four areas, according to the agency’s second annual enforcement report released yesterday. (Bloomberg Law | Nov 26)
The SEC said Monday its members had voted to propose a new rule on the use of swaps, options, futures and other derivatives by mutual funds and exchange-traded funds. If enacted, the proposed rules would replace a patchwork of guidelines issued over recent decades to enable funds to work around a 1940 law that restricts their use. (The Wall Street Journal | Nov 25)
U.S. regulators are considering making it easier for Wall Street to issue exchange-traded funds that rely on derivatives to juice returns. Under a Monday proposal, firms would be allowed to sell some leveraged and inverse ETFs without seeking special approval from the Securities and Exchange Commission.
(Bloomberg Law | Nov 25)