Week InReview

On Bond Market Liquidity

"In corporate bonds, the different measures of liquidity tell a mixed story. Record trading volumes and low bid-ask spreads indicate good liquidity, while reduced frequency of block trades suggest more difficulty in moving large blocks of risk. However, these oft-cited measures do not capture the full story. For example, bid-ask spreads have decreased primarily for retail investors, rather than for institutional investors.

"Moreover, measures of trading activity only capture activity that has occurred, not trades foregone by market participants because liquidity was not available or the cost was too high. Liquidity metrics also generally do not convey the reduction in immediately available trading opportunities. Such opportunities have declined as more dealers act as agents, and accordingly customers must wait until the opposite side of the trade has been found. Finally, market participants report that dealer willingness to make markets in size, take on risk, and provide firm quotes have all declined."

- The Treasury report on capital markets deregulation
Fri Oct 13, 2017
Let's recap
In case you missed it . . .
Almost a decade after credit derivatives had an ill-starred role in the financial crisis, ISDA - whose committees decide whether a company has had a so-called "credit event" - is again drawing intense scrutiny (Oct 11)

Financial Services Committee weighs package of changes targeting financial rules; piecemeal approach suggests major overhaul isn't coming soon (Oct 11)

Who has agreed to absorb research costs under Mifid II (updated Oct 13)

U.S. finance industry bemoans 'massive headache' of MiFID II
Finance trade bodies worry the SEC has been too slow in responding to new European rules (Oct 11)

The Mother of all Bases: It was one of the more interesting stories of 2016 - but now it's gone (Oct 11)
The Cyber Cafe
Cybersecurity news every Friday
Cybersecurity expert nominated for secretary of Homeland Security
Kirstjen Nielsen has served as top aide to White House Chief of Staff John Kelly.

Carbanak hackers pivot plan of attack to target banks, the enterprise
The cyberattackers are using a fresh set of techniques to infiltrate the enterprise.
- ZDNet

U.S. Supreme Court declines to review computer hacking cases
The U.S. Supreme Court sidestepped a growing controversy over who can give permission to access a computer, a debate that goes to the core of what constitutes hacking in this era of widespread use of the internet and social media.
Rule changes aim to streamline disclosure
SEC votes to amend Regulation S-K
(Oct 11) -- Under rulemaking unanimously proposed by Securities and Exchange Commission Chairman Jay Clayton and commissioners Michael Piwowar and Kara Stein, the SEC looks to help companies that seek to omit personal information from required disclosures and limit repetitive reporting. Under the proposed amendments to Regulation S-K - which governs companies' non-financial statement disclosure requirements for periodic reports, proxy statements, and other agency filings - companies would be able to omit non-material sensitive or confidential data from contracts attached to filings without requesting confidentiality from the SEC.
A swap dealer registration reprieve
CFTC to grant small market users one-year delay 
(Oct 11) -- Swaps market participants with less than $8 billion in business a year may not have to register as dealers with the Commodity Futures Trading Commission until at least 2019, CFTC chair J. Christopher Giancarlo said at a House Agriculture Committee hearing. A five-year-old rule set the registration threshold to fall to $3 billion at the end of 2018 unless the CFTC intervened, meaning users would have had to begin to calculate their activity - and possibly change their market behavior - by Jan. 1.  In the next few weeks, the agency plans to vote to extend the deadline, and vote on a final rule before the middle of 2018.
Binge reading disorder
Hand-curated, chosen with love.
Worst practices in institutional asset management
Whenever an institutional portfolio runs into trouble it's typically a governance issue more than investment strategy that causes the problems.

Goldman's bubble play: A way to bet on the next bank crisis

Derivatives provide hedge or exposure to high-yield AT1 notes; other market makers to start publishing tradeable prices soon.

Nobel economist Thaler says he's nervous about stock market
"We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping," Thaler said. "I admit to not understanding it."
- Bloomberg Markets