Week InReview

CDS... is there an app for that?

"In short, dealers are really just matchmakers. So here's the thing: we've seen how human matchmaking can be entirely replaced by (1) algorithms and (2) apps. For algorithms, that's just stuff like Match or eHarmony. And for apps, well, there's Tinder, etc. I assume that someone has even combined algorithms with an app, so users don't have to browse for dates, but just log on and are automatically matched. This model seems entirely applicable to many types of financial contracts. If I'm a hedge fund looking to go short on some debt obligation, I need to find someone who will sell me CDS. I could go to a dealer (and pay a nice bit for this), but why not just use an app that will match me with all of the funds that are looking to go long?"

Adam J. Levitin
Professor of Law
A.B., Harvard; A.M., M.Phil.,  Columbia; J.D., Harvard
Friday, November 11, 2016
Let's recap
In case you missed it . . .
Fixed-income investors to step up efforts to find other sources of liquidity; asset managers are having to become more proactive (Nov 8)

Number of fixed-income trading platforms exceeds 100; investors discuss market at conference in Barcelona (Nov 8)

There is little doubt that regulators are taking the problem seriously, even if they can't find proof of its existence (Nov 7)

Lower fees and tax gains see growth of market as pricier hedge sector loses allure (Nov 7)

Back in 2008, incoming President Barack Obama inherited a U.S. financial crisis that was to some degree made in China. The next U.S. president may well confront a Chinese financial crunch with its origins in the U.S. (Nov 6)
Broker-dealer compliance reports
CFTC grants extra time to file
(Nov 10) A rule adopted unanimously by the Commodity Futures Trading Commission, without an open meeting, gives f utures brokers and swap dealers an extra 30 days in which to file their annual compliance program reports Firms may file the reports within 90 days of the end of their fiscal year. The new rule, effective upon publication in the Federal Register, ensures that chief compliance officer reports and year-end financial reports will be filed around the same time.
Global swap-collateral rules
Major markets miss international deadline
(Nov 6) Regulators in three major Asia-Pacific markets missed the Sept. 1 internationally agreed upon deadline on collateral rules for the $493 derivatives market, echoing the discord between the world's largest markets on efforts to reduce risk in over-the-counter derivatives trading.  The U.S. implemented the rules as agreed. Japan was right on schedule. The European Union has yet to give a date. The Hong Kong Monetary Authority plans to issue final rules by year-end.  Singapore and Australia regulators said they will announce their plans "in due course."
New EU capital charges system
Asset managers in line for revised rules
(Nov 4)  The European Union is a bit closer to adopting a new system of capital requirements for thousands of investment firms,  acknowledging industry arguments that current rules inappropriately subject them to restrictions designed for big banks.  In a  discussion paperthe European Banking Authority outlined a new method to determine how much capital and liquidity firms must have to manage risks. The plan could also lead to revised rules for compensation and bonuses and could apply to asset managers, proprietary-trading firms and commodity traders overseeing trillions of dollars across the 28-nation bloc.  Their framework, which may be years away from completion, would be subject to European Commission legislation.
Binge reading disorder
Hand-curated, chosen with love
Dumb alpha: Do the right thing
Investing isn't hectic, it is calm and measured

Transcendental Meditation is taking over Wall Street
Over the last three years, one TM center has taught almost 2,500 professionals - 1,150 in 2016 alone - and roughly 55% are from Wall Street

The trendiest investment on Wall Street... that nobody knows about
This peculiar vehicle is called an interval fund, and asset managers are using it to offer portfolios they might not be able to market otherwise