Sep 192014
 

Full of sound and fury, signifying nothing.  As usual, Shakespeare said it best.  After much anticipation and fear that the Fed would remove its “considerable time” language, the statement left that phrase and stopped short of signaling when interest rates would begin to rise.  Chairwoman Yellen emphasized in her press conference that there is “no mechanical interpretation of what ‘considerable time’ means,” thus market expectations will likely fluctuate with each data release over the coming months.

Somewhat overshadowed by the FOMC decision this week, China injected 500 billion yuan into the five largest banks this week to help ease a pre-holiday cash crunch and tame any potential spikes in short-term rates.  Experts are unsure if this is the start of an easing cycle given the recent weakness in the data, though most agree that this amount isn’t enough to spur economic growth.  With the Fed, the Alibaba IPO, Scottish referendum all out of the way, and little news on the foreign policy front, markets are breathing a sigh of relief – for now, anyway.

The CFP hosted a a very successful conference on market fragmentation, fragility and fees with FINRA on Wednesday, September 17th.  Stay tuned for the key takeaways from that event over the next week.

 

China’s Slowdown Seen Yet to Bottom Even After PBOC Acts

http://www.bloomberg.com/news/2014-09-17/china-s-slowdown-seen-yet-to-bottom-even-after-pboc-acts.html

http://in.reuters.com/article/2014/09/17/markets-china-repos-idINKBN0HC0AR20140917

http://www.scmp.com/business/banking-finance/article/1594496/pboc-injects-500b-yuan-5-banks-after-dismal-data-market

http://www.businesstimes.com.sg/breaking-news/asia/economists-dial-down-china-growth-forecasts-after-weak-august-data-20140915

FOMC Press Release

http://www.federalreserve.gov/newsevents/press/monetary/20140917a.htm

The WSJ’s Jon Hilsenrath’s take on the Fed decision

http://blogs.wsj.com/economics/2014/09/16/hilsenrath-how-the-federal-reserve-could-tweak-considerable-time/

Dark Pools Confront More Transparent Future Amid Threats

http://www.bloomberg.com/news/2014-09-17/dark-pools-confront-more-transparent-future-amid-threats.html

http://online.wsj.com/articles/new-york-attorney-general-responds-to-barclays-1410903004?KEYWORDS=DARK+POOL

SEC rule could push trading costs higher

http://www.pionline.com/article/20140915/PRINT/309159977?AllowView=VDl3UXk1T3dDL0dCZ2dIRkN2YnRlRU9namtrZEErRmE=&utm_campaign=smartbrief&utm_source=linkbypass&utm_medium=affiliate

Sanctions Over Ukraine Put Exxon at Risk

http://online.wsj.com/articles/sanctions-over-ukraine-put-exxon-at-risk-1410477455

Central, East Europe Brace for Energy Shortages as Russian Gas Flows Fall

http://online.wsj.com/articles/eastern-europe-braces-for-energy-shortages-as-russian-gas-flows-fall-1410517559

Sep 122014
 

Though the FOMC meeting is not scheduled until next Wednesday, Fed officials and its researchers provided plenty of headlines this past week.  Federal Reserve Governor Tarullo announced a tougher capital surcharge for the largest U.S. banks aimed at reducing the “too big to fail” risk at the Senate Banking hearing on Tuesday.  It isn’t clear exactly which banks the rule will affect or how much capital firms would need to raise, but firms with a greater reliance on short-term loans will likely face higher charges.

The San Francisco Fed also released a study, which found that the public seems to expect a far more accommodative policy than the FOMC participants.  This study and the divergence of opinions heightens the importance of, and will likely result in greater volatility around the upcoming Fed meetings.  The FOMC will convene September 16-17 and provide a summary of economic projections with the press conference.

 

Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge

http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=b15fc832-df18-47d7-8c7d-1367e5770086

http://online.wsj.com/articles/feds-tarullo-says-fed-board-will-unveil-systemically-important-financial-institution-surcharge-rule-soon-1410211114?KEYWORDS=fed+surcharge

 

Assessing Expectations of Monetary Policy

http://www.frbsf.org/economic-research/publications/economic-letter/2014/september/assessing-expectations-monetary-policy/

http://blogs.wsj.com/economics/2014/09/09/grand-central-fed-frets-about-market-rate-expectations/

 

High-Frequency Trading Leads to Lawsuit Against Exchanges

http://online.wsj.com/articles/high-frequency-trading-leads-to-lawsuit-against-exchanges-1410192793

 

Regulators Weighing New Rules for Private Trading Venues

http://www.finra.org/Industry/Regulation/Guidance/CommunicationstoFirms/P594015

http://online.wsj.com/articles/regulators-weighing-new-rules-for-private-trading-venues-1410376093

 

 

 

Sep 052014
 

Market participants and regulators wasted no time getting back to work despite a shortened week.  The FSOC met yesterday assigning the insurer, Metlife, with SIFI status.  The OCC released new guidelines requiring the nation’s banks to improve their risk management practices and another economist warned of a possible bank crisis in China, something we highlighted in our news and policy round-up several weeks ago.

Next week, the Senate banking committee has scheduled a hearing on Wall Street reform entitled, assessing and enhancing the financial regulatory system.

 

Hearing: Tuesday, September 9, 2014: Wall Street Reform

http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=b15fc832-df18-47d7-8c7d-1367e5770086

China banking crisis ‘almost certain’, warns economist Gabriel Stein

http://www.smh.com.au/business/china/china-banking-crisis-almost-certain-warns-economist-gabriel-stein-20140902-10bcog.html#ixzz3CRtiRAVu

http://www.smh.com.au/business/china/china-banking-crisis-almost-certain-warns-economist-gabriel-stein-20140902-10bcog.html

Banks Ordered to Boost Risk Management to Meet OCC Expectations

http://www.bloomberg.com/news/2014-09-02/banks-ordered-to-boost-risk-management-to-meet-occ-expectations.html

Investment Technology Group to Launch Dark Pool for Bond Trading

http://online.wsj.com/articles/investment-technology-group-to-launch-alternative-trading-venue-for-bonds-1409774727

http://www.ft.com/intl/cms/s/0/b48c95f0-33bf-11e4-ba62-00144feabdc0.html#axzz3CP7K19Ni

IEX, Upstart Trading Platform, Raises $75 Million in New Financing

http://dealbook.nytimes.com/2014/09/02/iex-upstart-trading-platform-raises-75-million-in-new-financing/?_php=true&_type=blogs&partner=rss&emc=rss&_r=0

Regulators Propose Rule to Reduce Risk of Derivatives

http://dealbook.nytimes.com/2014/09/03/regulators-propose-rule-to-reduce-risk-of-derivatives/?emc=edit_dlbkam_20140904&nl=business&nlid=69558033

MetLife ‘Strongly Disagrees’ With FSOC Systemic Risk Tag

http://www.bloomberg.com/news/2014-09-04/metlife-deemed-systemically-important-faces-supervision.html

Aug 222014
 

Fed Chairwoman Janet Yellen’s Jackson Hole comments came and went without much fanfare.  Her speech shifted to a more neutral tone on the state of the U.S. employment market, skirting over the policy implications of such a view, and emphasized the need for flexibility.  She notes: “Monetary policy ultimately must be conducted in a pragmatic manner that relies not on any particular indicator or model, but instead reflects an ongoing assessment of a wide range of information in the context of our ever-evolving understanding of the economy.”

Though it was a relatively quiet week on the news and policy front, equity markets continued to grind steadily higher and index investor Vanguard saw their AUM rise above $3 trillion for the first time.  The battle between active and passive investing is something CFP Director, Russ Wermers, has written extensively about in his research on the mutual fund industry.

 

Vanguard Sees Record Inflows

http://online.wsj.com/articles/investors-pour-into-vanguard-eschewing-stock-pickers-1408579101

The Rise and Fall of Performance Investing

http://www.cfainstitute.org/learning/products/publications/faj/Pages/faj.v70.n4.4.aspx?intCamp=$topic42

Fight Brews on Changes That Affect Derivatives

http://dealbook.nytimes.com/2014/08/14/fight-brews-on-changes-that-affect-derivatives/?_php=true&_type=blogs&emc=edit_dlbkam_20140815&nl=business&nlid=69558033&_r=0

Yellen’s Speech in Jackson Hole

http://www.federalreserve.gov/newsevents/speech/yellen20140822a.htm

http://www.ft.com/intl/cms/s/0/bcaa2204-2a03-11e4-914f-00144feabdc0.html#axzz3B8uBepP5

 http://www.bloomberg.com/news/2014-08-22/yellen-says-fed-sees-significant-under-use-of-labor-resources.html

FSB Report on Shadow banking in the Americas and Asia

http://www.financialstabilityboard.org/publications/r_140822b.pdf

http://www.financialstabilityboard.org/publications/r_140822c.pdf

FSB Consultative Report on Foreign Exchange Benchmarks

http://www.financialstabilityboard.org/publications/r_140715.pdf

 http://blogs.wsj.com/moneybeat/2014/08/20/recommendations-roll-in-for-fixing-the-fx-fix/?mod=djemGrandCentral_h

Aug 152014
 

No news is good news.  That’s what a Tabb Group survey of market players and watchers tells us, anyway.  Between the Flash Crash, last year’s Hash Crash, and Michael Lewis’ Flash Boys, market microstructure and concerns regarding the stability of the market remain a central issue for financial market participants and regulators alike.  The absence any recent glitches seems to have led to rising confidence in the market’s structure according to this survey.  The majority of respondents supported a measure to eliminate the “maker-taker” fee structure, a topic that will be addressed along with microstructure, at the upcoming conference the CFP is co-hosting with FINRA on September 17th.  In a related topic, bidding is now underway for the CAT (Consolidated Audit Trail) supercomputer to track the US equity and options exchanges, along with bank dark pools.  The need for a central clearing system was one topic covered at our shadow-banking conference back in July.

The Federal Reserve confirmed Chairwoman Janet Yellen will speak at Jackson Hole forum for central bankers next week.  Former Chairman Bernanke launched several of the Fed’s bond-buying programs in his speeches at this event, thus market watchers will keep a close eye on her remarks in what should otherwise be another quiet week.

 SEC Computer Called CAT will Peer into Dark Pools, Track Orders

http://www.bloomberg.com/news/2014-08-07/sec-computer-called-cat-will-peer-into-dark-pools-track-orders.html

With Absence of Glitches, Confidence Rising in Market’s Structure

http://blogs.wsj.com/moneybeat/2014/08/14/with-absence-of-glitches-confidence-rising-in-markets-structure/

High-Frequency traders flee investment banks

http://www.ft.com/intl/cms/s/0/379ee6ce-1f0b-11e4-ad93-00144feabdc0.html#axzz3AQdEpZJg

Deutsche Bank Ordered by U.S. Relators to Improve Risk Controls

http://online.wsj.com/articles/regulators-cite-risk-control-deficiencies-at-deutsche-bank-1407419935?mod=WSJ_hp_LEFTWhatsNewsCollection

Appeals Court Says Dodd-Frank Whistleblower Protections Don’t Apply Abroad

http://blogs.wsj.com/riskandcompliance/2014/08/14/appeals-court-says-whistleblower-protections-dont-apply-abroad/