Quantitative traders are gaining prestige on Wall Street trading floors, with mathematicians and scientists in high demand at investment firms. In fact, quantitative hedge funds make 27% of investor stock trades, up from 14% in 2013, TABB Group data show.
Twitter use has been rising for years among financial professionals, and CEOs of financial firms are taking a cue from President Donald Trump and using the platform to directly communicate with the market. Tweets have become so important in finance that they now appear on Bloomberg terminals.
Investors who jumped into European high-yield corporate debt as the market outlook brightened could be in for a rude awakening should volatility surge. A shake-up could hit European high-yield debt hard.
While the repeal or replacement of the Volcker rule could take years, the review ordered by Treasury Secretary Steven Mnuchin could lead regulators to better define the types of trading banned by the rule, giving banks more leeway to trade within its bounds. The Commodity Futures Trading Commission, the Federal Reserve, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the Office of the Comptroller of the Currency were tasked with reviewing the rule.
The proliferation of custom indexes means that the number of indexes is now greater than the number of stocks in US markets. The repackaging of active strategies into special indexes has become popular with investors, prompting the creation of ever more indexes to satisfy demand.
The Federal Reserve's bond buying has been the agency action with the greatest effect on financial conditions, according to research by Eric Swanson, a professor at the University of California at Irvine. "Forward guidance was more effective than large-scale asset purchases at moving short-term Treasury yields, while [bond buys] were more effective than forward guidance and the federal funds rate at moving longer-term Treasury yields, corporate bond yields, and interest rate uncertainty," Swanson wrote.
The global exchange-traded fund and exchange-traded product industry outpaced the global hedge fund industry at the end of the first quarter by $847 billion, according to an ETFGI report. The ETF/ETP industry had $3.913 trillion in assets, compared with hedge funds' $3.066 trillion.
Buy-side execution performance will see enormous gains as traders harness artificial intelligence, financial-technology experts say. "When a model is constantly learning from the outcomes of when you followed the initial advice, your performance will keep improving," says Natasha Shamis of Liquidnet Labs.
The implementation of blockchain technology in the financial-services industry is meeting some resistance, with enthusiasm not yet translating into an industrywide rollout. While blockchain's potential for improving efficiency and making spectacular cost savings has been hailed, the commodity sector has concerns about loss of confidentiality, while other industry participants say formal regulation and oversight of the technology is needed.
Financial-technology specialists say they are concerned that sell-side firms are not ready to calculate research pricing, a task that will be required when unbundling rules under Europe's revised Markets in Financial Instruments Directive take effect in January. One specialist pointed out to a buy-side conference that few of their sell-side counterparts have structures and models in place for the task, although another expert suggested that buy-siders themselves should contribute to the calculation process.
Goldman Sachs' Jim Donovan has withdrawn from consideration as deputy treasury secretary, setting back Treasury Secretary Steven Mnuchin's work to fill department positions. Donovan has expressed a need to focus on family but says he supports the Trump administration's "ongoing work to reform the tax system and grow the US economy."
The EU will risk "fragmented markets and supervisory arbitrage" if it doesn't enact rules to create a European banking union, said Valdis Dombrovskis, the European Commission's financial-services chief. Among the most important rules needed are those that create bailout funds to deal with failed banks, he said.
Lawyers and market participants have criticized a European Commission proposal to adjust the European Market Infrastructure Regulation so margin must be posted on securitization special-purpose vehicles using derivatives. One lawyer says the change would render such vehicles economically unviable and force loan originators to seek methods such as private placements, which would defeat the regulatory intention to increase transparency.