Social data monitored by AI gives traders an edge | No-deal Brexit could bring UK banks rating downgrade | Operational RWAs down billions at European banks
August 14, 2018
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Social data monitored by AI gives traders an edge
Sentiment data gleaned from Twitter and news feeds using artificial intelligence technology is providing an advantage to quantitative traders. Machines cannot do all the work alone.
Bloomberg Professional Services (8/9) 
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No-deal Brexit could bring UK banks rating downgrade
UK banks are at risk of a credit rating downgrade in the event of a no-deal Brexit, according to S&P Global Ratings. Banks are poised for "stable" performance in coming years, S&P says, but a "disruptive Brexit" could bring them off track.
City A.M. (London) (8/13) 
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Operational RWAs down billions at European banks
European banks shed $32 billion in operational risk-weighted assets in the second quarter, marking a 5% decrease compared with Q1. ING's 15.4% decline, to $43.5 billion, was the largest, while BNP Paribas' 3.4% gain, to $86.4 billion, was the only increase.
Risk (subscription required) (8/13) 
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Bloomberg Insights
Banks: Bond-market fears of Turkish exposure overblown
Decline of the Turkish lira is exacerbating fears European banks are exposed to Turkish assets, but banks say bond-market worries might be overblown. "Fears about a systemic banking crisis should subside once visibility on banks' exposure to Turkey improves," says Christoph Rieger, head of fixed-rate strategy at Commerzbank.
Bloomberg (tiered subscription model) (8/14),  Reuters (8/13) 
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Investors welcome smaller issuers of exchange-traded products
Investors have been willing to pay a premium to diversify away from the offerings of State Street, Vanguard and BlackRock. This means an opportunity for smaller issuers.
Bloomberg Professional Services (8/13) 
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VanEck bitcoin ETF faces hurdles
The VanEck bitcoin exchange-traded fund faces some hurdles but could win approval by the Securities and Exchange Commission. The Winklevoss Bitcoin ETF has been denied twice.
Bloomberg Professional Services (8/13) 
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Trading Trends
End of Fed's MBS purchase program set to cause surge in supply
The Federal Reserve's conclusion of its program for purchasing mortgage-backed securities, which began a decade ago, is poised to make MBS supply soar by about 50% in the second half of 2018 as compared with the first half. Meanwhile, Bank of America analysts say a "risk-off phase" likely has begun for structured credit, while investors' decreased risk appetite is likely to affect products including mortgage-backed securities from Fannie Mae and Freddie Mac.
ThinkAdvisor (free registration)/Bloomberg (8/13),  Bloomberg (tiered subscription model) (8/13) 
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UBS works on recommendation algorithms for trades
UBS is developing recommendation algorithms similar to those used by Netflix to personalize trading suggestions for asset managers and hedge fund clients.
Financial Times (subscription required) (8/13) 
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Analysts: Pound's drop might be sign of "hard Brexit" fear
With seven months to go until Brexit and fear of no conclusive deal with the EU, analysts warn a 2% decline of the pound might be the start of a downward spiral. "We find that we are very much in the early stages of pricing for a 'hard Brexit,' " Nomura analysts say.
Reuters (8/13) 
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Operational Efficiencies
Banks must dump legacy reporting tech, expert says
Reporting regulations' fast evolution means banks can no longer rely on a tactical approach to compliance from legacy technology and must look to cloud and open platforms, says Guillaume Spay, solution lead for capital markets and treasury at Finastra. "Legacy technology is generally quite old, and the only way to avoid losing market share is to be more agile," Spay says.
Futures & Options World (subscription required) (8/13) 
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Conflict of interest operational risk never goes away
Ten investment banks and broker-dealers received fines from regulators due to misleading investors during the dot-com bubble. Conflicts of interest and conduct risk have followed banks through the financial crisis and beyond.
Risk (subscription required) (8/9) 
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FSB adviser: Market players with LEIs to level off at 1.2M
Now that a crucial deadline under Europe's revised Markets in Financial Instruments Directive has passed, the number of market participants holding legal entity identifiers is expected to remain at 1.2 million this year, says Allan Grody, who serves on two Financial Stability Board advisory panels. Many deem LEI adoption "a European effort with no robust commitments yet from US regulators," he says.
MLex (subscription required) (8/14) 
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Regulatory Review
Zions move highlights regulatory burden on BHCs
Zions Bancorporation's decision to stop being a bank holding company highlights the regulatory burden that comes with being a BHC. Zions is the largest bank to lose the status, looking to reduce compliance costs.
Harvard Law School (8/11) 
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Banks transitioning from Libor look for FRTB relief
Banks hope to negotiate a carve-out from capital requirements under the Fundamental Review of the Trading Book as they transition $370 trillion in swaps notional to a Libor alternative.
Risk (subscription required) (8/14) 
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Research & Analysis
Analysis: Bank M&A makes sense
Despite lukewarm reactions from the market, research shows that, when done correctly, bank mergers add value in the current environment.
The Columbia Law School Blue Sky Blog (8/13) 
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