Official: Basel III is close to becoming reality | Investment banks adjust to new reality following financial crisis | Largest US clearinghouses pass stress test
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October 17, 2017
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Official: Basel III is close to becoming reality
The Basel III banking regulatory reforms are close to being completed and it is "fairly clear what the result will be," William Coen, secretary-general of the Basel Committee on Banking Supervision, said in a speech to the International Monetary Fund. After work on Basel III is finished, the committee plans to take a break before launching any new policy reforms, he said.
Bank for International Settlements (10/13),  Politico Pro (subscription required) (10/13),  Global Investor (subscription required) (10/13) 
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Investment banks adjust to new reality following financial crisis
Saddled with new capital requirements, major global banks have struggled to create returns, opening the door for China's banks to gain prominence. Top investment banks have seen their revenues decline 34% since the financial crisis.
The Economist (tiered subscription model) (10/14) 
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Largest US clearinghouses pass stress test
CME Clearing, ICE Clear US and LCH have passed a stress test to show they can generate enough liquidity to weather a major market disruption, according to the Commodity Futures Trading Commission. The test posed an extreme but plausible scenario in which two major clearinghouse members defaulted.
Reuters (10/16),  The Wall Street Journal (tiered subscription model) (10/16) 
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5 Cures for Business Growing Pains
A growing business is a successful business, but it comes with its own set of complications. Growing pains can arise from new employees, added roles and responsibilities, and a premium on office space. Read this informative e-book for five practical tips to managing your growing office space.
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Bloomberg Insights
Demand for data scientists outpacing supply in US
The demand for data scientists in the US is greatly outpacing the supply, with an expected shortage of a quarter million people by 2024. Data analysis is quickly becoming an indispensable tool in finance and other fields.
Bloomberg Professional Services/Information Management (10/13) 
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MiFID notification requirement could spook investors
The updated Markets in Financial Instruments Directive will require money mangers to inform clients should their holdings drop by 10%, a requirement critics say could shake confidence and lead investors to divest holdings. "Warning non-professional investors straight away that the market is falling would only do one thing -- it makes it fall further," said Jean-Marie Catala of Groupama Asset Management.
Bloomberg Professional Services (10/12) 
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Mutual funds, insurers slow to come around to data-driven investing
The role of data science in fixed income markets is likely to expand over time, especially as pension funds, mutual funds and insurance firms catch up. "If you can figure out how to use data more efficiently and automate your investing processes even just marginally, you can crush your competition," one trader said.
Bloomberg Professional Services/Markets Media (10/12) 
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EU data protection rule to affect finance, other industries
The EU's General Data Protection Regulation will affect financial-services firms when it takes effect in 2018. "GDPR cuts across industries, but because financial services has so much sensitive data on people's finances, it has particular applicability there," said Patrick Lastennet of Interxion.
Bloomberg Professional Services/Markets Media (10/13) 
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Trading Trends
Quants concerned by lack of alternative risk premia data
A number of quantitative analysts say their efforts to model and predict liquidity risks in the futures market are hampered by the lack of available data from alternative risk premia strategies. The increasingly popular strategies were valued at more than $150 billion in 2016 with more than half the products futures-based, but analysts say that banks do not divulge the assets within them, which makes accurate forecasting difficult.
Risk (subscription required) (10/16) 
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Booming corporate credit market sparks product releases
Surging demand in the corporate credit market is prompting investment banks to issue innovative derivatives products such as total return swaps, involving increasingly complex bond combinations.
Financial Times (tiered subscription model) (10/16) 
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Traders sell US debt, buy other sovereign bonds
Bond markets took a cue from Federal Reserve chief Janet Yellen's speech at the Group of 30's annual International Banking Seminar, prompting a surge in global sovereign bonds and a decline in US Treasurys. Yellen reiterated the Fed's commitment to raising interest rates on pace with US economic growth, despite lagging inflation.
Bloomberg (free registration) (10/16) 
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Operational Efficiencies
High-speed traders help Pentagon identify cybersecurity risk
The Department of Defense is tapping executives from high-frequency-trading firms and quantitative hedge funds to help identify vulnerabilities in financial markets. High-speed traders and quant-fund managers tend to have a great deal of knowledge on the inner workings of financial markets and the automated systems that drive much of today's trading, making them ideally suited to see weaknesses that cybercriminals could exploit.
The Wall Street Journal (tiered subscription model) (10/15) 
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CME files patents for using distributed-ledger technology
Chicago Mercantile Exchange has filed patents for developing a platform that would use distributed-ledger technology to automatically store and execute financial transactions.
CoinDesk (UK) (10/16) 
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Nasdaq targets repo market with direct-clearing model
Nasdaq Clearing is aiming its direct-clearing model, which allows a direct relationship between clients and central counterparties, at the repurchase agreement market. The newly launched model improves client protection and cost efficiency, according to Nasdaq.
Futures & Options World (subscription required) (10/17) 
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Regulatory Review
Treasury: ABS should count toward capital requirements
The Treasury Department has called for some asset-backed securities to be among acceptable high-quality liquid assets for the Basel Committee on Banking Supervision's liquidity coverage ratio and net stable funding ratio to make assets such as housing loans more attractive. Industry groups have called for inclusion of private-label residential mortgage-backed securities, rather than limiting the list to assets issued by government-backed housing lenders.
Risk (subscription required) (10/16) 
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EBA calls for post-Brexit flexibility on bank risk models
The European Banking Authority called on national regulators to take a flexible approach to banks' internal risk models after Brexit. Banks that relocate operations from the UK to the EU because of Brexit should be allowed to rely on UK approvals until there is time for EU regulators to review them, the EBA said.
European Banking Authority (10/12),  Politico Pro (subscription required) (10/12),  Financial News (UK) (tiered subscription model) (10/12) 
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Research: Regulatory environment facing broker-dealers, investment funds
Ivy League law professors Allen Ferrell and John Morley examine the regulatory challenges facing investment funds, broker-dealers and credit rating agencies. They conclude that the way capital structures are regulated for investment firms should be revamped.
Harvard Law School (10/16) 
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Research & Analysis
PIMCO: Global GDP to continue 3% growth in 2018
PIMCO expects global GDP growth to continue at a 3% pace in 2018, anticipating slow removal of support from major central banks. The company advises caution in the current macroeconomic client.
Pacific Investment Management (10/2017) 
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