Budget passes Senate, paving way for tax reform | Dimon urges review of mortgage-securitization rules | Stock market highs fail to stimulate trading
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October 20, 2017
SIFMA SmartBrief
News on the capital markets
Morning Bell
Budget passes Senate, paving way for tax reform
The Senate has voted 51-49 to approve a budget blueprint for fiscal 2018 that opens the door to adoption of tax cuts proposed by President Donald Trump without Democratic votes. The measure needs reconciliation with a version passed by the House before it can be submitted for Trump's signature.
Reuters (10/19) 
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Industry News
Dimon urges review of mortgage-securitization rules
Dimon urges review of mortgage-securitization rules
Dimon (Kimberly White/Getty Images)
The Federal Reserve should revise mortgage-securitization and -servicing rules to make lending to first-time buyers, young self-employed people and those with prior defaults easier, said JPMorgan Chase CEO Jamie Dimon. He said less onerous rules would have let his bank extend many more loans.
MLex (subscription required) (10/18) 
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Stock market highs fail to stimulate trading
Despite record highs in equity markets, there has been a decline in overall trading due to ultralow volatility, subdued news cycles and an increase in passive investment. Average daily trading volumes at the New York Stock Exchange, Nasdaq Stock Market, NYSE American and NYSE Arca fell 12% this month relative to the rest of the year and 22% from the 2016 average.
The Wall Street Journal (tiered subscription model) (10/19) 
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Assumption of custodian losses divides banks, CCPs
The question of who should bear the cost of a custody bank failure is dividing clearing banks and central counterparties as regulators work to establish recovery and resolution rules following Financial Stability Board guidance. The question revolves around which party controls the risks.
Risk (subscription required) (10/19) 
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Initial unemployment claims lowest in more than 44 years
In the week that ended Oct. 14, the number of Americans making their first claims for jobless benefits dropped to 222,000, the smallest number since March 1973, the Labor Department said. It was the 137th week in a row that claims held below the 300,000 mark, which is viewed by economists as a sign that the labor market is strong.
Reuters (10/19) 
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The buy side is in flux
Investment managers have always had to contend with a complex mix of messy, dynamic factors that impact portfolios, but the present selection seems uniquely combustible and difficult to predict. Global political uncertainty, regulation and tax-reform are just a few factors unsettling this market. Download Bloomberg's The evolving state of the buy side report to learn more
Washington Roundup
Bill cracking down on elder fraud becomes law
President Donald Trump has signed into law a measure that gives US prosecutors broader authority to act against financial criminals who use telemarketing or email to exploit the elderly. The Elder Abuse Prevention and Prosecution Act also allows enhanced penalties for anyone convicted of victimizing or targeting a person older than 55. Get industry resources at SIFMA's Senior Investor Resource Center.
ThinkAdvisor (free registration) (10/19) 
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Senate banking chair wants Fed to normalize policies
Senate banking chair wants Fed to normalize policies
Crapo (Mark Wilson/Getty Images)
Senate banking committee Chairman Mike Crapo, R-Idaho, said the Federal Reserve should return to "more normal, traditional monetary policy." Crapo also expressed concern over the size of the Federal Reserve balance sheet and the slow pace the Fed has raised rates.
Bloomberg (free registration) (10/19) 
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Operations Update
Chicago exchange approved for 2-year speed bump test
The Chicago Stock Exchange has gained Securities and Exchange Commission approval for a two-year trial of a 350-microsecond trading delay to curb certain types of high-frequency trading. The speed bump will not be uniformly applied and will not affect most market maker trading activity.
The Wall Street Journal (tiered subscription model) (10/19) 
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Global Update
CFTC's Giancarlo: LCH could threaten US financial stability
US financial stability could be at risk if a liquidity shock hits London-based LCH Group, said J. Christopher Giancarlo, chairman of the US Commodity Futures Trading Commission. Overseas clearinghouses like LCH don't have direct access to the Federal Reserve, which means they could encounter delays getting short-term loans in a fast-moving crisis, he said.
MLex (subscription required) (10/17) 
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Last Chance to Register! The Capital Markets Conference Starts Monday in Washington, D.C.
Each fall, SIFMA's Annual Meeting convenes financial market experts with the industry's policymakers and regulators to assess the capital markets at the core of our American economy. Join more than 700 meeting delegates in Washington, D.C. on October 23-24 to explore what the future holds for businesses, investors and economic growth. Featuring candid one-on-one conversations with Congressman Kevin Brady (R-TX), Chairman of the House Ways & Means Committee; SEC Chairman Jay Clayton; CFTC Chairman J. Christopher Giancarlo; Abigail Johnson of Fidelity Investments; Ronald Kruszewski of Stifel Financial; OMB Director Mick Mulvaney; David Solomon of Goldman Sachs; and Warren Stephens of Stephens Inc.; plus eight in-depth breakout sessions on today's most salient issues including tax reform, cybersecurity, financial regulation and more.
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Now available: SIFMA's Research Quarterly, 1Q 2017
Total long-term securities issuance was $1.85 trillion in 1Q'17, a 15.5% decrease from $1.60 trillion in 4Q'16 but an 11.3% increase year-over-year. Treasury, corporate, agency and equity securities experienced increases q-o-q in the first quarter, while municipal, mortgage-related, and asset-backed securities experienced declines.
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