Morning Bell

• U.S. judge strikes down CFTC's position-limit rule
  Citing deficiency in regulators' justification for restricting bets in commodities, U.S. District Judge Robert Wilkins rejected a position-limit rule from the Commodity Futures Trading Commission. The Dodd-Frank Act does "not constitute a clear and unambiguous mandate to set position limits," as the CFTC had argued, Wilkins ruled. "The position limits rule would adversely impact commodities markets and market participants," according to a statement from SIFMA and the International Swaps and Derivatives Association. "We are pleased that the rule has been vacated." Read SIFMA's comments on the ruling. The Wall Street Journal (9/28), Bloomberg Businessweek (9/28), Reuters (9/28), The Hill/On the Money blog (9/28), Financial Times (tiered subscription model) (9/29)     

Industry News

• Mortgage-bond market is riddled with angst
  The $5 trillion market for mortgage-backed securities has been on a tear since the Federal Reserve announced its third round of quantitative easing. However, optimism is now starting to become pessimism as the market has given back some of its gains. Some of that is attributable to profit-taking. Still, many investors aren't ready to jump out of the market, believing the simple laws of supply and demand should prevail. The Wall Street Journal/Real Time Economics blog (9/28)     

• Fed's quantitative easing helps boost CMBS market
  The market for commercial mortgage-backed securities has increased since the Federal Reserve announced a third round of quantitative easing last month. For example, last week, JPMorgan Chase priced the public part of a $1 billion CMBS conduit at a spread that hasn't been this tight since 2007, which indicates sharp demand by investors for this kind of paper. Reuters (9/28)     

• Exchanges and others offer proposals to make trading safer
  Nasdaq OMX Group, NYSE Euronext, the Financial Industry Regulatory Authority and major broker-dealers proposed controls to cut off a financial company's ability to trade if it accumulates too large of a position. They are also considering further measures to be implemented at a central repository where all trades could be settled. Traders Magazine Online (9/28), Financial Times (tiered subscription model) (9/29), The Wall Street Journal (9/28)     

• Pursuit of returns leads to higher risk for investors
  High-risk instruments are making a comeback as traditional investments prove increasingly less lucrative. Pressure to generate decent returns might be luring managers into perilously deep waters. "I would not be surprised if some managers are reaching outside of their expertise for a few extra basis points," said Bonnie Baha, a portfolio manager for DoubleLine's Global Developed Credit strategy. Reuters (9/30)     

Washington Roundup

• Administration of Libor will be put up for bid, FSA says
  Martin Wheatley, managing director of the U.K. Financial Services Authority, said governance and administration of the London Interbank Offered Rate will be put out to tender. "It is essential that the conduct of a new administrator should be rigorous and transparent," Wheatley said. Meanwhile, regulators in Europe, Japan and the U.S. said the FSA's recommendations will provide a model for their efforts to reform interbank-lending rates. "The overriding priority should be to ensure the integrity and efficiency of the global financial markets, which means that the key benchmark indices around the world need to be subject to consistent, transparent and sound policies," GFMA CEO Simon Lewis said. Financial Times (tiered subscription model) (9/28), Risk.net (subscription required) (9/28), Financial News Online (U.K.) (subscription required) (9/28), Financial Times (tiered subscription model) (9/28)     

• FSOC will let companies know they're on SIFI radar
  The Financial Stability Oversight Council voted to notify the companies it is considering designating systemically important. However, the FSOC said it will not release names publicly until it has finalized a list. The designation means greater supervision by the Federal Reserve and stricter liquidity and capital rules. Reuters (9/28)     

• Idea to float the NAV gains support
  Securities and Exchange Commission Chairman Mary Schapiro and Republican Commissioner Daniel Gallagher late last week endorsed a floating net asset value for money market mutual funds. Their support came a day after Treasury Secretary Timothy Geithner pushed for the SEC to pursue it. The industry, for the most part, has called such a change "untenable." The Wall Street Journal (9/28)     

• BABs in jeopardy as "fiscal cliff" looms, SIFMA warns
  SIFMA warned its members late last week that customers who bought Build America Bonds could see the instruments "called in January for a price substantially less" than was paid. That could happen if Congress doesn't address the "fiscal cliff" of tax increases and spending cuts, and government subsidies of the bonds are no longer funded. "The purpose of the notice is to urge our members to examine the bond documents associated with bonds trading in the secondary market to determine the redemption risks, and to inform their customers ... that there may be redemption risks association with the bonds they buy," said Michael Decker, co-head of municipal securities at SIFMA. The Bond Buyer (special access for readers of SIFMA SmartBrief) (9/28)     

• SEC faces criticism for inaction on HFT concerns
  The Federal Reserve Bank of Chicago expressed concerns to the Securities and Exchange Commission about high-frequency trading more than two years ago. The SEC is taking a closer look at the strategy, prompting criticism from those who say the agency has been slow to respond. The SEC is meeting this week to discuss technology glitches that have affected trading and how to rein in super-fast computerized trading. Reuters (10/1)     

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Hot Topics

Top five news stories selected by SIFMA SmartBrief readers in the past week.

• SEC examines automated trading and systems that control it (The Wall Street Journal)

• Privacy laws present compliance challenge for securities firms (InvestmentNews)

• Rep. Frank calls for action on forex swaps exemption (Bloomberg)

• Geithner: Money-fund reform should be taken up by risk council (Reuters)

• Lehman Brothers lives, for now (Bloomberg Businessweek)

• Results based on number of times each story was clicked by readers.

SmartQuote

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