Seeing the flow

An 1/8th of a second exposure gives a novel view of white water.

Meet the world’s worst central banker

I won’t keep you in anticipation: the title is from the Atlantic, and it’s the Bundesbank’s Jens Weidmann. Now, worst is perhaps a stretch, but he is certainly the world’s most dangerous central banker. As the article explains: As Germany’s member of the European Central Bank’s (ECB) governing council, Weidmann has opposed doing anything to […]

So about those Ozzie swaps

From the Wheatley review final report: 5.9 Therefore, the Review recommends that the number of currencies and tenors for which LIBOR is published be reduced. Specifically: publication of all LIBORs for Australian Dollars, Canadian Dollars, Danish Kroner, New Zealand Dollars and Swedish Kronor should be discontinued; for remaining currencies, publication of LIBOR for 4 months, […]

Go, Europarl, go

The European Parliamentary Committee on Economic and Monetary Affairs today voted 45-0 to place limits on high frequency trading. The vote is preliminary, but it is encouraging. As Bloomberg tells us: Lawmakers backed a range of curbs on high-frequency trading in today’s vote, including a rule that orders must be kept in the market for […]

CDX HY to include non-traded names

This, from the FT, is deeply amusing: Wall Street financial engineers have devised a new way to combat declining trading in the credit derivatives market – they are revamping an index to add financial instruments that do not exist… Markit, will cross a Rubicon and begin to include three companies in its North American high-yield […]

Carrots and capital

A nice observation from Paul Fisher, Executive Director, Markets at the Bank of England: One of the challenges facing macroprudential policy is that the instruments may not be symmetric in their impact. Put crudely, we can make firms hold more capital and liquidity when the going is good. We can’t force them touse those buffers […]

HFT as hacking

A nice analogy by Mark Cuban: The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, high frequency traders do the same thing. A [black hat] hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. […]

Why I still shoot film

Most of the shots I post here are taken with a small digital camera – a Canon S95 – which I then downsize in photoshop. However, I do have, ahem, a slightly larger camera. Well a few of them actually, and one is really not that small at all*. Here’s something from one of the […]

Pricing and marginning liquidity risk

Back in the mists of time, I heard about a trade whereby a Japanese fund paid an investment bank a (small) fee in exchange for the promise that they would make a quote on a large portfolio of illiquid equities if requested to do so. The bank didn’t promise to quote ‘at market’, just that […]

Hoenig’s Back to Basics

If you are my age or older, and you were in the UK in the early 90s, the phrase ‘Back to Basics’ inevitably brings back memories of John Major and his failures. Let’s leave behind that unfortunate association, and allow Bloomberg to tell us about Hoenig’s position: Global bank regulators should scrap Basel capital rules […]

European dividend arbitrage estimated to be worth $500B – and falling

Index Universe reports: The imminent closure of a tax loophole driving the so-called “dividend arbitrage” business in European equities will cut off a major source of ancillary revenues for the region’s ETF issuers, says Josh Galper, managing principal of Finadium LLC, a consulting firm. Dividend tax arbitrage—moving equity holdings between different jurisdictions, often via securities […]

The season of mists…

… and mellow fruitfulness. Autumn is here (and there too).

Make everything as simple as possible, but not simpler

Andy Haldane gave a much commented upon speech at Jackson Hole this year. (See here for a reasonable summary.) I’ve been a bit late in commenting on it as the details are delicate. The headline is ‘bank regulation is too complex for its own good’, and the argument is interesting, but Haldane does not prove […]

Why letting oil guys play with radioactive isotopes might be a bad idea

You cannot make this stuff up. From the Guardian story: Halliburton has lost a seven-inch radioactive rod somewhere in the Texas desert… The rod, which contains americium-241/beryllium and is stamped with a radiation warning symbol with the words “Danger Radioactive: Do not handle. Notify civil authorities if found”, was lost during a 130-mile journey between […]

Accounting fail of the week

I love demonstrations of how far accounting diverts from reality like this from Jonathan Weil at Bloomberg: At Hudson City Bancorp Inc. (HCBK), one of New Jersey’s largest lenders, the balance sheet was so detached from reality that the company agreed last month to sell itself to M&T Bank Corp. (MTB) at a 20 percent […]

Banking? Forgedaboudit – Goldman

From Bloomberg: New bank regulations and capital requirements are “structural” changes to the industry that are more to blame for declining profits than the U.S. economic slump, Goldman Sachs analysts said [in a note] … More than half of the top 25 U.S. banks aren’t earning enough to cover their cost of capital, leading to […]

Bank spreads vs corporate spreads

FT alphaville had this as their chart of the day: Now, there is a lot going on here including deleveraging, corporate cash hoarding, bank use of collateral (reducing the assets available in bankruptcy to support senior debt holders), increasing mortgage quality, and changes in bank resolution & regulation. Still, it’s an interesting chart.

Collateral transformation

Bloomberg updates us on this continuing story: Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets […]

What is liquidity in a financial asset and why would you want it?

Lisa at FT Alphaville, linking to some Citi research, suggests that there are the following measures for bonds. The italics are Lisa’s comments; mine are in roman. Absolute number of block trades. These are defined as a trade size of over $5m for high-grade bonds, and $1m for high-yield. Once they have the count over […]

EU Basel 3 miss

FSA says: The draft European Union legislation to update the capital requirements framework, known as CRD IV1, has been under discussion between the European Parliament, European Commission and Council of Ministers. These discussions originally aimed to finalise an agreed position by end June 2012 enabling adoption by the European Parliament plenary in early July 2012. […]