Oxymoron of the year

“Self regulatory organisation.” From Bloomberg: The botched initial offering of Facebook Inc. (FB) is the catalyst that should lead to U.S. exchanges being stripped of self-regulatory powers and their related benefits, a Credit Suisse Group AG (CS) executive said. Nasdaq Stock Market’s claim of immunity from liability for $500 million in brokerage losses stemming from […]

Our likely speed between now and the new year

No Good Deals–No Bad Models

From Boyarchenko et al. (HT Alea): Faced with the problem of pricing complex contingent claims, investors seek to make their valuations robust to model uncertainty. We construct a notion of a model-uncertainty-induced utility function and show that model uncertainty increases investors’ effective risk aversion… the impact of model uncertainty is to give greater weight (i.e. […]

Bleak midwinter in the swaps market

Bloomberg has a story on what it terms the looming swaps armageddon. I would not perhaps go that far, but the article is interesting. I was spluttering at the first part of this sentence from Bloomberg about OTC derivatives clearing “This arrangement can withstand almost any shock, including defaults by four of the biggest lenders,” […]

Happy Christmas to one and all

DEM will be back after the holidays. Meanwhile, best wishes for your holiday, wherever you are spending it.

Hyperbolic but not altogether inaccurate

Felix Salmon on the ICE purchase of NYSE Euronext: Exchange mergers… aren’t actually boring at all: they’re an indication that the financial-services industry is desperately trying to protect the rents it can collect by means of consolidation. There are lots of stock exchanges, and none of them make much money. By contrast, there are relatively […]

Higher education bon mot of the week

From Worthwhile Canadian Initiative: we’re teaching students what we want to teach. Sometimes that’s what students want to learn. Sometimes it’s not.

Born in the USA

If you weren’t, and you are a bank, times are about to get tougher. From a Shearman & Sterling memo on the FED’s latest announcement on the regulation of foreign banks in the US: [It is proposed that] foreign banks under Federal Reserve supervision be subject to requirements that (1) they establish a US intermediate […]

Pot pourri

A mixture today: From a Bloomberg story as part of their America’s Great Payroll Giveaway series: “There’s a mythology promulgated by people in administration that you have to pay competitive salaries to attract the best people,” said Benjamin Ginsberg, political science professor at Baltimore-based Johns Hopkins University and author of a book detailing how universities […]

$800B, twice

From the FT: US banks are making a last-minute push to ease new global liquidity requirements, arguing that they would need to come up with an additional $800bn in easy-to-sell assets under the proposed standards. While ISDA says that the impact of requiring initial margin for bilateral transactions with a $50M threshold and assuming everyone […]

It’s cold out… but the ice is lovely

I’m somewhere fairly chilly right now, but the morning sunlight glinting on the ice is beautiful, and there is plenty of good coffee back inside. Even DEM needs something with more warming power than a Macchiato on days like this. That is real snow falling in the picture, and accumulating on the ice floes…

Higher capital requirements = Lower ROE = Less valuable clearing house

The FT reports that the London Stock Exchange and LCH.Clearnet are in talks about changing the terms of their €463m deal: The two parties have been thrown by tough new European rules forcing clearing houses to hold more capital. LCH needs to raise up to €375m to meet the new rules. Oops.

Answers, round 3

Here are the answers for the regulation round. Yes. Probably 100% as there is no ruling in the text, so the default is ‘other’. Whether this was intended or not is unclear. Residential mortgages. 1 day and either 5 or 10 days depending on whether the swap is cleared. Can we all say `futurisation’? 0.56% […]

Answers, quotation round

Simon H did the best job on this round, but many other people did well too. The answers are: The correct answer is the BCBS and IOSCO, as BCBS 226, Margin requirements for non-centrally-cleared derivatives, from which the quote comes is jointly authored by those two bodies (hence the SEC dissent so eloquently rendered in […]

Answers, picture round

The picture round was pretty easy, mostly. Shot 1 was indeed sunrise over Logan airport, outside Boston. Shot 2 was the BIS, HypoVereinsbank (now part of Unicredit), and Goldman. Unicredit continues to have a rather low price/book ratio (around 0.35 when I was writing the quiz); Goldman’s ability to keep the lights on during Sandy […]

Light posting – and a quiz to keep you (somewhat) amused

I am trying to finish something, so things will be a little quiet here for a while. I’ll also be travelling, too, so let me leave you with sunrise over the Eastern seaboard* and a few other things besides. The DEM seasonal quiz consists of three rounds. Picture round. 1. Which airport is this? (Hint: […]

Licensing tax advice

We are finally seeing the beginnings of a backlash against the kind of aggressive tax planning that is commonplace among multi-nationals and which has done so much to increase deficits and inequality. In this context, I have a modest proposal: license tax advice. We could proceed as follows. First, giving tax advice to corporations or […]

The sad state of the Guardian

These are the top five stories on the Guardian website at the moment. Three about two young people who seem to have done something quite a few young people are reasonably adept at, one speculated about the future of a football manager, and one a story about a unicorn. The Guardian was a serious paper […]

Natural monopolies and vertical integration

The SWP has a post here on the on-going swap data repository mess (SDR) in the US. I admit to not having fully thought through the pros and cons of vertical integration in this space, although I do have concerns about the monopoly issues that come with vertical integration, so I won’t comment on the […]

Community service, and economics too

The University of Missouri at Kansas City has its own currency. It’s called the buckaroo, and it teaches students about currencies, while encouraging them to do community service. Warren Mosler explains: All students are required to submit 20 buckaroos by the end of the semester to get their grades. Buckaroos can be earned by doing […]