"Cornering a market is tricky because the more successful you are at doing it, the more you become the market. It moves as you move. As you buy, prices move disproportionately upward. When you sell, prices can fall quickly and dramatically. The Corner is not a problem as long as big investors continue to buy and hold corporate securities. The Corner will become a problem if something—such as an interest rate rise or nervous retail investors—sparks a forced and sudden rush for the exits."
"In June, Standard Chartered sold a credit linked note issued to protect the mezzanine tranche of a $3bn portfolio of trade receivables. And on Tuesday, Raiffeissen Bank International announced it cut by about €340m, its risk weighted assets by selling the junior risk piece of a synthetic securitization linked to commercial real estate loans to New York based investor Mariner Investment Group."
"Intangible, complex risks to economies, insurers and reinsurers around the world are on the rise, owing to globalisation and heightened interconnectedness, signalling a need for greater data on emerging risks, says Lloyd’s of London Chief Executive Officer (CEO), Inga Beale."
"Wall Street firms have found a new way to profit from consumers with blemished credit who can’t qualify for a mortgage: let them rent a home first with the option to buy it later. Rent-to-own programs, once run mainly by small operators, were popular with cash-strapped consumers during the 1990s. They faded a decade later when easy lending made it possible for almost anyone to buy a home with no money down, but with lenders setting a higher bar, they are making a comeback. For investors, it is a chance to profit off the recovering housing market. Consumers get a chance to lock in a home before they have the money together for a down payment. But the price may be higher rent in the interim and a higher purchase price the longer they wait to move from renting to owning."
"ICE Clear Singapore has signed up its first three clearing members and a custodian bank as it attempts to grow its Asian business."
"U.S. regulators told two insurers and the financial arm of General Electric to upgrade portions of their resolution plans, saying more information was needed to address funding and liquidity."
"Everything from stock to bonds and derivatives could be exchanged and paid for in the same way the cryptocurrency community is executing bitcoin transactions, Masters said. "
"In practice, no single solution will be able to fill the void left by shrinking broker-dealer balance sheets. Instead, a number of new types of corporate bond liquidity pools are emerging, and - in the short-to-medium-term - a continuum of specialist liquidity pools will coexist, maintaining specific features that will complement each other."
"A new venture plans to create a multi-asset, multi-currency institutional payment and settlements infrastructure based on blockchain technology."
As you may have heard, people are worried about bond market liquidity. One problem is that banks don't want to trade bonds any more, because that is not such a good business in the modern regulatory environment. One potential solution for that problem is to have investors just trade bonds with each other, cutting out the banks as middlemen. But it turns out that doesn't work very well, in part because investors don't know how much bonds are supposed to cost, and need banks to tell them:
"You can’t blame the big banks for trying to preserve their privileged market position. For the rest of us, though, times are changing for the better. Rather than moving backward, let’s build a level playing field across all fixed-income markets that cultivates competition and drives innovation. That’s the surest way to increase liquidity, reduce risk and establish conditions that are fair for all investors—during periods of market tranquility and market turmoil."
"A host of new electronic fixed-income trading platforms have cropped up in recent years, aiming to connect buyers and sellers in a liquidity-challenged corporate-bond market. But new research from Greenwich Associates suggests that adoption and use of the new platforms has been spotty thus far."
"Bondcube was designed as a dark pool for debt, where banks or investors could leave indications of interest for the exact bonds they were looking to buy or sell. When an order matching the resting order came in, both sides were notified. That’s where the lack of reliable pricing hurt the venture, because there often were no independent marks to use for negotiating."
"The Financial Stability Board, the international body that monitors the global financial system, said authorities have challenges accessing, using and aggregating trade reporting data."
"And yet, eight years after mobile money revolutionized Kenya, the country remains an outlier. A number of other African countries have tried to get similar systems off the ground, but none has enjoyed Kenya's astonishing levels of success."
"Finally, imposing obstacles for firms that wish to centrally manage their exposures does not decrease risk. It actually reduces operational efficiency, increases costs and works to increase risk with no countervailing benefit. Ultimately, it may hamper the ability of banks to provide products in certain markets that can only be accessed through an affiliate, as the cost of posting inter-affiliate margin would make these products uneconomic. The result would be a further fragmentation of markets and reduction in liquidity."
"Simply put, the growth of the credit markets have not been matched by the addition of research resources (e.g., credit analysts) in many of the silos. Global banks are an obvious example, but a quick graph of employee growth across US banks, brokers, asset managers and rating agency types illustrates the reality that some investors have not added the resources necessary to do the fundamental credit work for today’s bloated HY market"
"One senior New York banker says: “People are beginning to wake up to this network effect. For example, if there is a defaulting member (ie a bank) that is dealing in yen swaps, we are talking about supporting a default on a Japanese CCP (JSCC)on the LCH in London and on the CME in Chicago. It will have a global impact and will require global resources from non-defaulting members.”"