"The Brazilian pension fund market faces growing longevity risk and the regulator is calling for insurers to create products to address this, which will result in new opportunities for the longevity swap and reinsurance providers to tap into a new geographic region."
"Despite progress in implementing the G20 financial reform program for OTC derivatives, challenges remain, including trade reporting, central clearing and cross-border regulatory coordination, according to the Financial Stability Board’s recent report."
"Given a free choice, banks would probably book all of their trades in a global hub. But growing supervisory concerns, plus shifting rules around swaps clearing and execution, bank resolution, capital and liquidity are producing a more fragmented – and possibly less efficient – model"
"The government of the Philippines is once again contemplating issuance of a catastrophe bond as it looks to boost its ability to finance the nations recovery after impactful catastrophe events, such as typhoons or earthquakes."
"The reinsurance market and its reinsurers are suffering from an identity crisis, increasingly borrowing from the insurance-linked securities (ILS) market as they behave more like ILS players and third-party capital providers, according to rating agency Standard & Poor’s."
"Once again the discussion of exchange-traded weather risk management products for Indian farms, companies and insurers has come to the fore, but this time the plan is for a product to be launched after September of this year."
"There is therefore a mounting industry campaign to delay Trace reporting requirements when trading big blocks of bonds. Asset managers and banks argue this would ameliorate the liquidity crunch afflicting bond markets, at a paltry cost to its transparency. There is some evidence to back them up. A 2013 paper by Paul Asquith and Parag Pathak at MIT and Thom Covert at Harvard Business School looked at the impact of Trace rollout for various segments of the bond market on trading volumes. They found that “price dispersion” fell thanks to the extra visibility, but trading activity also shrank markedly. The impact was particularly sharp for junk bonds."
"A consultation paper was published by the European Securities and Markets Authority (ESMA) to little fanfare last week, but it said it would consider changing the EU's "liquidation period" for derivatives trades so that it falls more in line with the U.S. equivalent."
"Payson Swaffield, chief income investment officer at Eaton Vance, said that market liquidity was already successfully shown during the taper tantrum two years ago. "Since the financial crisis, we have seen a sell-off in four markets: floating rate loans, high-yield, investment grade and muni markets," Swaffield said. "And they recovered within a year," he said, noting investors such as total-return buyers - not dealers - provided most of the liquidity that brought prices back on those occasions. "The fact that markets sell off is not a myth," he said. "The myth is that this is something new.""
"There can be little debate that broker/dealer behavior moving forward will constrained by the regulatory environment. They couldn’t radically expand their balance sheets if they wanted to. With broker/dealers taking less principal risk, the banking system is certainly a safer place. But there is a cost to less liquidity and that cost is increasingly borne downstream by investors."
"The liquidity indicators examined certainly went crazy during the financial crisis and the flash crashes/taper tantrum. But the message is that everything is ok now. This post, and to a large extent the others in the series, present a story of “move along, nothing much really happening here”. Anecdotal evidence we have heard/read is in the other direction."
"The documentary “Steve Jobs: The Man in the Machine” captures, in its succinct subtitle, the contradictions inherent in its subject. Jobs, who founded Apple Computer with his friend Steve Wozniak in 1976, is presented as both brilliant and abrasive: a driven and at times deceitful tyrant whose firm made some of the most beautifully designed consumer electronics of the past couple of decades. All this was accomplished by a businessman who harbored fantasies of becoming a Buddhist monk, even as he authorized strong-arm legal tactics against a lowly tech reporter who dared to write about a prototype iPhone that had been inadvertently leaked before its release."
Collateralized loan obligations that were created after the financial crisis in the U.S. have material exposure to the commodities sector, which poses an increased risk to investors due to the plunge in crude prices.
"If a plan has an “annuity purchasing policy” that meets the requirements prescribed by regulation, payment of all or part of the pension benefit in accordance with that policy would constitutes a discharge. The affected individuals would, however, remain “plan members” for purposes of any surplus distribution upon plan termination within a three-year period following the payment."
"For an institutional market participant in need of a foreign exchange trading counterparty, Wall Street’s so-called Bulge Bracket historically has been the go-to phone call. That dynamic is changing amid market fragmentation and the rise of screen-based trading, and in coming years liquidity increasingly will be found in nontraditional sources."
" On 26 July, the UK Financial Conduct Authority (FCA) formally granted Bloomberg a licence to run a so-called “multilateral trading facility” in the UK."
"Despite these almost insurmountable difficulties, two researchers from the Bank of England have recently made an interesting attempt to identify which secular factors have contributed how much to the approximately 450-basis-point (bp) decline in the global real long-term interest rate since the 1980s (see the two-part post by Lukasz Rachel and Thomas Smith on the Bank Underground blog). I’ll leave it to you to check out the methodology and details and will focus here on the main results: In a nutshell, the study finds that secular trends in desired saving and desired investment can account for 300 bps, or two-thirds, of the decline in real long-term interest rates over the past three decades. Another 100 bps are attributed to slower expected trend growth, and only the remaining 50 bps remain unexplained."
"Fitch Ratings said this morning that it is not convinced that the much-discussed reinsurance pricing floor has been reached, even in property catastrophe exposures and peak lines, with a further single-digit decline expected at the January renewals."
"GC Securities, the investment banking, catastrophe bond and capital markets arm of reinsurance broker Guy Carpenter, said today that it expects the catastrophe bond pricing floor, which was seen during the second-quarter, will persist for the near future."
"A new platform named PACE, launched by global reinsurance intermediary and capital advisor Aon Benfield, has been designed to help reinsurers monitor catastrophe exposures and can also help ILS fund managers to create optimal portfolios of insurance risk."