"American and British regulators are likely to charge several banks with rigging interest rates, including Citigroup, the third-largest U.S. bank, and London-based HSBC Holdings, the Wall Street Journal reported on Friday. The U.S. Commodity Futures Trading Commission and the U.K. Financial Conduct Authority were preparing a final round of civil charges against the banks for rate manipulation in the Libor scandal, the newspaper reported, citing people close to the investigation. The Journal said the CFTC was still investigating J.P. Morgan Chase, the largest American bank by assets, but that may not lead to charges. U.K. regulators said last year they dropped their probe of J.P. Morgan. U.S. and British regulators are leading a seven-year investigation into the manipulation of Libor, or the London interbank offered rate."
"LCH.Clearnet has cleared record volumes of interest rate swaps in Australian dollars, Hong Kong dollars and Singapore dollars this year as the clearing unit of the London Stock Exchange Group was recognised by the regulator in Singapore this month."
"The first complete draft of the Princeton Bitcoin textbook is now freely available. We’re very happy with how the book turned out: it’s comprehensive, at over 300 pages, but has a conversational style that keeps it readable."
"Visa is now a major shareholder in Square, the mobile payment services company co-founded and led by Jack Dorsey."
"Some market participants have long argued that the liquidity provided by HFT traders is illusory and difficult to access. But recent research concludes that HFT limit orders exert a stabilizing influence on markets, calling into question the effectiveness and rationale of recent regulatory proposals targeting high-frequency trading."
"As banks continue to retreat from liquidity provision in the fixed income markets, a new market structure is needed, and participants are ready to adopt change, according to Kristi Neller, head of sales, Direct Match. The question is: What will the new market structure look like? Speaking with TABB Group principal and head of fintech research Terry Roche at TabbFORUM’s 2016 fixed income conference in January, Neller says direct market access is increasingly important for buy-side participants. She talks about the challenges dealers are facing in today’s market and the shift of power to the buy side, the increasing role of proprietary trading firms in liquidity provision, and the opportunity for a centralized fixed income marketplace as new technology empowers the buy side to own its executions."
"Ever since the 2008 financial crisis, scores of companies have developed electronic trading platforms, each touted as the better mousetrap that will entice the buy side to come with their trades. The dirty little secret is that no amount of technology can solve this particular problem. Technology is wonderful for aggregating and re-allocating existing liquidity in the market, but it cannot conjure trade counterparties for illiquid CUSIPs out of thin air."
"The deepest, most-liquid debt market in the world is much more shallow than it looks, especially on the most volatile days. While the U.S. Treasury market consists of about 300 different securities, almost 70 percent of all daily activity takes place in the six or so most recently sold bonds and notes, according to Federal Reserve research. The other securities account for about 30 percent of the volume."
"When it comes to residential mortgages, big banks are waving the white flag. Banks originated 74% of all mortgages in 2007, but their share fell to 52% in 2014, the most recent data available from the Mortgage Bankers Association. And it could go even lower."
"Goldman Sachs and Credit Suisse have retained their positions as the top clearers in the US for futures and swaps, respectively, according to data released on Wednesday."
"Feb 11 US Court of Appeals judges questioned how the credit risk of a Collateralized Loan Obligation (CLO) should be calculated during oral arguments for a request by the Loan Syndications and Trading Association (LSTA) to review risk-retention rules and their application to the largest buyer of leveraged loans."
"The market for credit-default swaps has shrunk to a fraction of the size it was before the financial crisis. But these securities, created to insure against default, still can send shivers through markets as a closely watched measure of banks’ creditworthiness."
"Long the exclusive domain of the largest banks, a key part of the U.S. Treasury market is gaining two of the world’s most sophisticated traders. Citadel Securities, the broker-dealer arm of Ken Griffin’s firm, in November broke into a $220-billion-a-day segment of the market traditionally open only to dealers and their customers. Computerized market maker Virtu Financial Inc. is poised to join Citadel there and also enter a planned “all-to-all” venue that mimics the way stocks and futures trade, according to two industry executives familiar with the matter."
"By returning capital to its third-party investors, when it cannot generate adequate returns, reinsurance firm RenaissanceRe hopes to generate loyalty, demonstrate that it works on behalf of its investor-base and encourage them to increase capital commitments when the time is right."
"The biggest U.S. banks, including Bank of America, and payments networks such as MasterCard are applying for more patents than ever before on everything from mobile wallets to blockchain ledgers similar to those used for the digital currency bitcoin. Banks and payments companies were awarded 1,192 patents over the past three years, 36 percent more than the prior three-year period, according to researcher Envision IP."
"Lending Club, the world’s biggest marketplace lender, announced a share buyback programme and stressed its durability in a downturn on Thursday, as it attempted to turn round its free-falling stock price."
"A schism among software developers that threatens the future of bitcoin has broken into the open with Wednesday’s release of a rival version of the technology behind the digital currency. The current version of bitcoin, which is maintained by a fractious group of volunteer developers, is at risk of hitting a wall because of a limit on the number of transactions it can handle."
"The possibility of permanently inhibiting the market making capacity of large banks, with dire consequences in terms of under-provision of market liquidity, has been repeatedly raised. This paper presents systematic evidence from four different estimation strategies of the absence of breakpoints in market liquidity for fixed-income asset classes and across multiple liquidity measures, with special attention given to the corporate bond market. The analysis is performed without imposing restrictions on the exact dating of breaks (i.e. allowing for anticipatory response or lagging reactions to regulation) and focusing both on levels and dynamic latent factors. We report both single breakpoint and multiple breakpoint tests and analyze the liquidity of corporate bonds matched to their main underwriters making markets on those assets. Post-crisis U.S. regulatory intervention does not appear to have produced structural deteriorations in market liquidity. "
"Research from academics asserts that post-crisis US regulatory intervention – in particular the Volcker rule – has not resulted in structural deteriorations in market liquidity for fixed income asset classes."