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How Futures Can Steal Market Share from Customized Swaps
Many people underestimate the threat that futures markets pose for the OTC swaps industry because they have been suckered into thinking of swaps as carefully custom tailored instruments. It’s true...
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Congressional Intent & Futurization
The Capital Markets subcommittee of the House Financial Services Committee held a hearing yesterday on the derivatives portion of the Dodd-Frank Act — Title VII. The question of the futurization of...
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Futurization wheat and chaff
Finally, a journalist has located a real cost of futurization, as opposed to the many imagined ones.
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Prop Trading at JP Morgan
JPMorgan’s management released its Task Force Report (Report) on the trading losses at its Chief Investment Office (CIO). It’s very clearly written tick-tock and provides a good account of how various...
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3 points on the futurization of swaps
Today, the CFTC is hosting a Roundtable on the “Futurization of Swaps.” More than 30 people from various parts of the industry are speaking. I’m on the first panel. Here are 3 points I’ll be making: 1....
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How large is the taxpayer subsidy to Too-Big-To-Fail banks?
The issue came up yesterday when Fed Chairman Ben Bernanke testified before the Senate Banking Committee. Senator Elizabeth Warren cited a Bloomberg report that put the number at $83 billion to the 10...
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Margins, Liquidity and the Cost of Hedging
Our paper on end-users and the cost of margins is now out in Morgan Stanley’s Journal of Applied Corporate Finance.
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CSI: prop trading investigation squad.
Does JP Morgan’s derivative portfolio hedge its other lines of business? This picture says ‘no’. Does JP Morgan’s use derivatives to make prop trade bets on interest rates. This picture suggests ‘yes.’...
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Would you like fries with that McSwap?
Last week the OTC swaps market took a big step towards the creation of standardized interest rate swaps. Pushed by the buy-side, ISDA developed a “Market Agreed Coupon” or MAC contract with common,...
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Be careful how you swing that hatchet!
During last year’s debate about the Volcker Rule, Morgan Stanley commissioned a study by the consulting firm IHS that predicted dire consequences for the U.S. economy. I called the study a hatchet...
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The Value of Clearing Derivatives
What are the costs and benefits of the reform of derivative markets now taking place? A report released last week by the Bank for International Settlements (BIS) pegged the central estimate of the...
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Where Are We in the Reform of OTC Derivatives Markets
Here is my take on the current status of the reform. It’s a chapter in a report put out by the Americans for Financial Reform and the Roosevelt Institute titled An Unfinished Mission: Making Wall...
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Never give information to the enemy.
Douwe Miedema of Reuters covered yesterday’s meeting of the CFTC’s Technology Advisory Committee and reports that: The U.S. derivatives watchdog on Monday chided the industry for providing gappy data...
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It takes 2 to tango, and 3 to intermediate.
The Wall Street Journal ran a story last week about Citigroup and Deutsche losing money on the oil hedge they sold to Mexico. The article talks of a loss totaling $5 million on a put sold for a premium...
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Flash Futures
Michael Lewis has written a gripping and penetrating book about high frequency trading and the current state of U.S. equity markets. Lewis, of course, knows how to tell a good tale, so the book is fun...
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End-User Horror Stories #1 – FMC
ISDA, the trade association for OTC derivatives, released a paper today purporting to document the dangers of derivatives reform. As usual, the alleged victims are ‘end-users’, the non-financial firms...
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