Week InReview | SEC rule will require verification of swap transactions  | Dollar's influence on global finance seen in FX anomaly: BIS  | SEC investor panel pushes for bond cost disclosures  | ICYMI  | And another episode of 'Brex & the City' in Binge Reading Disorder

Friday, June 10, 2016
Let's recap
In case you missed it . . .
Debt traders miss credit default swaps as losses loom  (FT subscription required) (Jun 9)
Swap parties must verify details
SEC adopts new rule
(Jun 8) Under new  Securities and Exchange Commission trade acknowledgement and verification requirements for security-based swap transactions,  participants will have to acknowledge the details of trades to their counterparty, which must then verify or dispute the acknowledgement.  The rule won't take full effect until the agency finishes other Dodd-Frank Title VII requirements, including capital, margin and segregation requirements and record-keeping and reporting requirements for security-based swap entities.
The global FX anomaly
Dollar's influence seen: BIS
(Jun 8) The elevated cost of borrowing dollars from currency swaps compared with Libor rates shows tighter dollar liquidity is squeezing dollar liabilities that were built up in the years when the greenback was weak, according to a paper by Hyun Song Shin, head of research at Bank for International Settlements. The report indicates:
  • That although the cost of borrowing dollars using FX collateral in cross-currency swaps should be consistent with the cost of borrowing in the interbank market, interest rates implicit in FX have been abnormally high against the yen, euro, and Swiss franc
  • Triangle that links a stronger dollar, more subdued dollar cross-border flows, and a widening of the cross- currency basis against the dollar
  • EUR, JPY are following footsteps of USD as international funding currency during periods of weakness. Increasing EUR, JPY borrowing outside of home country may cause monetary spillovers at time when ECB, BOJ carry out monetary easing
Bond cost disclosures
Push by SEC's investor advisory panel
(Jun 7)  The Securities and Exchange Commission's Investor Advisory Committee recommended  that the agency work to give bond buyers more information about transactions costs before they purchase the instruments.  Dealers should be telling retail investors more about fees, commissions, markups and markdowns as part of a greater push toward price transparency in fixed-income markets, the committee said. The advisory committee's recommendation isn't binding on the SEC, but Chair Mary Jo White said she largely agrees with it.  The recommendations build on work by the Municipal Securities Rulemaking Board (MSRB) and Financial Industry Regulatory Authority (FINRA). Both groups have issued rules and guidance dealing with best-execution requirements in municipal bond transactions.
Binge reading disorder
Hand-curated, chosen with love
Will Brexit endanger Britain's famous pork pies and real ale? Regional producers wonder what happens to special protection from foreign rivals should Britain vote to leave the European Union

There are seven words I am not permitted to utter in front of my kids: Stife, Clutch, Fire, Dope, Swag, Fo' Shizzle and Chill
 
Emperors of banking have no clothes

To increase well-being, train your brain

8 bad habits that destroy your creativity
- Inc.
Transparency.
Inclusiveness.
Consensus.