Week InReview

Wall Street fears the end of an era

Some of the world's largest banks suspect that interdealer brokers - who only broker trades between banks - may secretly be allowing buy-side clients to trade in the interdealer market.

"The traders aren't claiming any laws are being broken. But they say that - in addition to their own profits - it's threatening long-standing conventions that have helped maintain market integrity and liquidity. One senior trader at a French lender said banks often try to buy or sell bonds for clients in the interdealer market, and if those investors are also present on the platforms then their ability to trade will decrease."

Friday | Sep 21, 2018
'We're using the future for a fiscal dumping ground.' Beware trillion-dollar deficits.
As the national debt climbs to once unheard-of levels, no one seems to care. Bold action is needed before time runs out. (Barron's | Sep 20)

Looming money-market shift has big implications for risk assets
When the Federal Reserve makes its forecast interest-rate increase next week, it will take the benchmark above core inflation for the first time since 2008. Money market funds, the bank-deposit alternatives that invest mainly in very short-dated securities, are already enjoying their longest streak of inflows since the global financial crisis. (Bloomberg Markets | Sep 20)

Surge in black-swan hedging casts shadow over U.S. stock rally
The underbelly of the options market is flashing a warning sign for U.S. stock bulls. As global trade skirmishes intensify and valuation fears stalk technology stocks, investors are forking over cash for tail-risk protection, even as Wall Street's traditional fear gauge sits at muted levels. (Bloomberg Markets | Sep 17)
Banks race to meet new capital standards
Only 44% will be fully ready for FRTB
(Sep 17) -- Many banks  may not  meet new capital standards that are still three years away from hitting their trading desks. Forty-four percent of respondents in an IHS Markit Ltd. survey of executives at global banks said they'll be fully ready to deal with the impact of the market-risk standards from the Basel Committee on Banking Supervision that are scheduled to take effect in 2022. 

Under the rules, many banks will face higher capital requirements and restrictions on the models they use to assess the risk that bonds, derivatives and other securities plunge in value. The standards, known as the Fundamental Review of the Trading Book, will lead banks to spend $40 million to $99 million each to upgrade technology and systems to comply, according to the survey of 34 risk managers published on Monday.

Among the most complicated of the changes is a requirement that banks amass more data about the value of securities that are traded infrequently.
Capital change for commercial real estate
Bank agencies propose new rule
(Sep 18) -- U.S. banking regulators issued a notice of proposed rulemaking Tuesday to revise capital treatment for high volatility commercial real estate, as required by a recent law overhauling the Dodd-Frank Act.
  • Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp. will accept public comments for 60 days on changes in capital rules meant to reduce burdens on banks.
  • New law required regulators to narrow capital requirements on such loans and expand exemptions.
  • Earlier: Bill Summary: Senate-Passed S. 2155, Bank Regulation.
The Cyber Cafe
Cybersecurity news every Friday
Banks, insurers get better at blocking hackers' cyberattacks
Banks and insurers managed to stop 81 percent of attempted cyber attacks last year, improving the rate by 15 percentage points from a year earlier as the industry continued to increase funding for information security.

Thinking of hiring in-house cyber counsel? Here are some tips.
In boardrooms across the nation, there is one risk that stands above all others: cybersecurity. As an ever-evolving threat, companies and the legal profession must also evolve to meet it. A  growing number of companies are looking to hire in-house cyber counsel. But while the demand for bringing this role in-house has increased, many companies don't understand its nuances.
Binge reading disorder
Hand-curated, chosen with love
Spock's home world has been discovered (sort of)
Gene Roddenberry, the creator of  Star Trek , was visionary in many ways: The Enterprise crew's communicators presaged today's smartphones, Bones's sickbay mirrored in modern medical scanners, and, well, we're still working on that transporter. Now, it seems he accurately predicted a location for science officer Spock's home planet, Vulcan.

When it comes to keeping your digital files safe, follow the 3-2-1 rule
Coined by photographer Peter Krogh and now widely respected, the rule goes like this: Have at least three copies of everything, on at least two different types of media, at least one of which should be somewhere else.
Transparency.
Inclusiveness.
Consensus.