Liquidity, Leverage and Securities Lending CCPs

Securities lending CCPs are at the intersection of major changes to liquidity and leverage in financial markets. Aside from requirements for increasing bank capitalization, Basel III is introducing new liquidity metrics such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). These shake-ups have already begun to change relationships between borrowers and […]

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More innovative products and ideas in securities finance

It is no secret that regulatory change brings out innovation (necessity and all that). Lately we’ve been seeing more proof of this in the securities finance space. Besides product launches in counterparty exposure management and ideas on centrally cleared repo, an interesting speech on innovation from a senior custody exec caught our attention. Here’s an […]

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“Embedded Financing: The Unsung Virtue of Derivatives”: An article from the Journal of Derivatives that every securities financing professional should read

Earlier in the summer there was a paper in the Journal of Derivatives that every person in securities financing should read. It is called “Embedded Financing: The Unsung Virtue of Derivatives” by NYU Stern Professor Bruce Tuckman. Let us explain.

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What happens when derivatives trading has more volume than the underlying? Is this the future for bond markets? (Finadium subscribers only)

The short answer is that the markets get messy and uncertain; we’ve seen this before with Fed Funds and OIS. Now the same situation could occur with US Treasuries, Gilts, other OECD government bonds and corporate bonds. What are the implications for this new market dynamic?

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Citi report on hedge funds and collateral: modeling an efficient counterparty

Citi Investor Services released a big hedge fund study, “Opportunities and Challenges for Hedge Funds in the Coming Era of Optimization,” the other week. While much of this contains older news, there are two things worth pointing out: Citi’s breakdown of asset manager needs for financing and an illustration of what being an efficient financing counterpart […]

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The Economist writes about repo: “Neither liquid nor solid” and blames tight specials markets on regulatory change. Sorry, but no.

Repo seems to be getting a wave of confusing press. An important article by virtue of its large circulation was in the July 12th Economist, “Neither liquid nor solid”.

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FRB-NY’s Liberty Street Economics on repo: “Lifting the Veil on the U.S. Bilateral Repo Market”

The latest post on the FRB-NY’s Liberty Street Economics blog is “Lifting the Veil on the U.S. Bilateral Repo Market”. Written by Adam Copeland, Isaac Davis, Eric LeSueur, and Antoine Martin, it addresses some important issues on sizing and composition of the repo market. It is worth a look.

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Wednesday News Roundup: repo failures, Germany collateralizes, bank benefits from collateral (Finadium subscribers only)

Some new and compelling news stories over the last week spark up talk about shifting collateral needs, and more importantly, fundamental changes to bond market liquidity that we could impact securities finance in a profound way. Here is our take:

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Finadium: Leading Asset Managers on SecLending and Collateral Management

Finadium has released its seventh annual survey of fund managers and insurance companies in securities lending. This year’s survey tackles some challenging topics including the value of agent lender indemnification in a CCP environment.

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Zoltan Pozsar’s new paper “Shadow Banking: The Money View”: some very interesting ideas on how to use the Fed’s RRP program

Zoltan Pozsar, one of our favorite economists, has written a new research piece “Shadow Banking: The Money View” (July 2, 2014). He has some fascinating ideas on the Fed’s RRP program and shadow banking.

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