What is the right business model for FI: agency, principal or a mix of both?

Boss playing with employees

Earlier in November there was an interesting article in IFR by Christopher Whittall, “Fixed income trading enters new era”. It was focused on the principal versus agency models in fixed income. It is an understatement to say the fixed income trading and distribution business has undergone dramatic change, driven by cost and regulatory considerations. But not everyone has reacted the same way.

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IMF’s Manmohan Singh on CCPs: an idea for a new layer for the risk waterfall

Manmohan Singh, the IMF economist, has published a new paper “Limiting Taxpayer “Puts”—An Example from Central Counterparties” (IMF Working Paper WP/14/203), November 2014. We have long admired his work on collateral velocity and were interested to see what he had to say about central counterparties.

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The US risk-free reference rate should be the repo rate

The Federal Reserve hosted a meeting yesterday of market participants and regulators on reforming the US risk-free reference rate for USD derivatives. We strongly think that this rate should be the single best reference rate for overnight transactions: US Treasury repo. LIBOR, a triangulated best guess by multiple trading desks, has been good but its time is done. Fed Funds and OIS don’t work either.

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