Tuesday, September 6, 2016

Surprise! Market Theories Fail in Real-World Tests!!

Single-vector studies miss the full picture

Author: Ed Blount

“There is nothing less practical than a bad theory,” wrote CEO Paul Shott Stevens of the Investment Company Institute (ICI) in a July 2016 blog.  Mr. Schott introduced a series of recent findings that the ICI suggests may present a rebuttal to their members of the “first-mover” hypothesis. What is that, one may ask, and why should I care?

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Sunday, July 10, 2016

Dealer-based Execution on Trial

Always Worse than Exchange Pricing?

Author: Ed Blount

Is it true that customers always get a better price for their trades when executions take place on a regulated exchange? That seems to be the premise underlying a putative class action suit filed in federal court last November in the Southern District of New York. Next week, on July 19th, the court and litigants will be developing the pretrial schedule, including discovery and deadlines for naming experts, in what may well be a landmark case for competition in financial services. 

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Tuesday, April 19, 2016

More Challenges for Fund Directors in the New Regulatory Environment

Author: David Schwartz

Securities and Exchange Commission Chair Mary Jo White’s March 29 speech to the Mutual Fund Directors’ Forum can be seen as a showcase of the philosophical differences between market regulators and banking supervisors. For directors, the speech also reveals the sometimes conflicting results of the compliance forces created by these two complementary regulatory systems.

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Saturday, February 20, 2016

Global Financial Reform: Unintended Adverse Consequences in Connected Markets

Author: David Schwartz

Financial markets in the 21st Century are profoundly global.  This fact was amply demonstrated by the 2007 – 2009 financial crisis, which was centered in the banking systems of the developed western economies but transmitted with devastating effect to economies worldwide. And yet, despite the global consequences of systemic risk transmission, the supervision of financial markets remains essentially a national discipline.  

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Monday, June 30, 2014

BIS Sees the Financial System at a Crossroads

BIS's 84th Annual Report Sees Banks Shying from Risk While Asset Managers fill the Gap

Author: David Schwartz

In their 84th Annual Report, the Bank for International Settlements examines the current state of global financial affairs and highlights some trends it sees emerging in the financial framework.  While noting that the overall financial system has has gained some strength since the crisis, banks remain in a rebuilding phase, concentrating  their business models towards traditional banking. Despite their apparent recovery, BIS warns that banks face lingering balance sheet weaknesses from direct exposure to overindebted borrowers, the drag of debt overhang on economic recovery and the risk of a slowdown in those countries that are at late stages of financial booms. They also note that in the current financial landscape, market-based financial intermediation has expanded, notably because banks face a higher cost of funding than some of their corporate clients.  Asset managers appear to have stepped into the gap left by banks in the intermediation markets.  Their rapid growth in this area together with high size concentration in the sector, BIS warns, may influence market dynamics and hence the cost and availability of funding for firms and households.


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