Reported through the Wall Street Journal yesterday, the Germans have issued a bond (a German treasury note known as Schatz) with a zero coupon. This is unprecedented in some ways. What it says is that investors are so desperate that they are willing to forfeit any yield for the privilege of parking their funds for two years in what they see as safe assets as escalated debt crisis in the euro zone continue to play out in contagious and unpredictable ways. What’s driving demand? Between...

As the European and US authorities are trying to regulate pretty much everything in the financials industry in their “Prudential Regulation” stance to prevent our economies to implode, unregulated entities are thinking about getting a regulated status.. In the news today there is rumour that ICAP, one of the leading inter-dealer broker in the OTC derivatives space, is assessing whether they should buy the Plus Market,  the UK exchange for fledgling companies that is planning to...

Fidelity Mutual Fund, which started its India operations in 2004, recently announced its decision to quit the Indian Mutual fund industry. L&T Finance, a subsidiary of L&T Finance Holdings Ltd., is likely to acquire Fidelity’s India business. The new entity is likely to have a 2% market share and 13th position in the industry in terms of asset base. This will be L&T’s second acquisition in this market after the acquisition of DBS Chola Mutual Fund in 2010. India’s...

Yesterday, the Bank of International Settlements released consultative document sets out a revised market risk framework that proposes a number of specific measures to improve trading book capital requirements. (BIS Fundamental Review of the Trading Book) Amongst the points to consult on is whether to replace the “poster child of failure in the 2008 financial crisis”, value-at-risk (VaR) measure, with  expected shortfall (aka CVaR), a risk measure that better reflects “black...

I have seen several impressive examples of wealth managers leveraging social media technology by using games and establishing interest groups/public communities to expand its relationships with clients. For example, HypoVereinsbank has created a Facebook page and a “Youth Culture” blog, which features fashion discussions, concert ticket giveaways, information on upcoming festivals and on art collections at the bank, etc.  Wells Fargo has been very active in setting up interest group blogs not...

The Indian capital markets regulator, SEBI, is talking reforms as it recently announced a blueprint that is potentially set to increase competition among exchanges. The regulator’s stance on increasing competition and allowing foreign investment in exchanges was closely anticipated in recent months, especially among large global banks. SEBI had to address pressing concerns on attracting foreign investment (Figure indicates the drastic fall in FII inflows into India in 2011) and failing to keep...

  During my last post, I posited a question that many wealth managers are considering when it comes to social media: How do we measure influence?  What happens when a peer (John Doe) on a social networking forum says something that contradicts your advisor’s opinion? If John Doe has 1,000 followers, will that make his opinion more trustworthy than if he had 200 followers? Is there a tipping point where if John Doe says something enough times or has enough followers your advisor will find...

CA Cheuvreux, the agency broker owned by Crédit Agricole, will this week relaunch Blink, its broker-crossing network, as a multilateral trading facility (MTF) aimed at institutional investors and retail. The Blink-MTF will trade 1,700 stocks across 14 European markets, after receiving approval from UK authorities. However, it aims at differentiating itself from rivals Bats and Chi-x Europe by excluding the proprietary trading desks of big banks and high-frequency traders. The launch of yet...

European corporates have found a new way to finance themselves: issuing bonds on regulated markets. Indeed it is reported that during the first quarter of 2012 European Corporate Bond Issues have over-passed European Bank loans. Historically European corporates would typically have used market funding for only 9% of their debt, vs. their US counterparts at 64% of their debt coming from bonds. The latest ECB LTRO will realistically not have any impact on real economy financing so the Debt...

Blackrock Solutions recently announced it had set up a bond crossing network with the working title “Aladdin Trading Network”. The idea is that the buy-side would be able to anonymously cross corporate bonds, mortgage securities, or other fixed income instruments, bypassing dealers for some portion of their trading lists. The announcement has attracted a lot of US press, but market participants should understand that neither the theory nor application of the crossing concept is in any way...