Wall Street & Technology's OTC Derivatives Weblog

Click iTunes icon or copy url below into your rss reader.

AIG and Backdoor Bailouts?
January 27, 2010 @ 10:02 AM | By Greg MacSweeney

WSJ's Dennis Berman tells Kelsey Hubbard about ongoing investigations into the bailout of AIG, including allegations of a coverup over payments made to some of the biggest banks who had exposure to the collapsed insurer. Was there a conspiracy to pay banks in full, but not make the news of the payments public? But the big questions: where was the Fed when AIG was writing the toxic contracts in the first place? Where was the oversight as AIG took on more and more excessive risk?

Comment on this blog entry


FDIC May Securitize Bad Assets
January 26, 2010 @ 11:32 AM | By Greg MacSweeney

Each time the government seizes a failed bank, taxpayers own more of them. So with five banks recently seized by regulators, what's the FDIC going to do with all those bad assets? It turns out the FDIC is planning on securitizing the assets and selling it off to investors. Sound familiar? But before you think this is just another bad move, the FDIC actually had great success with this in the 1980s and early 1990s. American Public Media’s Jeremy Hobson reports.

CFTC Chairman Calls for Comprehensive Reform to OTC Derivatives Market
November 20, 2009 @ 11:23 AM | By Greg MacSweeney

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), says that most important thing that needs to happen to the over the counter derivatives market is comprehensive reform. “The number one thing is transparency,” just like when securities are traded in the public market and everyone knows the price and the volumes. “We need to bring that same reform to this large and unregulated market,” Gensler said in an interview with MSNBC. Hear Gensler’s comments on OTC derivatives, futures contracts and more in this brief video clip.

The CFTC’s Warning that Went Unheeded
October 21, 2009 @ 11:01 AM | By Greg MacSweeney

In the following video, PBS’s FRONTLINE takes a look at how the CFTC tried to regulate the derivatives markets back in the fall of 2008. The then head of the CTFC, Brooksley Born, faced pressure from then Fed Chairman Alan Greenspan, Treasury Secretary Robert Rubin and former SEC Chairman Arthur Levitt to stop trying to regulate the derivatives industry. This is the first time that Born speaks out about the opposition she faced from The Fed, Congress and the Clinton Administration. And she warns it will undoubtedly happen again, unless regulations change.

Bet Your Life?
October 12, 2009 @ 10:19 AM | By Greg MacSweeney

Are Life Settlement Securities the next toxic asset? Less than one year after the credit crisis, firms such as Goldman Sachs, Credit Suisse and JP Morgan are creating life settlement securities which are made by repackaging thousands of life insurance policies into tradable securities. Policyholders get money upfront at a fraction of the policy’s value and investors are paid the full value of the policy when the policyholder eventually dies. A no brainer for investors, right? However, DBRS, a credit ratings agency, says that no life settlement security has met its standards for “safety and security” to date. And critics say these products are just like the exotic investments that triggered the financial meltdown. Wall Street claims the products are safe, because they could be structured in a way that not many people of the same age or with the same illnesses would be included in the same security. Now where have we heard that before?

E.U. Unveils Controversial Financial Regulatory Plan
September 23, 2009 @ 11:13 AM | By Greg MacSweeney

Today the E.U. unveiled a plan to overhaul the way banks and financial markets are overseen. Officials hope to present the plan to the G20 in Pittsburgh as a blueprint for averting financial crises. Marketplace's Stephen Beard describes the report.

But will anything actually be accomplished? It’s been more than a year since the credit crisis began and there has been a lot of talk on both sides of the pond about regulatory overhaul, yet nothing has happened. Talk is cheap, but modernizing the regulators so they can monitor today’s (high speed and innovative) financial markets is going to take a lot of work and a huge investment. Simply put, the regulators are not capable of monitoring a mostly electronic marketplace that is getting more complicated and innovative by the day. If lawmakers want to financial regulatory reform, they had better be ready to open the checkbook to the tune of millions of dollars.

Here in the U.S., Congress is beginning two weeks of hearings on banking reform. Treasury Secretary Tim Geithner will defend a plan to merge two of the four federal regulators. But the move is drawing its fair share of debate. Marketplace’s John Dimsdale reports.

Move To OTC Clearing Is Right Says LCH.Clearnet CEO
August 13, 2009 @ 10:34 AM | By Greg MacSweeney

As regulators focus on curbing speculation, the Wall Street Journal chats with Roger Liddell, LCH.Clearnet CEO, about whether things are headed in the right direction. Liddell also reveals plans for forex clearing, and updates on a proposed LCH.Clearnet takeover.

The End Of Wall Street: Why It Happened
July 24, 2009 @ 10:07 AM | By Greg MacSweeney

Here is another well produced and interesting video from the Wall Street Journal about the credit crisis. I don't think there is fresh information here, or breaking news, but the video is easy to watch. Chapter two of this WSJ series takes a look at what was going through the minds of CEOs, corporate boards, fund managers and mortgage lenders as they created hard-to-understand derivatives Warren Buffett once called "weapons of financial mass destruction."

The Most Sweeping Changes to Financial Regulation Since the 1930s
June 17, 2009 @ 10:52 AM | By Greg MacSweeney

President Obama is focusing on the next step to fix the financial system: proposing new regulations that are intended to help consumers and put limits on bankers. MSNBC’s Steve Liesman goes over some of the changes, as does CBS News’ Chip Reid in the following videos. Also, new financial regulations will create a new financial consumer protection agency, require banks to carry more capital on their books, regulate derivatives and more, reports American Public Media Marketplace’s Steve Henn in the following audio clip.

Watch CBS Videos Online

The Man Who Knew About Madoff Before Anyone Else
June 15, 2009 @ 06:34 AM | By Greg MacSweeney

Harry Markopolos repeatedly told the Securities and Exchange Commission that Bernie Madoff's investment fund was a fraud. He was ignored, and investors lost billions of dollars. It didn’t take for Markopolos to figure out that Madoff was a fraud, he says in the following video. It took him five minutes to figure out he was a fraud and four hours to mathematically prove it. Markopolos sent five separate reports to the SEC starting in 2000. All of the reports were ignored. Steve Kroft from CBS’s 60 Minutes reports.

Watch CBS Videos Online

Peter L. Bernstein Dies, Proponent of Efficient Market Theory
June 09, 2009 @ 08:55 AM | By Greg MacSweeney

Peter L. Bernstein, the author of Against the Gods: The Remarkable Story of Risk and other books, died on June 5th at the age of 90. In this McKinsey Quarterly video from January 2008, the well-known author discusses the meaning of risk and explains why sophisticated mathematical models to control it sometimes go awry.

Ultimately, Peter L. Bernstein will be remembered for his development and refinement of efficient market theory, which helped him bring investing theory -- more than simply picking stocks -- to the general public. Bernstein, it seems, advocated increased regulatory oversight to strengthen the foundation of the markets, while also believing that the wealth and opportunity created by a free market were worth the risk. He also was a Keynesian and he argued that the health of the market economy required public spending on various projects.

Overreaching Derivatives Regulation Worries Dealers
June 05, 2009 @ 07:36 AM | By Greg MacSweeney

The regulator of the futures trading industry is proposing new rules for trading financial contracts known as derivatives. John Dimsdale reports that big wheelers and dealers are now fretting about overreaching regulation in this American Public Media audio clip.

Is the Credit Crunch Finally Abating?
June 05, 2009 @ 07:27 AM | By Greg MacSweeney

Last September, Standard & Poor’s Market, Credit and Risk Strategies Group launched the Credit Crunch Checklist, designed to help investors know when the credit freeze started to thaw. Michael Thompson, head of the group at S&P, says “We are in a lot better shape than we were in September.” The Credit Crunch Checklist looks at a four things, including the prices of homes, inventory of home sales, the spread between the 3-month LIBOR and Fed Funds Rate and the price of crude oil. On three of the four criteria, the Credit Crunch Checklist “has seen major improvements,” said Thompson in this MSNBC" Squawk on the Street" video.

The Rise of a Financial Stability Regulator
May 28, 2009 @ 10:14 AM | By Greg MacSweeney

Just as the Great Depression led to the creation of new institutions and financial practices, the Obama administration is on track to impact financial regulations. One of the new concepts involves a financial stability regulator, Wall Street Journal’s David Wessel explains. The big question remains: “How much power will be given to the new regulator?”

Book Dissects J.P. Morgan During the Financial Meltdown
May 14, 2009 @ 11:04 AM | By Greg MacSweeney

A new book dissects J.P. Morgan’s role in the financial crisis and how JPM managed to both help create the products that would ultimately derail the markets and also how JPM avoided some of the huge losses tied to the financial crisis. Author and journalist Gillian Tett, assistant editor, Financial Times, talks about her new book, "Fool's Gold" in which she analyzes J.P. Morgan and its role in the financial meltdown.

The Big Flaw of the CDS Big Bang
May 07, 2009 @ 03:00 PM | By Kevin McPartland

By Kevin McPartland

Is the CDS Big Bang setting us up for another Big Bust? Did we just give billion-dollar matches to people now pouring gas onto over-insured assets? Is anyone out there watching this — or does the thought of reading about credit default swap regulation put people to sleep at their own peril? Wake up....

continued...



Was AIG's Fall Criminal?
April 28, 2009 @ 10:04 AM | By Greg MacSweeney

New information has surfaced in the federal investigation of the collapse of insurance giant AIG. As CBS News chief investigative correspondent Armen Keteyian reports, investigators wonder if AIG’s downfall was due to criminal acts, such as securities fraud. CBS News is reporting that a Justice Department criminal investigation is trying to figure out just how AIG crumbled. According to Keteyian, sources say investigators are digging into whether Joseph Cassano, the former head of London-based AIG Financial Products, and two of his top deputies -- Andrew Forster, an executive vice president, and Thomas Athan, a managing director -- committed securities fraud and other federal crimes.

Watch CBS Videos Online

Let’s Play the Financial Acronym Game
January 05, 2009 @ 09:08 AM | By Greg MacSweeney

Here is a fun audiocast from American Public Media about the alphabet soup in financial services. CDO, CDS, FDIC, LIBOR, TARP, ARM and the list goes on. Ever notice that there are a lot of acronyms involved in finance and business? Well, there's a good reason for them.

continued...



Private Bank Can Participate in TARP, Kashkari Says
November 11, 2008 @ 09:07 AM | By Greg MacSweeney

TARP Czar Neel Kashkari -- also known as the Interim Assistant Secretary of the Treasury for Financial Stability in the U.S. Treasury -- says that private banks can participate in the Troubled Asset Relief Program (TARP) and the revised loan to AIG sets restrictions on executive pay, golden parachutes and the bonus pool, according to Mary Thompson, CNBC.

Bernanke Talks Tough About Role of "Financial Engineering" in the Subprime Crisis
November 05, 2008 @ 02:11 PM | By Penny Crosman

In a speech at the University of California at Berkeley on Friday, Fed Chairman Ben Bernanke critiqued government-sponsored and private mortgage securitization and suggested possible solutions, including the covered bonds used by Europe’s banks.

continued...



Unknown Credit Default Data Could Inspire Regulators (audio)
November 04, 2008 @ 08:16 AM | By Greg MacSweeney

Regulators might be shocked into action when it comes to credit default swaps (CDS). The value of all the credit default swaps could be $40 trillion or $50 trillion -- nobody knows for sure, reports Bob Moon for American Public Media’s Marketplace radio program.

Related audio: The Sky Didn't Fall on Lehman Swaps, Yet

The Sky Didn't Fall on Lehman Swaps, Yet (audio)
October 24, 2008 @ 07:13 AM | By Greg MacSweeney

Hundreds of billions in losses were expected from Lehman Brothers' credit default mess. But the reality wasn't so disastrous after all -- more like $5 billion. But some experts say dealers are hiding CDS exposures and the real losses may be yet to come, according to this Marketplace segment from American Public Media.

Greenspan 'Shocked' by Breakdown (video)
October 24, 2008 @ 07:09 AM | By Greg MacSweeney

Former Fed Chairman Alan Greenspan said he was "shocked" by the breakdown in the credit system and told Congress the crisis was once in a century. (WSJ.com video)

While Greenspan Pans Derivatives Price Modeling, Vendors Fine-Tune Their Offerings
October 23, 2008 @ 05:05 PM | By Penny Crosman

In testimony before Congress today, Alan Greenspan placed the blame for the current financial crisis squarely on the use of mathematical models to determine value and risk for mortgage-backed securities: “It was the failure to properly price such risky assets that precipitated the crisis,” he said. “In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivates markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.”

continued...



Federal and NY State Prosecutors Investigating CDS Trading (NPR.org audio)
October 21, 2008 @ 08:42 AM | By Greg MacSweeney

Prosecutors are looking to see if traders manipulated the prices of credit default swaps in order to weaken confidence in financial companies, according to this report from NPR’s Marketplace Morning Report. Then the traders would short the financial stocks as the prices fell.

continued...
Comment on this blog entry


One Way to De-Mystify Derivatives Valuation
October 14, 2008 @ 03:44 PM | By Penny Crosman

A primary cause of the current financial crisis, many people believe, is the difficulty -- some would say impossibility -- of properly valuing and pricing the complex derivatives on so many organizations' books. Just today, the superintendent of the New York State Insurance Department told a Congressional panel that a lack of transparency on credit-default swaps made it hard for the state to know what the broader effects of an AIG bankruptcy would be. Buyers and traders often don’t know what assets underlie credit default swaps and collateralized mortgage obligations and therefore can't easily determine what those assets are worth or how likely they are to default.

continued...
Comment on this blog entry


Why the Bailout Failed and Ideas for Fixing Wall Street and its IT
September 29, 2008 @ 05:00 PM | By Penny Crosman

Congress’s failure to pass the Treasury’s proposed $700 billion financial bailout package today came as no surprise to Anil Kumar, global head – financial services group at IT services giant Satyam. “They didn’t do a good job of summarizing the plan,” Kumar says. “They’ve got to redefine the plan to be more consumer-oriented, rather than solely based on removing toxic assets from banks’ balance sheets.” He adds, “Unless the housing problems are addressed, I don’t think it will pass.”

continued...
Comment on this blog entry


A CEP Toolkit Just for Quant Researchers
April 25, 2008 @ 12:40 PM | By Penny Crosman

Intrigued by Vhayu’s announcement of a complex event processing tool geared toward quant researchers, yesterday I looked at this software. It gives quants a means to look for patterns, test ideas and strategies and run what-if scenarios against massive volumes of real-time and historical tick data. It combines some of the features of mathematical algorithmic modeling tools (such as Numerix and Algorithmics) with a fast historical and real-time tick database (a la Vhayu, Kx) with a front-end complex event processing graphical user interface (in the vein of Progress Apama, Streambase or Coral8).

continued...
Comment on this blog entry


More Remedial Derivatives Technology Emerges
April 08, 2008 @ 10:06 AM | By Penny Crosman

You know markets are suffering when the latest new features vendors tout for their products have to do with liquidation pricing. This morning, SuperDerivatives announced it will provide the liquidation price (or ’exit price’) of all derivatives held within clients’ portfolios. Under the terms of FAS 157, firms are required to define the exit price of all instruments to calculate fair market value or "…the price that would be received to sell an asset or paid to transfer a liability."

continued...
Comment on this blog entry


Buy Side Still Laissez-Faire About Derivatives Processing
April 03, 2008 @ 10:23 AM | By Penny Crosman

La plus ca change, la plus c'est la meme chose -- when I mix my eighth-grade-level French with a report the Aite Group released this morning on buy-side OTC derivatives processing, this is what I come up with. As we reported last summer, sell-side firms (with a major push from the Fed) are working hard to automate derivatives processing; but buy-side firms are not.

continued...
Comment on this blog entry


Doesn't Operations Deserve Some Respect?
March 06, 2008 @ 09:53 AM | By Penny Crosman

In news accounts about Societe Generale's recent trading fiasco, there were mentions of how the operations department was called "the mine" and all Jerome Kerviel wanted was to get out of there and become a trader. The International Herald Tribune reported that in 2006, a man working in Societe Generale's back office operations killed himself on a suburban train. This made me wonder -- is it time for a change in the way operations is viewed? Maybe the people responsible for settling billions of dollars worth of trades shouldn't be abused or treated like peons.

continued...
Comment on this blog entry


Markit, Six Investment Banks To Launch Derivatives Pricing Platform
February 21, 2008 @ 10:30 AM | By Penny Crosman

In the wake of the subprime mortgage crisis and subsequent plummeting in value of mortgage-related derivatives such as CDOs, which in turn has generated a crop of unhappy investors, lawsuits and regulatory concern around improperly sold and priced derivatives, it's no wonder that companies that offer help in determining the value of derivatives contracts are coming out with new products. While many (Numerix, Maplesoft, Quantify) offer pre-built mathematical models for calculating the theoretical value of a derivative now and in the future, Markit, a provider of several derivatives indices, strives to provide actual prices at which certain types of derivatives are currently trading. (Reuters and NYSE Euronext also offer such derivatives valuations.)

continued...
Comment on this blog entry


Columbus Avenue Chooses SuperDerivatives As Independent Platform for Valuing Credit Derivatives
January 23, 2008 @ 01:07 PM | By Ivy Schmerken

Hedge fund administrator Columbus Avenue Consulting, LLC, selected the Super Derivatives Credit derivatives platform, SD-CD, to price its hedge fund clients’ portfolios of credit default swaps.
The decision points to a growing demand for independent valuation sources, as hedge fund portfolios are hedging or placing bets on the fixed-income market using credit default swaps or indexes.

continued...
Comment on this blog entry


Markit to Acquire Swapswire to Fortify OTC Derivatives Processing Infrastructure
December 05, 2007 @ 12:42 PM | By Ivy Schmerken

UK data supplier Markit announced an agreement to acquire Swapswire, an electronic trade confirmation network backed by dealers for processing OTC derivatives. Financial terms were not disclosed. The acquisition is expected to close in early 2008.

continued...
Comment on this blog entry

March 2010 Sun Mon Tue Wed Thu Fri Sat   1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31       Weblogs of Interest Dark Reading: Firewalled Chief Risk Officer: New Era of Risk Management InformationWeek's Blog Digest Parry Aftab, the Privacy Lawyer

Categories Archives March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 February 2006 January 2006

1. Aite Group
2. Algorithmic Trading
3. Christopher Dodd
4. Compliance
5. Data Management
6. Derivatives
7. Exchange
8. Federal Reserve
9. Low Latency
10. Market Data
11. Operations
12. Risk Management
13. SEC
14. Thomson Reuters
15. Transparency