Regulatory

The Yin and Yang of Executive Compensation

Apr 1st, 2014 | Filed under: Alpha Strategies, Best Practices, Regulatory, Today's Post

The lesson for investors in the new Wachtell Lipton document may simply be that a corporation that is careless about compensation at the highest level, that cannot carefully document the reasons for payouts, is asking for trouble and that one must consider whether the market has fully discounted the trouble.


The Market’s Early Experience with SEFs

Mar 23rd, 2014 | Filed under: Derivatives, Regulatory, Today's Post

After a lengthy CFTC deliberation and some controversy, the SEF system, with a "made available to trade" component, has gotten itself up and running. Some early observations from Celent.


Who left the wrench in the markets engine? Maybe the SEC…

Mar 20th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, Technology, Today's Post

There is an arm's race aspect to the trend toward ever-higher speeds in trading, and this has created a "latency risk" in the markets that has an adverse impact on liquidity, a new study shows. This feeds into some ongoing arguments.


Mutual Fund Whistle Blower Case Will Proceed

Mar 9th, 2014 | Filed under: Best Practices, Regulatory, Today's Post

Lawson, the whistle blowing employee of an investment advisor, is protected by SOX. Six Justices agreed on that, although they disagreed on exactly why, or on how far the implications might take future courts.


Depositary-lite and the challenge of implementation

Mar 3rd, 2014 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Regulatory, Today's Post

AIFMD brings many changes to the table. Grant Thornton Ireland has issued a new paper looking at the ramifications.


Those Action Levers in the Back Office

Mar 2nd, 2014 | Filed under: Derivatives, Regulatory, Risk management, Today's Post

Financial firms still have people manually implementing Excel spreadsheets in connection with various mandated stress tests, a fact that suggests to a Celent research director that Fred Flintstone runs the back office.


Tell Me I’m Reading this Wrong: ‘Mobilize more personal pension savings for…’ Financing?

Feb 19th, 2014 | Filed under: Insolvency, Institutional Investing, Regulatory, Today's Post

Unless Reuters has been utterly misled, a recent report there suggests that Europe's greybeards are considering an astonishingly bad approach to the insolvency of their banking system: soak the pensioners.


Who’s Allowed to Chase Alpha: Detail Work Continues

Feb 12th, 2014 | Filed under: Derivatives, Regulatory, Risk management, Today's Post

The multi-state, multi-national law firm Pillsbury Winthrop Shaw Pittman has offered its clients, especially the banking entities among them, a guide to the principal elements of the newly finalized Volcker Rule, and it touches upon several significant concerns that industry participants have expressed.


Really Fast Information Processors or Tippees?

Jan 27th, 2014 | Filed under: Academic Research, Algorithmic and high-frequency trading, Alpha Strategies, Regulatory, Today's Post

A forthcoming paper by Goldstein et al opens a window onto the convergence of two market-structure issues that, until quite recently, had not even been thought very similar.


IOSCO Cautions About Fragmentation

Dec 17th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

The IOSCO has recommendations for market authorities as to trade execution services. These recommendations are driven by a general sense that technology has brought about increased fragmentation and that this, unless carefully monitored, is a dangerous thing.


Thoughts on Messrs. Gidfar and Hultgren: And on Pronouncing ‘Big Words’

Nov 26th, 2013 | Filed under: Derivatives, Regulatory, Today's Post

A new youtube video that seems aimed at building public sentiment for preserving section 716 of the Dodd-Frank Act intact, is actually after bigger game. And the bigger game is a far better target. But the word "derivatives" is not really that tricky to pronounce.


AIFMD for Americans: What US & Non-EU managers need to do to comply

Nov 19th, 2013 | Filed under: Regulatory, Today's Post

Guest columnist Shane Brett looks at AIFMD and what it means for Americans.


4 Essential Tasks To Prepare For FATCA

Nov 10th, 2013 | Filed under: Regulatory, Today's Post

Guest columnist Shane Brett explains the steps needed for firms to be FATCA-compliant.


AIMA Survey, Interviews: On Regulatory Costs

Oct 27th, 2013 | Filed under: Hedge Fund Regulation, Regulatory, Today's Post

Managers broadly are of the view that the more complex a regulation, the more expensive it is for those affected. The regulations that concern them the most in this respect are: FATCA and AIFMD.


Much ado about nothing..in other words, the JOBS Act is finally here

Oct 13th, 2013 | Filed under: Hedge Fund Industry Trends, Institutional Investing, Regulatory, Retail Investing, Timely Research, Today's Post

Guest columnist Diane Harrison looks at the U.S. JOBS Act for what it is...and isn't.


Is The BIS Working to Cartelize the Banking World?

Sep 24th, 2013 | Filed under: Regulatory, Risk management, Today's Post

A newly issued report by the Bank for International Settlements speaks volumes about what is happening to the world banking system as the new millennium enters its troubled teen years. I refer to the special feature, “How have banks adjusted to higher capital requirements?” written by Benjamin Cohen and included with the BIS’ latest quarterly [...]


Principles as Abstractions: The AIMA Offers a Canvas

Sep 9th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

On the too-big-to-fail front, for example, AIMA observes that risks associated with the failure of any particular entity "should be adequately addressed...." That is quite unobjectionable. All problems should be adequately addressed.


The CFTC/HFT Rumors and Some Reflections

Sep 2nd, 2013 | Filed under: Algorithmic and high-frequency trading, Commodities, Regulatory, Today's Post

The CFTC is said to be close to issuing a concept release on high-frequency trading, pushing the regulatory process beyond the agency's earlier talkfests. Christopher Faille muses about an approach the concept release will almost certainly not advocate.


State Street: Bad News for FpML is Good News for Markets

Aug 12th, 2013 | Filed under: Derivatives, Hedge Fund Regulation, Regulatory, Today's Post

Buried in the midst of a wide-ranging report, we have found the news that the old-fashioned FIX protocol is still a vital force, unlikely to be replaced by the flashier open-source FpML.


AIFMD Europe-Wide Standardization: Not Yet Accomplished

Aug 5th, 2013 | Filed under: Hedge Fund Industry Trends, Regulatory, Today's Post

As Julian Young, Partner, EMEIA Asset Management, E&Y put it, some alternative investment fund managers will need to "operate across a patchwork quilt of regulatory standards [in Europe] for the next few years at least" despite the standardization goals that were part of the appeal behind AIFMD.


AIFMD & Private Equity Managers An implementation checklist

Aug 1st, 2013 | Filed under: Private Equity, Regulatory, Today's Post

Guest columnist Shane Brett looks at AIFMD compliance for private equity managers.


Insider Trading and Redemptions: The 7th Circuit Speaks

Jul 28th, 2013 | Filed under: Alternative Mutual Funds, Legislation/Court rulings, Regulatory, Today's Post

According to a new 7th Circuit decision, there is a sharp distinction between insider trading in corporate shares on the one hand, and the redemption of fund shares on the other, at least with regard to the traditional theory of such trades.


Complying with AIFMD

Jul 23rd, 2013 | Filed under: Regulatory, Today's Post

Guest columnist Shane Brett examines AIFMD compliance.


As Clock Ticks Down: Extraterritorial Swaps Resolution

Jul 22nd, 2013 | Filed under: Derivatives, Regulatory, Today's Post

A year ago the CFTC published its "final exemptive order regarding compliance with certain swap regulations." That order was to last for one-year, and thereby set a clock ticking. Negotiations became frantic in recent weeks as the alarm approached. Nobody wanted to hear it ring.


Indexical Question: How Much Transparency is Enough?

Jul 10th, 2013 | Filed under: ETFs, Regulatory, Today's Post

In an initial consultation report in January of this year, the IOSCO Board took an aggressive position on transparency, saying that transparency of indexes used for ETFs should be such that market participants have "the ability to replicate a published Benchmark level...." The new final statement, EDHEC complains, has lost that language.


New Tweaks to MiFID/MiFIR Recall College Daze

Jun 18th, 2013 | Filed under: Algorithmic and high-frequency trading, Regulatory, Today's Post

MiFIR includes provisions that allow for "dark pools" and that limit the size -- or, if you will, the depth -- of such pools. On June 10, 2013, authorities in Brussels released a new proposal for tweaks of MiFIR in general and these provisions in particular.


Push-back Grows Against the FTT and Its Cascade

Jun 6th, 2013 | Filed under: Regulatory, Today's Post

“The analyses we’ve done show that the project, as it has been prepared by the commission, will first of all raise nothing at all, there’ll be no revenue,” one prominent Euro-banker says. According to earlier forecasts, the FTT was supposed to raise between €30 and €35 billion. So the prospective return has gone from €35 billion to zero?


Supreme Court Accepts Fidelity Whistle-Blower Appeal

May 30th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

One case now before the U.S. Supreme Court poses the issue of the proper interpretation of the whistle-blower protection offered by Sarbanes-Oxley. The underlying problem is that when Congress wrote that statute it had in mind operational companies like Enron, or WorldCom, or Tyco International. The very different world of investment advisers and their funds, [where the public entities are the funds proper which employ no one], wasn't on its collective mind.


CFTC Approves New Swaps Rules: Uses Some Old Jargon

May 22nd, 2013 | Filed under: Derivatives, Regulatory, Today's Post

Under the Dodd-Frank Act, and the implementing rules now approved by the CFTC, trades that aren't "large notional swaps" are to be reported more rapidly and thoroughly than those that are. This of course makes the definition of a large notional swap (a/k/a a block trade) an important matter.


Abstraction, Patents, and the Latest Alice Ruling: A Scorecard

May 16th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

The Federal Circuit's effort to address en banc the district court's rejection of the applicability of patent law to a fairly commonplace hedge against settlement risk seems to have broken down in confusion. This may have profound implications for both the traditional and the alternative asset management industry.


The EU’s AIFMD and Your Road Show

May 14th, 2013 | Filed under: Regulatory, Today's Post

Shane Brett, of Global Perspectives, makes the point that the "non-European world" is in no position to ignore the implementation of AIFMD. Although the implementation will be gradual, by 2018 any manager from anywhere who wants to bring his road show to a European city will have to be fully compliant.


Rest in Peace Margaret Thatcher

Apr 10th, 2013 | Filed under: Currencies, Regulatory

The great success of the Thatcher-era Big Bang was that it shocked the Square Mile out of insularity. The turnover and value of London-based equity transactions increased from roughly £500 million in 1986 to more than £2 billion nine years later.


Stop the Presses: IOSCO Calls for Balancing and Monitoring

Apr 4th, 2013 | Filed under: Derivatives, Regulatory, Today's Post

IOSCO's new draft report says that regulators ought to do a lot of "monitoring" of the consequences of changes in market structure. A little less predictably: it goes into some detail on the diversity of regulatory systems that bear on the question of fragmentation.


Dallas Fed. Judge: SEC May Proceed Against Cuban

Mar 31st, 2013 | Filed under: Regulatory, Today's Post

Though the charges against him are civil, not criminal, Mark Cuban may be the Amanda Knox of the jurisprudence of insider trading. He had reason to believe himself vindicated in July 2009, but now the SEC has successfully revived the matter and Cuban faces a trial.


NG Futures Traders: Who’s Your Regulator?

Mar 24th, 2013 | Filed under: Commodities, CTA, Energy, Regulatory, Today's Post

As a three-judge panel of the D.C. Appeals Court saw it, there were two questions in the Brian Hunter case. First, did the CEA’s language encompass manipulation of NG futures contracts as part of the exclusive jurisdiction of intervener CFTC? Second, if so, was that repealed or modified by the 2005 legislation?


Cap Gains Tax Records: The Fall-Out of the EESA of 2008

Mar 14th, 2013 | Filed under: Regulatory, Today's Post

In 2008 the U.S. Congress mandated a significant compliance upgrade for brokers and other financial intermediaries, in regard to their 1099-B income reporting obligations. Now new IRS releases recognize that discrepancies will exist between a taxpayer's records of securities transactions and those of the broker, and they attempt to adjust for that. But traps for the unwary remain.


Accountants’ Quarrel: How Many Buckets for Credit Impairment

Mar 12th, 2013 | Filed under: Regulatory, Today's Post

A threatened divergence arises because the IASB proposes to distinguish between assets with a 12-month allowance balance and those with a lifetime expected loss balance. This is a 'two bucket' model, according to an update recently presented to the G-20, although for historical reasons it is still sometimes called the three-bucket model.


IOSCO: 15 Rules for Avoiding Liquidity Failures

Mar 10th, 2013 | Filed under: Regulatory, Today's Post

Collective investment schemes aren't banks. They aren't in the maturity transformation business. Furthermore, they don't want to stumble into that line of business accidentally, either.


HFT-Limiting Experiment Underway in Germany

Mar 7th, 2013 | Filed under: Algorithmic and high-frequency trading, Regulatory, Today's Post

The Germans seem prepared to experiment with limits on high-frequency trading, as we see in a recent Bundestag vote that leaves the particulars to BaFin. I spoke recently to David Weild, a former vice chairman of NASDAQ, about this experiment and about related issues.


Lehman: Don’t Blame Canada: Blame Iksil!

Mar 4th, 2013 | Filed under: Derivatives, Regulatory, Today's Post

Lehman's adversary proceeding may yet raise the important issues of risk management that arise out of the relationships among the major Wall Street players at times of crisis. But the latest 'Blame the whale' request by the bankruptcy lawyers involved is a blatant distraction and diversion.


Basel/IOSCO ‘Near Final’ Proposal: Part Two

Mar 3rd, 2013 | Filed under: Derivatives, Forex, Regulatory, Today's Post

This is the second of a two-part discussion of a paper jointly issued by Basel and IOSCO on margin requirements for non-centrally cleared derivatives. The new paper solicits feedback on the phase-in timeline it proposes, a phase-in designed to provide flexibility so the affected markets can meet "operational and logistical challenges" by which they might otherwise be stymied.


Basel/IOSCO ‘Near Final’ Proposal: Part One

Feb 28th, 2013 | Filed under: Derivatives, Regulatory, Timely Research, Today's Post

This is the first of a two-part discussion of a paper jointly issued by Basel and IOSCO on margin requirements for non-centrally cleared derivatives. The new paper solicits feedback on only four still-open issues, and the list of issues itself illustrates the near finality they claim for this paper.


SEC Laying Groundwork for Alt-Increments Trial

Feb 20th, 2013 | Filed under: Regulatory, Today's Post

In the February 5th roundtable on the use and consequence of penny increments (decimalization), an event hosted by the SEC, several strong voices spoke in favor of alternative tick sizes, and others pressed for at least a pilot program. It appears that the SEC may have thought of this gathering as a way of laying the foundation for the latter.


Intellectual Property Rights in Software: Go Ask Alice

Feb 13th, 2013 | Filed under: Best Practices, Regulatory, Timely Research, Today's Post

Lawyers argued an intellectual property issue of great significance to our readers before the Federal Circuit Court of Appeals en banc, on Friday, February 8, 2013. They were disputing a patent claim that, if upheld, will make life a lot more complicated than it already is for those attempting to provide the infrastructure of the alternative-investment industry.


UCITS Brand: Time for a Restricted Extension

Feb 11th, 2013 | Filed under: Regulatory, Today's Post, UCITS

The authors want a new "Restricted UCITS" label created to ward off a possible arms race in which depositaries otherwise will attempt to satisfy their clients in a competitive way in an escalation that will end with them "offering guarantees for risks they cannot really control."


HF Investors and Managers Differ On Impact of New Regulations

Feb 6th, 2013 | Filed under: Hedge Fund Industry Trends, Regulatory, Today's Post

Forty-three percent of managers see Dodd-Frank as having a negative impact; 35 percent see it as having no impact at all; only 22 percent see it as a positive. The positive they see in it may simply be the presumed improved access to institutions that are “keen to invest in vehicles with some degree of regulated oversight,” in the words of Preqin's Amy Bensted.


Pensions: Public Choices and Investor Caution

Feb 5th, 2013 | Filed under: Institutional Investing, Regulatory, Today's Post

The great political problem (what economists these days call a 'public choice' problem) is that politicians worldwide have every incentive to defer or avoid decisions about pension reform, however urgent or necessary that reform. Investors should be aware, and be wary.


Intermediaries: Watch Who You’re Calling Sophisticated

Feb 3rd, 2013 | Filed under: Regulatory, Today's Post

IOSCO reminds investment banks and other intermediaries that they "may make the reasonable choice of treating all customers as retail because doing so may be more cost-effective than establishing separate categories for customers." Those words appear in a footnote but, given the context created in the rest of the report, they seem rather pointed.


Delaware Struggles with Corporate-Auction Questions: Don’t Ask

Jan 14th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

The directors of a corporation selling itself have a duty to their shareholders to familiarize themselves with all the material facts, and they are to be discouraged from stuffing wax in their ears in order to avoid hearing anything inconvenient.


Letter to Basel Asks: Does Gradualism Matter?

Jan 8th, 2013 | Filed under: Regulatory, Today's Post

So why not just say: ‘everybody has to have a CCP for everything!’? If we cannot for reasons of practicality do that all at once, why not do it more gradually? There are lots of good answers to that.