News on the global Financial Markets
21/10/2011 GFMAIOSCO says HFT could affect short-term
price setting on exchanges
The International Organisation of Securities Commissions published a report delving into high-frequency trading and other trading practices that use advanced technologies. IOSCO's technical committee suggested that national regulators look into HFT's effects on individual financial markets. "The very short term nature of many HFT strategies, coupled with high speed, high volume trading algorithms, could cause market prices to move away from fundamental values in the short term and impair the price discovery process that takes place on public and transparent markets," the report says. AFME also emphasised the need for more research on HFT. Financial News Online (U.K.)(subscription required)(20 Oct.), aiCIO Daily News(20 Oct.), Reuters(20 Oct.)
Experts doubt effectiveness of EU's proposed ban on naked CDS
Experts and insiders are questioning whether the EU's efforts to ban naked credit default swaps on sovereign debt will be effective. "Most buyers of sovereign CDS now are genuine holders of government-bond portfolios who are worried about downgrades," said Georg Grodzki, head of credit research at Legal & General Investment Management. "The damage has been done and has become self-perpetuating even without speculative bets." Bloomberg Businessweek
FSA's Turner warns of trade-offs with more intrusive regulation
Adair Turner, chairman of the UK Financial Services Authority, said more intrusive rules might not be the answer as he called on the government to consider the trade-offs. Instead, policymakers might want to consider ways to bolster lending to help the economy. "Political independence to take unpopular action, to 'take away the punchbowl', is not the challenge today -- the party is not so much out of hand as cancelled," he said. Financial Times(tiered subscription model)(20 Oct.), The Guardian (London)(20 Oct.),
Some flexibility on Basel rules could help, regulators say
The Financial Stability Board, the International Monetary Fund and the World Bank said in a report that some emerging and developing economies should be allowed flexibility in implementing Basel II and III rules. While some of the rules should be implemented quickly, others can be phased in, the regulators said. However, flexibility shouldn't apply to Group of 20 or FSB nations, according to the report. Bloomberg Businessweek
The International Organisation of Securities Commissions published a report delving into high-frequency trading and other trading practices that use advanced technologies. IOSCO's technical committee suggested that national regulators look into HFT's effects on individual financial markets. "The very short term nature of many HFT strategies, coupled with high speed, high volume trading algorithms, could cause market prices to move away from fundamental values in the short term and impair the price discovery process that takes place on public and transparent markets," the report says. AFME also emphasised the need for more research on HFT. Financial News Online (U.K.)(subscription required)(20 Oct.), aiCIO Daily News(20 Oct.), Reuters(20 Oct.)
Experts doubt effectiveness of EU's proposed ban on naked CDS
Experts and insiders are questioning whether the EU's efforts to ban naked credit default swaps on sovereign debt will be effective. "Most buyers of sovereign CDS now are genuine holders of government-bond portfolios who are worried about downgrades," said Georg Grodzki, head of credit research at Legal & General Investment Management. "The damage has been done and has become self-perpetuating even without speculative bets." Bloomberg Businessweek
FSA's Turner warns of trade-offs with more intrusive regulation
Adair Turner, chairman of the UK Financial Services Authority, said more intrusive rules might not be the answer as he called on the government to consider the trade-offs. Instead, policymakers might want to consider ways to bolster lending to help the economy. "Political independence to take unpopular action, to 'take away the punchbowl', is not the challenge today -- the party is not so much out of hand as cancelled," he said. Financial Times(tiered subscription model)(20 Oct.), The Guardian (London)(20 Oct.),
Some flexibility on Basel rules could help, regulators say
The Financial Stability Board, the International Monetary Fund and the World Bank said in a report that some emerging and developing economies should be allowed flexibility in implementing Basel II and III rules. While some of the rules should be implemented quickly, others can be phased in, the regulators said. However, flexibility shouldn't apply to Group of 20 or FSB nations, according to the report. Bloomberg Businessweek