Advertisements

Tag Archive: Dodd Frank


How MF GLOBAL Failed

Not many people know about the convictions behind how MF global failed. This is how the destruction process works @ Wall Street and MF Global bankruptcy was one of the example of it.

They were very bad in Europe; leveraged 33:1 so there is no space of error when the firm is leveraged like that.

The three lessons that are can be shared from MF Global’s death:

  • Accounting loopholes have to be closed and oversight improved.
  • Non-bank financial firms should have a lead regulator.
  •  Rule-writers should consider “non-systemic” firms as well as “too big    to fail” banks.

But there is a contrast view to it:

More regulation, more rules, Dodd Frank/EMIR/FATCA  and to no purpose at all.

A banker wants to bet his firm on the direction of sovereign debt. If successful, we call him Soros and pat in him on the back. And if not, the firm is closed down. Regulations were pointless, because no rule book can reign in human ingenuity. Continue reading

Advertisements

Its been while not posted about the regulatory stuff as in the past I’ve frequently expressed concern that the legacy of Dodd-Frank will be to Googlepromote artificial consolidation of the banking industry by driving small banks out of business and making large banks even more “Too Big to Fail.” This is for two reasons.

The first reason would be if Dodd-Frank perpetuates the so-called TBTF subsidy. This is the idea that being designated too big to fail creates an implicit government guarantee for creditors that permits large banks to access capital markets more cheaply than non-TBTF banks. Whether there is a continued subsidy, and if so, how large, seems to be still somewhat undetermined at this point. Continue reading

I did this post last year but the essence is clearly visible now so posting it again under new rules and regulations :-images

Deja vu all over again, the over-reliance on ‘shaky’ collateral and concentration of risk is building once more – this time in the $648 trillion derivatives market. New Clearing House rules (a la Dodd-Frank) mean derivatives counterparties are required to pledge high quality collateral with the clearing houses (or exchanges) in a more formalized manner to cover potential losses.

However, the safety bid combined with Central Banks monetization of every sovereign risk asset onto their balance sheet has reduced the amount of quality collateral available; this scarcity of quality collateral creates liquidity problems. Continue reading

Dodd-Frank Trade Reporting isn’t coming … it’s here. February 28, 2013 was the date that Major Swap Participants (MSPs) were imagesrequired to begin reporting equity, foreign exchange and other commodity swaps. And this is just the beginning of a series of milestones in the regulation that was designed to prevent future “too big to fail scenarios,” such as what occurred during the Global Financial Crisis of 2008. But, there is a bigger story here around regulation and compliance and how IT is used to ensure transparency, accuracy and accountability in reporting.

Regulation, Regulation and more Regulation

While Dodd-Frank is a U.S. regulation under the supervision of the Commodities Futures Trading Commission (CFTC), any financial institution doing business with a U.S. bank will need to comply. Continue reading

Well some of the Big banks granted two-year phase in to meet Dodd-Frank rule to wall off swaps, as the phase 2 imgescommenced from June 10th 2013.

The shift towards OTC clearing is a huge collective undertaking for clearing houses, clearing firms and buy-side clients. The use of a CCP is a mutualised risk model that shifts the market away from what were exclusively bilateral arrangements – under master agreement and credit support annex (CSA) – to one where both the FCM (as a clearing house member) and the client will be required to post margin into the CCP. It is a radical departure. Many are still coming to terms with the concept that all derivative contracts like IRS and CDS (and not only interdealer ones) will now have to be cleared with initial margins and variation margins based on the mark-to-market’s daily fluctuations, just like exchange-traded derivatives. Continue reading

%d bloggers like this: