Subprime fallout has Wall Street scrambling
Subprime fallout has Wall Street scramblingWall Street firms are trying to contain the subprime-mortgage fallout and reassure investors. Observers now expect a resolution to resemble a quick, brutal crash of the subprime market, a slow meltdown or a short-term blip.
Mutually Assured MayhemWall Street is on edge, scrambling to buck up Bear Stearns and avert a domino-effect debacle
On June 26 managers of Credit Suisse's (CS ) alternative investment group sent an e-mail to investors reassuring them that its portfolios "have minimal direct exposure" to subprime mortgages and "do not have any direct exposure" to the two Bear Stearns & Co. (BSC ) hedge funds that had nearly collapsed the week before. As that note was wending its way through the ether, other investors were quietly trying to sell their stakes in hedge funds full of subprime securities. Some were noting that Toronto bank CIBC holds many subprime bonds. Paris bank BNP Paribas (BNPQY ) was fending off questions about its investment in the Bear fund with heaviest losses.
It's white-knuckle time on Wall Street as firms try to prevent the subprime mess from spreading. The hedge fund blowup has suddenly thrown the world's biggest financial institutions into a game of brinkmanship that will end in one of three ways: a quick, brutal crash of the subprime mortgage market and possibly the broader corporate bond market; a slow, painful meltdown of one or both lasting many months; or a short-term blip that, over time, will be forgotten as conditions return to normal.
Disaster has been averted so far. But pressure continues to come from all sides. The decisions made by Wall Street's bankers, hedge fund managers, and bond raters over the next several weeks will determine which way the game plays out. One twitchy move by any of them could lead to mutually assured destruction.
ELBOW DEEPAt first the subprime mess looked more or less like a Bear Stearns problem. When its funds stumbled, it was Bear that put up a staggering $1.6 billion in loans to stanch the bleeding. It was Bear's stock that took the biggest hit of any brokerage house, falling some 3.2% in a day. And it was Bear that, as reported by BusinessWeek.com on June 25, drew the scrutiny of the Securities & Exchange Commission, which has opened up a preliminary investigation into what went wrong inside the 84-year-old firm led by CEO James E. Cayne.
Ordinarily, rivals wouldn't shed tears if Bear Stearns were suffering—they'd pounce on the weakness. But much of Wall Street is elbow-deep in the same troubled securities, all created during the height of the mortgage boom, that are now coming back to bite Bear. Last year, Wall Street churned out some $550 billion in so-called collateralized debt obligations (CDOs): complex bonds often backed by subprime loans that pay high yields in good times but are dangerous when the market gets rocky, as it is now. "This is not [only] a Bear Stearns problem," says Joseph R. Mason, associate professor of finance at Drexel University's LeBow College of Business.
A DOZEN PROBESCDOs are especially troublesome in a choppy market because they're illiquid— difficult not only to sell but even to value. Until now, accounting rules have let firms peg their CDOs at roughly the price they paid for them. But if the market sets new prices, then others must use those prices to value their holdings. What gives Wall Street nightmares is the possibility that Bear Stearns' struggling hedge funds, which once controlled $16 billion in assets, will be liquidated by their creditors. A shotgun sale of poorly performing securities would provide Wall Street with a true price for valuing the slumping assets. "Nobody wants to officially acknowledge the worthless nature of these products," says Peter Schiff, president of Euro Pacific Capital, a Darien (Conn.) money management firm. Indeed, SEC Chairman Christopher Cox, during a hearing on Capital Hill on June 26, disclosed that regulators have opened a dozen separate probes on the subprime market and the issue of CDO pricing, in addition to the Bear inquiry.
If Bear's holdings were auctioned off at, say, 60 cents on the dollar and other firms marked down their CDOs accordingly, losses would spread. Firms would start dumping their CDOs to get what they could for them. Thus would begin a quick, brutal crash.
That's one reason Wall Street firms such as Merrill Lynch (MER ), JPMorgan Chase (JPM ), Goldman Sach (GS )s, and Deutsche Bank (DB ), all of which had financed the funds in the first place, have been in no rush to liquidate them. A liquidation would have hurt everyone.
There's another force bearing down on CDO holders: credit rating agencies such as Moody's Investors Service (MCO ) and Standard & Poor's, which like BusinessWeek is a unit of The McGraw-Hill Companies (MHP ). If the ratings agencies were to downgrade the CDOs, it would force holders to mark down their values accordingly, potentially igniting the same sort of disaster scenario. That hasn't happened yet. "Our surveillance involves significant testing and analysis, and our long-term record is excellent," says an S&P spokesman. Noel Kirnon, head of global CDO ratings at Moody's, says the firm has a rigorous process for monitoring CDOs, and adds that deterioration in the underlying assets "has not exceeded expectations."
The wild card is institutional investors such as pension funds, university endowments, and foreign governments. If they get more nervous about the hedge funds they're invested in, they could start looking to cash out—as some have done already. If they rush for the exits, hedge funds will feel pressure to get out of CDOs, perhaps prompting a downward spiral.
The broader housing market also presents a potential threat. In Maricopa County, Ariz., which includes Phoenix, houses are entering foreclosure at a rate of more than 50 a day, according to Foreclosure.com, up 60% from last year, as recent buyers are hit by high payments and falling equity. The faster foreclosures rise, the more it may become apparent that the loans held by the CDOs are in trouble and the greater the risk of CDO downgrades.
In this high-stakes game, the risks to other lines of business are major. Already, concerns are growing that the Bear situation may be spilling over to junk bonds and leveraged loans—two red-hot markets that have kept leveraged buyouts booming and generated big profits for big banks. An index of leveraged loans has fallen 2% the past two weeks. Junk bonds are down as well. Steven C. Miller, managing director of Standard & Poor's LCD, a loan market research service, says that for the first time in two years, investment bankers have had to issue "bridge" or back-up financing for an LBO after running into difficulty selling junk bonds to fund the deal.
LBO firms are going back and offering investors higher yields and better protections to raise money for pending buyouts such as the one for retailer ServiceMaster Co. (SVM ), owner of Terminix and Merry Maids. "There's a much more sober view in the leveraged finance market right now," says Miller.
For all the pressure on CDOs, though, a crisis hasn't yet been touched off. Some observers are downplaying the significance of the hedge fund blowup to Bear Stearns' bottom line. Roger Freeman, an analyst at Lehman Brothers Inc. (LEH ), says in a June 26 research note that the matter will not have "a meaningful impact on Bear's earnings." Likewise, Miller of S&P LCD predicts that, for all the consternation over Bear, the LBO pace will only slow, not stop. CIBC, meanwhile, rejects suggestions that it could be the next firm to tumble. The assumptions about its subprime exposure "are simply not true," says bank spokesman Stephen Forbes. Paribas declined to comment.
Wall Street's strategy from here will be to try to maintain the status quo, putting out new fires quickly. "They are hoping to buy themselves as much time as possible," says James Melcher, founder of Balestra Capital, a hedge fund. "The game could work out if the top dozen firms get together to hold the market and gradually deflate it over time."
But the prospect of a meltdown is on everyone's mind. On June 26, UBS (UBS ) analysts held a conference call with money managers to review the Bear situation. "There's a search for contagion going on," says Douglas J. Lucas, a UBS analyst on the call. "I've talked to people from as far away as Australia." Everyone is watching to see who might blink.
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subprime, CDO, mortgage derivatives, CDS, ABXLabels: ABX, CDO, CDS, mortgage derivatives, subprime
Hedge fund future bleak with Merrill sell-off
Hedge fund future bleak with Merrill sell-offMerrill Lynch's planned auction of about $800 million of bonds held by a money-losing Bear Stearns hedge fund could signal the end of a Bear Stearns effort to save the fund. The 10-month-old fun run by Bear Stearns senior managing director Ralph Cioffi has lost 20% this year and is under increasing pressure from creditors, including Merrill. Bear Stearns has attributed the falloff of the fund and a sister fund to the slump in the U.S. housing market.
Some Lenders Dislike Plan to Save Bear Stearns FundBy JULIE CRESWELL and VIKAS BAJAJ
An effort to save a troubled hedge fund at Bear Stearns hit a major hurdle yesterday when Merrill Lynch signaled that it would move forward with plans to auction $850 million in subprime securities that had been held as collateral.
While negotiations are continuing and the auction could be averted, the move signaled that some lenders in the High Grade Structured Credit Strategies Enhanced Leverage fund are not happy with some terms of the Bear Stearns bailout plan.
Executives at the bank have been scrambling to shore up the fund since three lenders — Merrill, Citigroup and JPMorgan Chase — asked the bank to put up more capital. The executives had offered to inject $1.5 billion in new loans into the fund, and a consortium of other banks, including Citigroup and Barclays, would infuse $500 million in new capital.
In return, the Wall Street banks and brokerage firms that had provided nearly $6 billion to the hedge fund would have had their own exposure reduced but would have had to agree not to demand more cash or collateral from the fund for a year, according to people briefed on the plan who were not authorized to speak for attribution.
If Merrill moves forward with an auction, it could make it much more difficult for Bear Stearns and the longtime portfolio manager of the fund, Ralph Cioffi, who has spent the last few days scrambling to try to bring in new money, to save the 10-month-old fund. If other lenders decide to follow Merrill’s lead and seize and sell assets, it could lead to the dissolution of the hedge fund.
Late yesterday, some people briefed on the plan said that one option might be for Bear Stearns to buy out Merrill’s stake. Representatives at Bear Stearns and Merrill declined to comment.
But if the assets — securities and bonds backed by subprime mortgages that can be difficult to value — are sold at prices well below where they are currently valued, the reverberations across Wall Street would be strong. Not only would Merrill be forced to post losses on its holdings, but other banks, hedge funds and investors owning similar securities would have to mark down the value of those holdings to new, lower prices.
“If we end up seeing these assets sold at significantly distressed prices, it will likely cause other funds to have to re-evaluate how effective and fair the values that they have been carrying these securities have been.” said Josh Rosner, a managing director at Graham Fisher, an investment research firm in New York.
The potential for a large ripple effect across the financial markets has been one reason many of the other lenders, even those unhappy with the terms of the bailout plan, stayed at the negotiating table with Bear Stearns, according to people briefed on the talks.
Started just last year, the Bear Stearns hedge fund was hit by a combination of bad bets on bonds backed by subprime mortgages as well as high levels of leverage. Investors originally put $600 million into the fund and another $6 billion was borrowed from the Wall Street banks.
Through the end of April, the fund had lost about 23 percent, prompting investors to try to redeem their investments. In May, the fund froze redemptions and soon faced margin calls from its banks.
While Bear Stearns has little exposure to the fate of the fund — the company and individual executives invested just $40 million in it — its stock nonetheless declined 2.2 percent, to $146.79. in the last two days.
Investors are probably concerned about how the outcome could affect the larger Bear Stearns business of underwriting and trading bonds backed by mortgages.
Full articleVideohedge funds, mortgage backed securities, CDO, CDS, credit derivatives, mortgage derivativesLabels: CDO, CDS, credit derivatives, hedge funds, mortgage backed securities, mortgage derivatives
USFE - US Futures Exchange to Offer Credit Derivatives
U.S. FUTURES EXCHANGE TO OFFER CREDIT DERIVATIVE FUTURES ON AGENCY DEBT
CHICAGO (June 4, 2007) —
U.S. Futures Exchange (USFE) announced today that it will list the first credit derivative futures on Federal Agency debentures, beginning with a government tranche of the CDX™ index including credit default swaps on Fannie Mae and Freddie Mac.
The new product allows for the creation of synthetic Agency notes as well as spread trades against corporate and sovereign debt. USFE currently expects to list the new contracts in the fourth quarter of 2007.
"Default swaps from both Fannie Mae and Freddie Mac are included in the tens of trillions of dollars referenced to the CDX™ family of indexes," said Satish Nandapurkar, CEO of USFE. "Yet, there has never been a distinct 'government' tranche to represent the highest quality credit risk. USFE is pleased to provide fixed income investors with a new, on-exchange opportunity to hedge risk in this area."
USFE collaborated on the design of Agency credit default swap futures with David Boberski, Head of Interest Rate Strategy at Bear, Stearns & Co. Inc., a global leader in futures clearing and execution.
"Agencies are the largest issuers of corporate debt and they deserve a prominent place in credit derivative trading," said Mr. Boberski. "Agency credit default swap futures are a rare example of a product that is relevant to both credit and interest rate traders. While USFE continues the tradition of offering 'government' risk on an exchange, creating the mechanics to match the over-the-counter market is a first for the futures industry and highlights the continued convergence of these markets.
USFE offers a primer on the new product by Mr. Boberski at
www.usfe.com/index_news.html.
derivatives, online trading, electronic exchange, CDS, CDX, ABS, ABX, credit default swapsLabels: abs, ABX, CDS, CDX, credit default swaps, derivatives, electronic exchange, online trading
Banks look to asset-backed securities for revenue boost
Banks look to asset-backed securitiesThe business of turning mortgages and other debt into complex bondlike products has increasingly become a favored tool for investment banks to generate profits. Globally, investment banks reported $30 billion in revenue from asset-backed securities in 2006.
Investment banks are increasingly reliant on the business of turning mortgages and other kinds of debt into complex bond-like products for a significant share of their profits, according to JPMorgan research to be published Monday. Banks globally saw revenues of almost $30bn from asset-backed securities business in 2006, which analysts at JPMorgan estimate is as big as the revenues generated by equity derivatives or cash equities trading. In Europe, Deutsche Bank and Credit Suisse, two of the largest in the field, rely on ABS activity for about 10 per cent of group pre-tax profits, the research will say.
Investment banks are increasingly reliant on the business of turning mortgages and other kinds of debt into complex bond-like products to generate a significant share of their profits, according to research to be published Monday.
Banks globally saw revenues of almost $30bn from asset-backed securities business in 2006, which analysts at JPMorgan estimate is as big as the revenues generated by equity derivatives or cash equities trading.
In Europe, Deutsche Bank and Credit Suisse, two of the largest in the field, rely on ABS activity for about 10 per cent of group pre-tax profits, the analysts will say.
Securitisation is the process of turning financial assets into saleable securities and encompasses everything from the mortgage-backed securities that help fund ordinary home loans to the complex structured bonds known as collateralised debt obligations.
Industry growth has been spurred by investor demand for higher-yielding assets and the desire among banks to offload more of their lending risk into the capital markets.
Kian Abouhossein, analyst at JPMorgan, says issuance volumes in these markets has grown more than six-fold from about $500bn in 2000 to more than $3,000bn last year, about 77 per cent of which was from the US. Mr Abouhossein estimates US banks earned revenues of about $19.9bn from this business while their European peers gained about $7.5bn.
"This has become a big market and is significant for the banks. We would argue that it is at least as big as the equity derivatives or cash equities businesses, which have attracted a lot of attention as stand-alone businesses," he says.
The research is mainly focused on European banks and estimates that four of the top 10 institutions saw revenues of more than $1bn from their ABS businesses. Deutsche Bank is the clear leader, generating more than $2bn and earning pre-tax profits from that of more than $1bn, which is almost 11 per cent of group profits.
"The biggest banks have a cost-income ratio from their ABS business of 50-55 per cent, which is much better than the average for investment banking of about 70 per cent," Mr Abouhossein says.
The second biggest player in Europe is Royal Bank of Scotland, with ABS revenues of $1.7bn and made more than 4 per cent of group profits from the business.
abs, cds, asset backed securities, credit default swaps, derivatives, revenue, risk managmentLabels: abs, asset backed securities, CDS, credit default swaps, derivatives, revenue, risk managment
Algorithms Finding A Foothold In Fixed-Income Markets
Fixed-income algorithms find their wayThe main object of algorithms in the equities market is to find price discrepancies between markets offering the same security. The fixed-income market is made of markets with different structures, making algorithms harder to gauge. For the last few years, however, an algorithmic strategy for the fixed-income world has been taking place.
Algorithms Finding A Foothold In Fixed-Income MarketsAs Advanced Trading first attempted to gauge the extent to which algorithms have been deployed in the fixed-income market in the
November 2005 issue, it became apparent that it would be some time before these strategies became as prevalent in the market as they are in equities. While many of the structural issues discussed in
that first article — such as the format of the dealer-to-customer trading venues, which use a request-for-quote (RFQ) system — still exist, some of the major interdealer venues now are seeing high levels of automated trading, and there is automated arbitrage between them.
There now are algorithms that can be used on RFQ venues, and perhaps more important, algorithms are being written on the buy side to support decision-making and assist in transaction processing, lowering the effective cost of transactions. And while the entry of a new participant,
NYSE Bonds, has yet to cause a major ripple, its unconventional firm-quote platform for the most-active corporate bonds has the potential to change the paradigm for this dealer-driven market.
It is clear that the fixed-income market will never look like the equities market — which has few parameters and security types, and where the main object of algorithms is to capitalize on price disparities between markets offering the same security. In contrast, the fixed-income world is comprised of several markets that are structured quite differently from one another and each of which has thousands of securities and many specialized order types.
However, if one expands the definition of "algorithm" beyond the typical equities function of splitting an order and executing against a benchmark to include any automated routine that processes incoming market data and provokes trading activity, one could conclude that algorithms indeed are prevalent in the fixed-income world.
"Algorithmic trading has two pieces: one, decision support; and two, execution," explains Jon Dean, head of global connectivity at MarketAxess. Algorithms have been used in decision support — for example, tracking price correlation between bonds and futures contracts derived from those bonds, and creating hedging strategies based on the information — for some time. And now that price data is improving and electronic trading is becoming more prevalent, according to Dean, bond algorithms are moving closer to combining decision support and execution. Pricing data has become much easier to obtain since the National Association of Securities Dealers (NASD) began offering the
Trade Reporting and Compliance Engine (TRACE) in 2002, with adoption increasing steadily in 2005 and 2006, Dean says, making corporate bonds a much less murky category and paving the way for further automation.
If You Want It, Build ItAt present, most of the buy-side firms using fixed-income algorithms extensively build and deploy them in-house. Because of the amount of IT effort this requires, some firms, including Bank of New York (BNY) Asset Management, are making algorithmic development part of a firmwide integration strategy.
BNY recently completed an 18-month IT overhaul that produced a common trading and data information backbone called the Transaction Processing Layer (TPL). The goal of the initiative was to integrate trading and analytical platforms in all asset classes so that traders could see a representation of the market at any given point, says Eric Karpman, a VP at the firm and head of its FIX fixed-income technical committee.
The strategy came about because the bank was concerned with updating its asset allocation strategies across multiple asset classes, part of a growing trend toward sector-based trading, according to Karpman. The availability of TRACE data convinced bank executives that this would be a sound investment. "The proliferation of data gave us a reason to go forward," Karpman says. "Algorithmic trading was just a natural exploitation of the resources that were made available by the TPL."
The FIX-based TPL was built on Informatica's data-integration software. Drawing historical and real-time price and portfolio data off this backbone, BNY Asset Management's algorithms facilitate cross-asset trading across all desks, including the personal, global and institutional fixed-income desks; short-term money markets; institutional equities; and index funds, Karpman says. A team of 11 technologists built the system, but frequent input from other bank divisions, including securities master data, market data and quantitative analysts, also was required in order to obtain timely data and satisfy the business needs for each desk, he relates.
The first tier of assets to be automated consisted of foreign exchange, credit derivatives, government bonds and to-be-announced mortgage-backed-securities (TBA-MBS), Karpman notes. The second tier consisted of corporate bonds, municipal bonds and other structured products, he adds.
About 25 percent to 30 percent of BNY Asset Management's fixed-income trades in liquid areas, such as U.S. Treasury bonds and
credit default swaps (CDSs), are conducted algorithmically, Karpman says. "We use the TPL as the glue — there is indicative data, market data, price data, all in one central place," he relates. "We were able to easily create plug-ins for the trading systems to send the trades electronically through our custom algorithms."
Karpman admits that the system is probably more cutting-edge than what reigns at most institutions, which tend to be dependent upon vendors for technology solutions. However, he believes most large institutions working in multiple asset classes are close behind BNY on the way to an algorithmic apotheosis. "All the large buy-side firms have some kind of quantitative framework to analyze liquidity and find the best strategy for execution," Karpman asserts. "That is the first step in building an algorithm."
Buy-Side Demand on Rise
The increasing availability of price data and the shift of the entire financial services industry toward sector-based, cross-asset trading means that the production of elaborate strategies to capitalize on miniscule price adjustments across multiple asset types has probably only just begun, industry observers suggest.
"Corporates have been very interesting," notes Brad Bailey, senior analyst at Aite Group. "There has been more transparency in that market, and the credit default swap has risen as a means of giving greater transparency in pricing." Credit derivatives, typically used as a hedge against corporate bonds, have grown at about a 200 percent annual rate for the past few years, according to Bailey.
In the interdealer world, Icap and eSpeed have indicated that more than 20 percent of their order flow is from automated strategies, Bailey adds. Increasingly, this traffic is from hedge funds, such as those operated by Citadel Investment Group, as much as traditional dealers, he says. Algorithms are being used in the market both to arbitrage one platform against the other and to support the decision-making process, Bailey contends. Icap, eSpeed and Citadel officials did not return calls seeking comment.
In the dealer-to-customer area, algorithms are being deployed on the dealer side in order to generate prices, and to modulate those prices based on the class of customer requesting them and the up-to-the-second price data being fed in, says John Bates, founder and VP of Progress Apama Software, which creates risk management, event processing and trading algorithms for financial firms. "The more-recent engines are skewing the price of the bond in real time, based on data changing in real time, and may be changing the spread as corresponds to the tier of customer," Bates comments. "When a request comes in, you spawn a millisecond-length calculation that uses your analytic libraries built up over the years." In other words, dealer firms now can offer not only up-to-the-millisecond pricing based on real-time data feeds and historical information, they also can offer more-loyal customers a better price, or selectively offer improved pricing to less-frequent customers as an incentive to trade more frequently.
Algorithms also come into play when firms take a position in both futures and bonds at the same time, Bates adds. They can be programmed, he explains, to rehedge when set thresholds are crossed.
On the dealer-to-customer sites, such as MarketAxess, which primarily deals in corporate bonds, a few customers have created algorithms that attempt to exploit the latency in the RFQ model, MarketAxess' Dean says. "You can perform intraday arbitrage between RFQ and an order-driven system," he relates. "It can be solved programmatically, but it is not as optimum as in an equities scenario." Traders still must manually press the button to ensure the order has been executed because the information the algorithm was acting on was only an indicative price, Dean explains.
Dean says he believes that nearly all of the 100-plus buy-side firms that write to MarketAxess' application program interface (API) are using some type of automated strategy to inform their trading. But, he predicts, it will be six to 12 months before execution algorithms and cross-platform strategy trading really takes off among the mainstream institutional customers. And it may be even longer before traditional vendors of buy-side order management systems (OMSs) offer algorithmic fixed-income capability, Dean notes.
This frustrates potential customers, such as Travis Bagley, head of fixed-income transitions at Russell Investment Group in Tacoma, Wash. Bagley says his main goal in trading on behalf of his fund customers is cost-minimization rather than rapid profits.
"We are ready and poised to include some kind of algorithmic trading into our process as soon as they become available from vendors," Bagley says. "The algorithms that are out there and working today are created by proprietary users, such as hedge funds and prop trading desks doing arbitrage and alpha-generation strategies. What we'd like to see is one of the trading software vendors create an algorithm for cost minimization as we trade across multiple venues."
It seems that buy side-focused vendors, most of which grew up in the equities marketplace, may still be overwhelmed by the flurry of algorithms that brokers continue to develop for equities.
Sell Side PrioritiesFor the sell side, it makes sense to allocate technology and resources for the business lines that are most likely to pay off in the shortest amount of time. That means that fixed-income algorithm development ranks behind foreign exchange, options and futures at Credit Suisse's Advanced Execution Services (AES), according to Guy Cirillo, AES global sales channel manager. "We would develop fixed income further down the road as that pent-up demand matures," says Cirillo. "Once these markets are ready for algorithms, we will develop them."
There also must be a global market for the technology in order to fully commit to it, Cirillo notes. "With everything we do, we want to see it applied to not only the North American market, but also Europe and Asia," he says. "If there is something that is only in demand in one region of the world, we are more hesitant to develop that."
Another factor preventing widespread deployment of fixed-income algorithms is the variety of FIX flavors in the marketplace, according to Gary Maier, CIO at Five Mile Capital. Version 4.4, which has the greatest support for fixed income, has yet to be adopted by many brokers, and FIX 5.0 already is on the horizon, notes Maier. "They are mainly doing 4.2," he says.
In the structured product arena, FpML [Financial products Markup Language] is probably better than FIX. "Algorithmic trading will become more pervasive, but it is hard to anticipate when that happens," Maier adds.
FOR MORE ON ALGORITHMIC TRADING in the fixed-income space, view Wall Street & Technology's Editorial Perspectives TechWebCast at advancedtrading.com/events/ondemand.full articleelectronic trading, structured products, credit derivatives, fixed income, CDS, IRD, EQD, algorithmic tradingLabels: algorithmic trading, CDS, credit derivatives, electronic trading, EQD, fixed income, IRD, structured products
With credit-derivatives backlog clearing, Fed eyes equity derivatives
With credit-derivatives backlog clearing, Fed eyes equity derivativesThe backlog of unconfirmed trades in the credit-derivatives market plunged 94% last year, following efforts by the Federal Reserve to persuade market participants to clean up their acts. Now the Fed is turning its attention to the backlog in equity derivatives.
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CDOs put the squeeze on bond investors
CDOs put the squeeze on bond investorsCollateralized debt obligations are pushing down the costs to protect against bond defaults. CDOs can return three times the rate of the underlying securities, and are "changing the economics of investing in corporate bonds," said the head of structured credit research at Barclays Capital in London.
full storyCDO, derivatives, CDS, bonds, fixed income, tradingLabels: bonds, CDO, CDS, derivatives, fixed income, trading
