Reuters to Stop Sneak Peek of Consumer-Confidence Data
(Jul 2013)
Thomson Reuters will no longer be offering investors an early look at the results of the University of Michigan consumer-confidence survey, the NY Times reported yesterday and the Wall Street Journal is reporting this morning. The move was prompted by an investigation by the NY Attorney General and would likely be temporary while the investigation is ongoing.
We talked about this story a bit last week, emphasizing the in depth analysis conducted by Nanex, LLC on high frequency trading data...
Foreign Exchange Rate Fixing
(Jun 2013)
Bloomberg News recently reported that traders at some of the world's largest banks have been in the business of rigging foriegn exchange (FX) rates. An FX rate essentially tells you how much of one currency you can buy with another currency: for example, currently you can buy about 100 Japanese yen for each US dollar. The rates affect "trillions of dollars of investments" according to Bloomberg, since they are used for the valuation of portfolios, derivatives, and even equity and fixed...
IRS Could Put a Halt to REIT Conversions
(Jun 2013)
We've talked a lot about real estate investment trusts (REITs) before. In the US, REITs are companies that invest at least 75% of their assets in real estate, pay out almost all of their annual income in dividends, but also pay little or no corporate income tax. As we've discussed before, many companies have tried to qualify for the REIT designation to reduce their tax liabilities, even if their business is only peripherally related to real estate.1 This 'REIT conversion boom' has been...
Investors Returning to Capital-at-Risk Products
(May 2013)
Yakob Peterseil of Risk.net recently noted that "[b]anks are boosting issuance of leveraged notes linked to US equity indexes and notes that pay out when yield curves steepen." According to the article, reverse convertibles and buffered notes are seeing a resurgence as investors begin to be more optimistic about stock market growth. In addition, principal-protected structures like structured certificates of deposit and principal-protected notesare falling out of favor as attractive terms are...
Missouri Action Against Morgan Keegan Over Municipal Bond Issue Also Illustrates Markup Abuse
(May 2013)
On April 3, 2013 Missouri's Secretary of State of the State submitted a Petition for an Order to Cease and Desist and to Show Cause against Morgan Keegan over taxable municipal bonds Morgan underwrote for the City of Moberly in July 2010. The petition and the Offering Circular for the bonds are available to view online. The story has been picked up by The Bond Buyer and Law360.
Setting aside the Petition's allegations, the trading in this set of bonds highlights markup abuse we have found is...
Resurgence of Commercial Mortgage Backed Securities and Decreased Underwriting Standards
(Apr 2013)
Late last week, Reuters reported that the issuance of so-called 'large-loan' Commercial Mortgage Backed Securities (CMBS) has recently spiked and that the increase in volume may be due in part to more lenient underwriting standards. Large-loan CMBS issuance in the first few months of 2013 has already surpassed that of 2012.
CMBSs are created by securitizing a pool of commercial mortgage loans such that an investment in a CMBS is a claim on the future cashflows from the pool of commercial...
529 College Savings Plans Underperform Similar Mutual Funds -- Morningstar
(Apr 2013)
On Monday, Morningstar Fund Research issued their 2013 529 College-Savings Plans Industry Survey, which reviews the performance of the 529 industry in 2012. Their study finds that "college savers are continuing to invest in 529 college-saving plans at an impressive clip, even though their performance has lagged that of similar funds in recent years."
529 Plans are typically run by states and are used by investors to save for future education expenses such as college tuition on a...
Taking the Teeth out of the STOCK Act
(Apr 2013)
NPR reported earlier this week that Congress has quietly overhauled important provisions of the STOCK Act . For those that don't know, the STOCK ("Stop Trading on Congressional Knowledge") Act was signed into law in April 2012 and sought to prevent "Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes."
The STOCK Act was supposed to prevent Members and Congressional staff from trading...
CFTC Investigating Potential Manipulation in Interest Rate Swap Market
(Apr 2013)
Bloomberg's Matthew Leising is reporting that the Commodity Futures Trading Commission has issued subpoenas to current and former employees at swap brokerage firm ICAP (IAP) "and as many as 15 Wall Street banks" for alleged manipulation of a key benchmark price in the interest rate swap market.
The benchmark, known as ISDAfix, "provides average mid-market swap rates for six major currencies at selected maturities on a daily basis." Similar to LIBOR, the rates are set based on end-of-day...
