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November 2007

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  • How do you price liquidity risk?
  • Click here to download pdf including photos of the event
  • According to Olivier LeMarois, CEO of Riskdata, equity market neutral funds’ reliance on one risk model for both trading and risk management exacerbated their losses in the summer.
  • "This is the leather room, which we reserve for our more intimate client relationships"
  • That a third of hedge fund assets are invested in multi-strategy funds has implications for the wider market when funds need to sell off their most liquid assets.
  • The Hedge Fund Working Group, a UK group of managers headed by Andrew Large, has released its extensive guide to best practices for hedge funds that it hopes will encourage a global standard.
  • The reaction to JPMorgan, Bank of America and Citi’s proposals to launch a super-SIV called M-LEC to solve the liquidity crisis in the ABCP sector has been an equal mix of enthusiasm and cynicism.
  • Spate of high-profile delistings by blue-chip European companies boosts Pink Sheets’ premium market segment.
  • In front of a US Senate committee, the agencies are indignant while investors claim they are focusing on the wrong signals.
  • Hong Kong’s notoriously volatile investors are again set firm in headless-chicken mode (the bullish version). Ever since China’s foreign securities regulator, Safe, announced in August that mainland investors would "soon" be allowed to begin throwing their hard-earned savings at Hong Kong-listed stocks, the local Hang Seng index has been on a superhuman tear.
  • The NFA is seeking to up the ante in its fight against the bucket shops that tarnish the US retail FX market.
  • Sub-prime slime and the credit crunch have diverted attention from global imbalances. However, any dollar rout would be ugly. Neglect is no substitute for policy.
  • Global liquidity is set to keep contracting and inflation will keep on increasing despite a growth slowdown. There is a serious risk of global recession in 2008.
  • In March, Taiwan’s voters will go to the polls, and as ever the issue of cross-strait relations with mainland China will be key. And few groups will have more at stake than Taiwan’s banking sector.
  • Research released in mid-October came to the far-from-shocking conclusion that two in five of workers in the UK’s financial services sector are stressed.
  • Devising le menu is something that the French are famous for turning into an art form. Société Générale certainly did not disappoint for the France vs England semi-final of the rugby World Cup.
  • We don’t usually like to blow our own trumpet at Euromoney, but our Regional finance and investment conference for south east Europe, now in its seventh year and still going strong, is without doubt one of the landmark shindigs in the region. And not just for the sun-drenched charms of the ridiculously picturesque fishing village of Cavtat in Croatia.
  • Proposed US legislation shows that patience has snapped with the markets.
  • MTS will probably unveil the mechanics behind the new trading structure for its European government bond trading platform before the year-end. A brief statement last month put to rest months of speculation on whether the MTS Supervisory Board would allow non-banking participants to trade on the platform, which up to now has been the preserve of primary dealers. The verdict was positive but surprised many as the decision has been mired in controversy for some time since it was first mooted over a year ago. In fact, such was the level of discord among bankers that few believed the platform would be able to approve a radical move and still retain its market position.
  • Leaving to one side the continuing debate about the causes of the credit crunch and how best to cure the dislocation in money markets, the relative inadequacies of European capital markets, especially in fixed income, are undisputed.
  • Icap’s announcement on October that it was buying Traiana, a held company that specializes in automated post-trade processing services, triggered some talk that the broker was looking to challenge CLS, the regulator-sponsored settlement utility. Not surprisingly, Icap was swift to play this down.
  • If hedge funds have increased systemic risk, we need to find out by how much and whether the benefits outweigh the risks, says Andrew Lo and Amir Khandani’s paper on quants (see story on page 42). But registration is not the way forward. The authors back up proposals made by other academics that instead a monitoring board would make a good starting point. "By establishing a dedicated and experienced team of forensic accountants, lawyers, and financial engineers to monitor various aspects of systemic risk in the financial system, and by studying every financial blow-up and developing guidelines for improving our methods and models a capital markets safety board may be a more direct way to deal with the systemic risks of the hedge fund industry," concludes the paper. "A great idea," comments one manager, "but the banks will never allow it."
  • 180,600,000,000 the dollar amount of equity capital raised in Bric countries (Brazil, Russia, India and China) so far this year. The total is up 137% on the same period in 2006 thanks to record volumes across all Bric markets.
  • India’s booming stock market was given a thorough hiding on October 17. Rumours had been swirling for days that the country’s market regulator, the Securities and Exchange Board of India (Sebi), was planning to ban the use of participatory notes (PNs), which allow any foreign institution to invest directly in India-listed stocks without having to be registered in the country as a foreign institution.
  • RBC Capital Markets has made Mike MacBain co-head of its global debt markets business. MacBain, who will be based in New York, will focus on financial products and commodities, alongside Richard Pilosof. MacBain was most recently president of TD Securities and global head of DCM and cash equities.
  • The US dollar’s long-term weakness looks set to persist as the currency seems to fall to a fresh historical low against the euro on a weekly basis. The latest G7 meeting, held over the weekend of October 20-21, did nothing to provide any support. In the immediate aftermath of the meeting, the dollar fell to 1.4349 against the euro before bouncing. The reasons for the recovery, at this stage, are not clear.
  • What was hailed as a great success for the credit derivatives market, the tackling of the unconfirmed transaction backlog, has turned out to be far from a mission accomplished.
  • In October, Royal Bank of Canada (RBC) added to its set-up in the Caribbean. The number one Canadian bank announced a $2.2 billion acquisition of RBTT (Royal Bank of Trinidad and Tobago) Financial Group. RBTT had been in discussions with potential buyers since April and suitors included Canadian rivals Scotiabank and CIBC, through its FirstCaribbean unit. RBC is paying for the group with 60% cash in hand and a further 40% in RBC shares.
  • The Mexican stock exchange, the Bolsa Mexicana de Valores, has announced plans to go public before the end of the year as it attempts to lead by example in the poorly performing Mexican IPO market.
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