asterisk2a + financialmarkets   6

Libor affair shows banking’s big conceit -

[LIBOR scandal exposes] a big conceit at the very heart of the modern banking world.

Most notably, in recent decades large investment banks in the City of London and Wall Street have increasingly wrapped their activities with an evangelical adherence to the rhetoric of free markets; whenever they have wanted to justify
sky-high profits, wacky innovations or, most recently, the need to prevent a new regulatory drive, they have invariably cited the ideals of Adam Smith.


[T]he real issue was that Libor was never organised as a proper market in the first place, which is precisely why the manipulation continued unchecked on such a wide scale for so long.

[...] the market has been dominated by a small clique of powerful banks, which also controlled the BBA.
CFTC  free  market  economic-thought  economic  history  financialmarkets  interbank  lending  interbank  oligopol  competition  toobigtofail  adamsmith  accountability  transparency  WallStreet  greatrecession  GFC  banking  banking  crisis  SEC  BBA  FSA  manipulation  barclays  EURIBOR  LIBOR 
june 2012 by asterisk2a
Libor Probe in Switzerland Examines, UBS, Credit Suisse, 10 Other Banks - Bloomberg
UBS AG (UBSN) and Credit Suisse Group AG (CSGN) are among 12 banks facing a Swiss inquest into possible manipulation of the London interbank offered rate, the latest probe into how the benchmark for $350 trillion of financial products is set.

Derivative traders working at various financial institutions might have manipulated Libor and Tibor submissions by “coordinating their behavior, thereby influencing these reference rates in their favor,” the watchdog said. “Derivative traders might have colluded to manipulate the difference between the ask price and the bid price of derivatives based on these reference rates to the detriment of their clients.”

European Commission regulators also raided banks that offer financial derivatives linked to the euro interbank offered rate, or Euribor, over possible collusion. Deutsche Bank and RBS were visited by EU officials, two people said in October.

EU regulators are “intensifying our antitrust scrutiny on wholesale financial markets,”
financialmarkets  antitrust  EURIBOR  2012  TIBOR  LIBOR  banking  kartell  collusion 
february 2012 by asterisk2a
Penetrating Insights On Why The Market Feels Like A Colonoscopy | ZeroHedge
In a widely quoted experiment by Nobel Prize winner Daniel Kahneman (with others, published in 2003) over 600 subjects undergoing colonoscopies were given different versions of the same procedure. One set got essentially a short version, where the pain of the process peaked out near the end of the exam. The other group got a longer version, with the last few moments in relatively little discomfort. The second group reported much less pain when asked about the experience than the first.

Kahneman’s colonoscopy is a tailor made, if coarse, analogy to the ongoing sovereign debt woes in Europe. ...

The bottom line is that pain, like beauty, is in the eye of the beholder.
financialmarkets  financialcrisis  richardkoo  economic-thought  economics  balance  sheet  recession  deleveraging  GFC  UK  2012  sovereign  debt  crisis  Europe  pain  psychology  behavioral  finance 
january 2012 by asterisk2a
Drohende Kreditklemme: Europa geht das Geld aus - SPIEGEL ONLINE - Nachrichten - Wirtschaft
existential crisis of the "system"

die ganze Finanzbranche ist in Aufruhr. Es sei in Zukunft nicht mehr selbstverständlich, dass ein Staat seinen Haushalt über die Kapitalmärkte finanzieren könne, warnte am Montag der Präsident der Bankenverbandes, Andreas Schmitz.
Wer wissen will, was damit gemeint ist, sollte sich die verzweifelten Versuche einiger Euro-Staaten anschauen, an frisches Geld zu kommen.

Je länger die Doppelkrise bei Staaten und Banken anhält, desto mehr wird sie zur existentiellen Gefahr für die Währungsunion. Denn beide sind aufeinander angewiesen: Die Staaten brauchen flüssige Banken als Abnehmer für ihr Anleihen - und die Banken brauchen solide Staaten als Garanten für die Wertpapiere in ihren Bilanzen. Beides funktioniert derzeit nicht.
creditcrunch  2011  2012  Europe  PIIGS  capital-flight  sovereign  debt  crisis  ECB  uncertainty  confidence  financialmarkets 
november 2011 by asterisk2a
Credit-Default Swap Risk Bomb Is Wired to Explode: Mark Buchanan - Bloomberg
The European nations are linked in a network of debts, as Bill Marsh recently illustrated in the New York Times with a beautiful piece of graphic art. Greece and Italy are prominent; Ireland, Portugal and Spain lurk ominously nearby. France and Germany seem exposed, too, as does the U.S.
The image is like a complex wiring diagram for a ticking debt bomb. Yet what it shows may be less important than what it leaves out: a largely invisible network of ties among institutions around the world, which could ultimately cause global financial chaos.
This hidden network has been created by institutions that buy and sell unregulated credit-default swaps. These are essentially insurance contracts on bonds; in the event of a default on the bond, the seller of the swap promises to pay the buyer the bond’s value.

The researchers showed that too much risk sharing can make it easy for distress to spread like a virus.
CDS  Europe  bomb  debt  bubble  2011  OTC  sovereign  crisis  unknown  toobigtofail  2008  AIG  risk  system  systemicrisk  problems  exposure  Greece  PIIGS  tippingpoint  history  lesson  economics  Financalmeltdown  FinancialCrisisInquiryCommission  financialmarket  financialmarkets  financialcrisis  finance 
november 2011 by asterisk2a
Warning signs on market liquidity risks | Journalist Profile |
HFT trading prompting bids to be pulled. As the SEC described it: “This sudden decline in both price and liquidity may be symptomatic of the notion that prices were moving so fast, fundamental buyers and cross-market arbitrageurs were either unable or unwilling to supply enough buy-side liquidity.” A perfect recipe for a price vacuum and severe downdraft
Subjecting traders to an LVaR gives rise to a multiplier effect. Tighter risk management leads to more restricted positions, hence longer expected selling times, implying higher risk over the expected selling period, which further tightens the risk management, and so on. This feedback between liquidity and risk management can help explain why liquidity can suddenly drop. We show that this ‘snowballing’ illiquidity can arise if volatility rises, or if more agents face reduced risk-bearing capacity— for instance, because of investor redemptions, losses, or increased risk aversion.
algos ETF HFT causing uneconomic market dislocations
HFT  flashcrash  liquidity  trading  financialmarkets  markets  ETF  algo 
may 2011 by asterisk2a

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