Macaskill on Markets
-
Wall Street’s Trump party could end in a hangover
US banks will get a trading and dealmaking boost from Trump’s re-election, but rising Treasury yields could pose challenges. -
Sideways: Timing is everything at Deutsche Bank
Former credit trader Shikha Gupta discovers that a verbal contract isn’t worth the paper it is written on. -
Macaskill on markets: In the year of equities, derivatives are key
It is turning out to be an equities year for the big investment banks, as fixed income revenues fall or stall and fees from dealmaking recover slowly.
-
A US climate bill filled with green credits will create business for banks and provide relief from the backlash against ESG products.
-
West Virginia state treasurer Riley Moore has opened another front in a campaign by Republican officials in the US against banks that promote ESG policies.
-
HSBC Asset Management’s head of responsible investing has had it up to here with consultants and regulators lecturing him on climate change risk.
-
The confirmation of disappointing third-quarter sales and trading revenues for most banks set the stage for a crucial fourth-quarter push by investment bankers – the push to maximize their own bonus payments.
-
Dismal trading volumes in the third quarter were punctuated by some chunky investment-grade bond issues and stock offerings that were a disappointment to investment banks in terms of fee generation.
-
As the high-yield debt markets converge further with leveraged loans, the model of a modern head of leveraged finance at a big house is a banker with a focus on lending, such as Andy O’Brien at JPMorgan or David Flannery at Bank of America Merrill Lynch. An Irish surname isn’t obligatory, but a reputation for hard work and patient application to client needs is, and flashy behaviour is not encouraged.
-
The obvious port of call for a prop trader leaving a comfortable berth at a bank is a hedge fund. Another potential destination nowadays is a sovereign wealth fund. Most sovereign wealth funds are treading cautiously as they move towards making greater use of tradable markets but their sheer size means that their impact on liquidity could be significant, along with their potential contribution to bank revenues.
-
The trickle of proprietary dealers out of investment banks could become a flood in the coming months. This will provide a welcome diversification of sources of market risk-taking as traders end up at corporations and sovereign wealth funds, as well as the obvious destination of hedge funds. A broadening of the range of institutions actively trading across asset classes should help to offset a reduction in liquidity resulting from the death of the traditional bank prop desk.
-
A serious second-quarter equity trading stumble by Goldman Sachs led to predictions that its investment banking dominance might be coming to an end as a new regulatory era dawns.
-
Students of internal politics at Goldman Sachs will be closely watching the career path of David Heller in the coming months. As the global co-head of securities with primary responsibility for equity trading, Heller might be expected to take the fall for a disastrous second-quarter performance in equity derivatives.
-
Limited understanding of markets by key regulatory and political figures is a contributing factor to the European sovereign debt crisis, as financiers and government officers increasingly fail to communicate.
-
The reluctant decision by European governments to publish stress tests for their domestic banks might shed an unwelcome light on the illiquidity of many local sovereign debt markets.
-
As electronic trading is dragged blinking into the sunlight, more careful name choices for platforms and systems might be a good idea, if only from a public relations standpoint.
-
The attack of the machines or flash crash in US stocks on May 6 highlighted serious problems in the one corner of the markets that is supposedly an oasis of liquidity and transparency. This does not augur well for plans by regulators to push fixed-income markets such as credit towards electronic trading and settlement.
-
The revolving door between Wall Street and Washington is not working to the industry’s specifications. Robert Khuzami, former general counsel for the Americas at Deutsche Bank, has been leading the charge against Goldman Sachs over alleged CDO fraud in his new role as head of enforcement at the SEC. And Gary Gensler, a former Goldman Sachs partner, has taken an unexpectedly tough line with the industry over derivatives reform in his position as head of the Commodity Futures Trading Commission. Bank heads could be forgiven for feeling that with friends like these, who needs enemies?
-
The SEC fraud suit against Goldman Sachs has shone a spotlight on the exploitation of the useful idiots at the heart of the credit crisis. Goldman must now hope for similar suits against rival dealers so that it can try to deploy the Murder on the Orient Express defence – the argument that they all did it. But whether or not Goldman is joined in the dock by some of its peers, the industry now faces the most serious threat yet to its derivatives-based trading revenues and a business model of adopting multiple roles in the modern capital markets.
-
The SEC fraud suit against Goldman Sachs has shone a spotlight on the exploitation of the useful idiots at the heart of the credit crisis.
-
The Lehman bankruptcy examiner’s report provides a timely reminder of how difficult it is for outsiders to gauge the risk management culture at an investment bank.