Thursday, May 7, 2015

Wednesday, May 6, 2015 Recap: Does Tick Size Matter, Asia Economic Review, FDIC Strategic Plan, Low GDP Blamed on Baby Boomers, and The FRAC Wants You!

  • SEC approved a pilot to increase the tick size on small caps
  • Changyong Rhee gives economic review of Asia Pacific
  • The FDIC published their strategic plan for 2015-2019
  • CFTC Commissioner Mark Wetjen testified before Congress
  • CFTC charged United Arab Emirates residents with spoofing
  • NY Fed published paper blaming low GDP on baby boomers
  • SIFMA wrote a letter to the Treasury reporting on the economy
  • Lagarde's remarks at "Conversation with Janet Yellen"
  • The OFR’s (FRAC) is seeking members
  • IMF published "High Liquidity Creation and Bank Failures"

The SEC approved a pilot to assess the impact of widening the tick size on smaller companies. The goal is to see if wider tick sizes equate to a better market for investors. “The data generated by this important market structure initiative will deepen our understanding of the impact of tick sizes on market quality and help us consider new policy initiatives that can improve trading in the securities of smaller-cap issuers,” said SEC Chair Mary Jo White. The pilot will target stocks with a market cap of $3 million or less. Expect more analysis of this topic coming soon.
The IMF released a video where the Asia and Pacific Department Director, Changyong Rhee, provides an economic review of the Asia and Pacific Regions including outlook, risks and policy.

The FDIC published their strategic plan for 2015-2019. The FDIC's primary mission is to insure depositors for up to $250K in deposits. The plan discusses how the FDIC plans to carry out this goal as well as the factors that exist outside of the span of control that may make it difficult for the company to reach its goal. In addition to providing a list of annual performance goals the company also provides an update on the status of those goals.

Commissioner Mark Wetjen testified before Congress to provide his thoughts on the reauthorization of the U.S. Commodity Futures Trading Commission (CFTC). This is the third day of hearings. Within the speech Wetjen focuses on "(1) key rules the commission should promulgate to continue implementation of Dodd-Frank; (2) the cross-border implications of the commission’s rules (identifying several discreet issues in particular); (3) swap-trade execution; (4) clearing and FCM risk management; and (5) swap reporting and data."

The CFTC charged United Arab Emirates residents with spoofing in the gold and silver futures markets. Heet Khara and Nasim Salim allegedly placed bids and offers in the gold and silver futures markets with the intent to cancel them before execution. On May 5 a judge ordered that all of Khara and Salim's assets be frozen to prohibit them from destroying evidence.

Liberty Economics, the research leg of the New York Federal Reserve System, published the working paper, "U.S. Potential Economic Growth: Is It Improving with Age?" The paper seeks to find a relationship between the contribution of labor and potential growth. Ultimately, the authors found that "...potential growth is no longer improving with age." The reason for the falloff -- people are living longer. 

The Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association (SIFMA) wrote a letter to the Secretary of the Treasury reporting on the economy.  The Committee blamed weaknesses in the economy on  various factors including "unseasonably harsh winter weather, a sharp contraction in oil drilling activity, and strikes that snarled operations at West Coast ports." 
  
Christine Lagarde, Managing Director, International Monetary Fund gave a speech entitled "Ethics and Finance  -- Aligning Financial Incentives with Societal Objectives". The speech was delivered at an event referred to as "Conversation with Janet Yellen, Chair of the Board of Governors of the Federal Reserve System". Strangely, there was no mention of this event on the Fed calendar. The speech was found on the IMF's website.

The OFR’s Financial Research Advisory Committee (FRAC) is seeking members. Established in 2012 the FRAC is a group of 30 rotating members and several will rotate in August 2015. "Applicants should have expertise in fields related to the OFR mission, such as economics, financial institutions and markets, financial markets analysis, econometrics, applied sciences, risk management, data management, information standards, and technology." Membership terms are two-to-three years.

The IMF published a working paper entitled High Liquidity Creation and Bank Failures. "...results suggest that regulatory authorities can mitigate systemic distress and reduce the costs of bank failures to society through early identification of high liquidity creators and enhanced monitoring of their funding and investment activities."