Week InReview

The INVESTORS staff looks forward to working with you again this year. If you would like information about membership on INVESTORS' Councils, have colleagues who might enjoy these mailings, or have questions or concerns about issues addressed in our newsletters, please reach out to our staff director Matthew Jones,  at (202) 712-9050 or  mjones@association.institutionalINVESTORS.org
Friday, January 6, 2017
Let's recap
In case you missed it . . .
It's a bad start to 2017 for the European Central Bank. The collateral freeze that plagued the 5 trillion-euro ($5.2 trillion) securities lending market at the end of last year is still very much with us, and in fact has got worse (Jan 4)

Some 20 years after their invention, credit default swaps are still going through growing pains. (Jan 4)

The rate hike that everyone expected to happen happened, and on Wednesday we got to learn more about why it did and what's next, with the release of the minutes of the Fed's Dec. 13-14 meeting (Jan 4)

Big U.S. banks are set on getting Congress this year to loosen or eliminate the Volcker rule against using depositors' funds for speculative bets on the bank's own account, a test case of whether Wall Street can flex its muscle in Washington again (Jan 4)

Since the DOL conflict of interest rule's publication, mutual fund providers and their adviser-intermediaries have also been asking the SEC extensive questions about sales loads, fee schedules, etc. (Dec 30)
MiFID II crosses the pond
Survey finds most funds plan to unbundle
(Jan 5) On Jan. 3, 2018, the European Union MiFID II regulations that will overhaul the financial-research market, will become effective. The EU law requires asset managers to separate, or "unbundle," trading commissions from investment-research payments. A survey of more than 100 U.S. and Canadian funds conducted by the Investment Technology Inc. poll found that 
  • 82% of North American asset managers plan to globally unbundle their brokers before then
  • 43% of North American asset managers expect the rules to directly affect them; however most are adapting to them
  • 59% of those surveyed say they plan to continue paying for research using commission sharing arrangements
  • 33% expect to use a combination of both commission-sharing and research-payment accounts
  • 8% plan to set up a new research payment account ahead of the MiFID II start date
"MiFID II is going to have a significant impact well beyond the shores of Europe, as institutional investors require asset managers to change the way they budget, fund, price and pay for research," Jack Pollina, ITG's head of global commission management, said in a statement.
Bankers call for bipartisanship
Don't ask for Dodd-Frank repeal
(Jan 4) The American Bankers Association, in a letter to House and Senate leaders, encouraged the 115th Congress to work "in a bipartisan manner" as it re-evaluates Dodd-Frank, but did not ask lawmakers to repeal the 2010 law. The group conveyed their legislative priorities, which include
  • an elimination of "artificial and arbitrary" regulatory asset threshold
  • changes to mortgage rules
  • oversight of financial innovation
  • cybersecurity
  • small-dollar credit
  • money laundering
ABA president Rob Nichols' letter - addressed to Senate Majority Leader Mitch McConnell, Senate Minority Leader Charles Schumer, House Speaker Paul Ryan and House Minority Leader Nancy Pelosi -  said that more than 1,500 banks have failed, been acquired or merged since 2006, while only four new bank charters have been granted. "There are many factors beyond the Dodd-Frank Act that have caused the closure and consolidation of banks, but the sheer weight of more than 24,000 pages of proposed and final rules of this law has become a key consideration for many institutions in determining their future," Nichols wrote.
Binge reading disorder
Hand-curated, chosen with love
Hong Kong's top investor likes bank stocks, the ruble, and kittens
Top investor smashes peers after learning to bet on horse races;  'You have to accept a lot of defeat to win back,' Wong says

'The Fourth Industrial Revolution' by Klaus Schwab
The World Economic Forum's founder and executive chairman says  the revolution described in his book is "dividing societies into those who embrace change and those who do not," which "threatens our well-being in ways that will have to be identified and addressed."

2017 Active Management is Back! (or not)
This is the year that active-investment management makes its return to form. It is the year , or so we  are told, when active fights back, scores some points, and gets its revenge on passive indexers