January 12, 2017

Critical updates from the Federal Reserve, Treasury and more

In the Spotlight

The Federal Reserve Bank of New York’s Liberty Street Economics Blog Publishes “Credit Market Arbitrage and Regulatory Leverage”
In a companion post, the NY Fed examined the recent trends in arbitraged-based measures of liquidity in the cash bond and credit default swap (CDS) markets. In this post, the NY Fed turns to the mechanics of the CDS-bond arbitrage trade and explore how the costs and profitability of such trades might be affected by the finalization of the supplementary leverage ratio (SLR) rule in September 2014.
Blog Post 

The Federal Reserve Bank of New York’s Liberty Street Economics Blog Publishes “Trends in Arbitrage-Based Measures of Bond Liquidity”
Corporate bonds are an important source of funding for public corporations in the United States. When these bonds cannot be easily traded in secondary markets or when investors cannot easily hedge their bond positions in derivatives markets, the issuance costs to corporations increase, leading to higher overall funding costs. The NY Fed examines recent trends in arbitrage-based measures of liquidity in corporate bond and credit default swap (CDS) markets and evaluate potential explanations for the deterioration in these measures that occurred between the middle of 2015 and early 2016. 
Blog Post

TRACE Trade Reporting of Treasury Securities - Updated Port Request Form
Effective Monday, July 10, 2017, FINRA member firms will be required to report transactions executed in Treasury securities (Treasuries) to TRACE as per Regulatory Notice 16-39 .

The FINRA Services Port Request Form has been updated to include FIX and CTCI options for Treasuries trade reporting, identified by the code "TS". FINRA encourages firms to complete the form indicating their desired method of connectivity into both test and production environments, and to submit the form as early as possible in anticipation of testing and implementation.
Questions regarding connectivity and the completion of this form may be directed to NASDAQ Subscriber Services at (212) 231-5180 or subscriber@nasdaq.com . All other questions regarding TRACE Treasury Reporting may be directed to FINRA Product Management at (866) 899-2107 or FINRAProductManagement@finra.org .
Port Request Form

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U.S. MARKET HIGHLIGHTS

Federal Reserve Board Announces Reserve Bank Income and Expense Data and Transfers to the Treasury for 2016
The Federal Reserve Board on Tuesday announced preliminary results indicating that the Reserve Banks provided for payments of approximately $92.0 billion of their estimated 2016 net income to the U.S. Treasury.  The 2016 audited Reserve Bank financial statements are expected to be published in March and may include adjustments to these preliminary unaudited results.
The Federal Reserve Banks' 2016 estimated net income of $92.7 billion represents a decrease of $7.6 billion from 2015, primarily attributable to a decrease of $2.5 billion in interest income from changes as a result of the composition of securities held in the Federal Reserve System Open Market Account (SOMA) and an increase of $5.2 billion in interest expense associated with reserve balances held by depository institutions.
Press Release

FICC Publishes the Martin Luther King, Jr. Day Holiday Schedule
Fixed Income Clearing Corp. (“FICC”) will be closed Monday, January 16, 2017, in observance of Martin Luther King, Jr. Day. The following changes in FICC's operations and schedules will be in effect:

Government Division RTTM Comparison and Netting:
Comparison System
All Regular Way, When-Issued, and Forward Settlement Trades executed on Friday, January 13, 2017, should be submitted on Friday, January 13, 2017, by the normal cut-off time of 8:00 p.m.

Netting System
All netted obligations resulting from compared Regular Way Trades among Netting Members submitted on Friday, January 13, 2017, will settle on Tuesday, January 17, 2017.

All output will be available by 3:00 a.m., Saturday, January 14, 2017.

No trade input will be accepted on Monday, January 16, 2017. Trades executed on Monday, January 16, 2017 should be submitted on Tuesday, January 17, 2017, along with trades of that day.
Press Release

SIFMA Recommends Full Market Close on January 16 in the U.S., U.K., and Japan in Observance of the Martin Luther King, Jr. Day Holiday
SIFMA has confirmed its previous recommendation for a full market close on Monday, January 16 for the trading of U.S. dollar-denominated fixed-income securities in the United States, United Kingdom and Japan in observance of the U.S. Martin Luther King, Jr. Day Holiday.

This recommendation applies to trading of U.S. dollar-denominated government securities, mortgage- and asset-backed securities, over-the-counter investment-grade and high-yield corporate bonds, municipal bonds and secondary money market trading in bankers’ acceptances, commercial paper and Yankee and Euro certificates of deposit.

SIFMA’s recommended early and full market closes are recommendations only; each member firm should decide for itself whether its fixed-income departments remain open for trading. All SIFMA recommendations are subject to change due to market conditions.
Press Release

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SIFMA NEWS

Stay Informed with SIFMA’s Leading Research
Stay informed with SIFMA’s research reports and statistics. We analyze vital statistics and data pertaining to financial markets and the general economy, as well as conduct surveys on retail business activity and human resources management. Leveraging the depth and breadth of research expertise at our member firms, many SIFMA reports include surveys of a diverse group of market participants to analyze sentiments from across the industry. SIFMA’s flagship reports include the Research Quarterly, Securities Industry FactBook, Economic Outlook, Government Forecast, Municipal Issuance Survey and Foreign Activity Report.

New Edition Available: Download SIFMA’s Fact Book
The securities industry raised $2.3 trillion of corporate capital for U.S. businesses in 2015 through debt and equity issuance in the U.S. Find more facts in SIFMA’s indispensable Fact Book, an annual publication that contains comprehensive data on the securities industry, capital markets, market activity, investor participation, global markets, savings and investment, and much more. The Fact Book - used frequently by industry professionals, regulators, academics, and journalists - amasses data from dozens of sources into a single, easily accessible reference source for researchers and others who track key industry statistics.

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Events

Insurance- and Risk-Linked Securities Conference: February 26-28, Miami
SIFMA’s IRLS 2017 Conference will bring together market participants to discuss insurance-linked securities and alternative capital, with subtopics covering technology disruptors including InsurTech, cyber and terror risk, structuring considerations, the Florida market, and more. Join us to participate in an interactive dialogue with industry experts, thought leaders, sponsors, and institutional investors over a two-day program. Featured speakers include Tom Ridge, the first Secretary of U.S. Department of Homeland Security, and Dr. Phil Klotzbach, Research Scientist of Atmospheric Science at Colorado State University.

Sign up for SIFMA's Signature Executive Education Program, SII at Wharton
The Securities Industry Institute® (SII) is the premier executive development program uniquely tailored for financial services professionals. For more than 65 years, SIFMA and The Wharton School of The University of Pennsylvania have partnered to equip SII participants with practical information, ideas and answers directly applicable to their present and future responsibilities. Registration is open for the March 5-10, 2017 program. Visit our website to learn more.

C&L Annual Seminar 2017 - Register before early bird rates end Jan. 13
This premier event, to be held March 19-22 in San Diego, provides an opportunity for the industry’s leaders and regulators to come together to educate, share ideas and address emerging trends impacting the compliance and legal community. Keynote speakers include: Preet Bharara, United States Attorney of Southern District of New York, U.S. Department of Justice; Robert W. Cook, President and Chief Executive Officer of FINRA; Suni Harford, Regional Head of Markets, North America, Citi; and Jan Lynn Owen, Commissioner of California Department of Business Oversight. Early bird rates end January 13, 2017—register today!

Early Bird Rates Available: 2017 Operations Conference & Exhibition: May 8-11, Florida
The 44th annual Operations Conference and Exhibition provides a tailored program for leaders facing significant industry changes that will impact their business—primarily driven by regulation, risk, resiliency, and the evolution of technology. Program topics include: Shortening the Settlement Cycle, Consolidated Audit Trail, Cybersecurity, Regulatory Perspectives in Operations, Fixed Income Market Structure Issues, Collateral Margin Changes, Distributed Ledger Technology and its Applications, and more. Register at the early bird rate!

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Economic Calendar

Week of1/16

MONDAY

  • U.S. Holiday: Martin Luther King Jr. Day
  • All Markets Closed

TUESDAY

  • Empire State Mfg Survey 8:30 AM ET
  • William Dudley Speaks 8:45 AM ET
  • 4-Week Bill Announcement 11:00 AM ET
  • 3-Month Bill Auction 11:30 AM ET
  • 6-Month Bill Auction 11:30 AM ET
  • John C. Williams Speaks 6:00 PM ET

WEDNESDAY

  • MBA Mortgage Applications 7:00 AM ET
  • Consumer Price Index 8:30 AM ET
  • Redbook 8:55 AM ET
  • Industrial Production 9:15 AM ET
  • Housing Market Index 10:00 AM ET
  • Neel Kashkari Speaks 10:00 AM ET
  • 4-Week Bill Auction 11:30 AM ET
  • Beige Book 2:00 PM ET
  • Treasury International Capital 4:00 PM ET

THURSDAY

  • Weekly Bill Settlement
  • Housing Starts 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Business Outlook Survey 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • John C. Williams Speaks 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • EIA Petroleum Status Report 11:00 AM ET
  • 3-Month Bill Announcement 11:00 AM ET
  • 6-Month Bill Announcement 11:00 AM ET
  • 2-Yr FRN Note Announcement 11:00 AM ET
  • 2-Yr Note Announcement 11:00 AM ET
  • 5-Yr Note Announcement 11:00 AM ET
  • 7-Yr Note Announcement 11:00 AM ET
  • 10-Yr TIPS Auction 1:00 PM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

FRIDAY

  • Patrick Harker Speaks 9:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
  • John C. Williams Speaks 1:00 PM ET

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Featured Data and Resources

View all Rates Reference Data Aggregated by SIFMA Rates Group

Calendars
SIFMA’s New 2017-2018 Market Close Recommendations
CME’s Full 2017 Holiday Calendar and Related Notices
FICC’s 2017 Holiday Schedule for GSD

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