Derivatives

A Matter of Magnitudes: Making Matterhorn Out of a Molehill

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The CFTC released its civil complaint in the Sarao case yesterday, along with the affidavit of Cal-Berkeley’s Terrence Hendershott. Hendershott’s report makes for startling reading. Rather than supporting the lurid claims that Sarao’s actions had a large impact on E Mini prices, and indeed contributed to the Flash Crash, the very small price impacts that Hendershott quantifies undermine these claims.

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Spoofing: Scalping Steroids?

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The complaint against Sarao contains some interesting details. In particular, it reports his profits and quantities traded for nine days.

First, quantities bought and sold are almost always equal. That is characteristic of a scalper.

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Did Spoofing Cause the Flash Crash? Not So Fast!

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The United States has filed criminal charges against on Navinder Sarao, of London, for manipulation via “spoofing” (in the form of “layering”) and “flashing.” The most attention-grabbing aspect of the complaint is that Sarao engaged in this activity on 6 May, 2010-the day of the Flash Crash. Journalists have run wild with this allegation, concluding that he caused the Crash.

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What percentage of the market is in the US SDR data?

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We analyse the SDR data in light of the whole market in the cleared Rates space. SDR data is shown to represent over 60% of total-market volumes at a trade-by-trade level. That’s huge! It’s funny how times change. Next month, the BIS

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The Risks of Clearing Finally Dawn on Tarullo: Better Late Than Never, I Guess

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In October, 2011 I was in a group of academics invited to meet the Board of Governors of the Fed to discuss our research. The theme was network industries, and I was to make a presentation on the network aspects of clearing and its implications for systemic risk.

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Fund Managers: Fixing EMIR Reporting Glitches

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Now that more than a year has passed since they’ve had to deal with new reporting requirements under the European Market Infrastructure Regulation (EMIR), fund managers are belatedly waking up to the fact they could soon face whopping regulatory fines for not submitting correct data on their derivative transactions to accredited trade repositories. Regulatory operations […]

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OIS Swap Nuances

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Overnight Indexed Swaps (OIS) are fixed-float swaps where the floating leg index is a compounded overnight interest rate. For short dated swaps, those less than 1Y, the coupon structure is usually zero coupon. For longer dated swaps, the fixed leg

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BATS in the OCC’s Belfry?, or The Perils of Natural Monopoly Regulation, CCP Edition

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