Almost every day we read another salvo of arguments in the debate over whether bond market liquidity has been harmed by new banking regulations. Based on bid-ask spreads and most other standard liquidity metrics, bond markets appear to be about as liquid as they have been for a long time. Liquidity is worse, however, for larger-sized trades. If necessary to achieve financial stability, this is a cost well worth bearing.
The amount of liquidity offered to bond markets by large banks is markedly reduced. Large banks are stocking much smaller market-making inventories of bonds. Balance sheet space is treated like expensive real estate, available only to positions that can afford to pay rental fees that are now much higher.In the case of repurchase agreements, known as repos, access to bank balance-sheet space has been sharply increased by regulation. The three-month U.S. treasury-secured repo rates paid by non-bank dealers are now even higher than three-month unsecured borrowing rates paid by banks, a significant market distortion. Trade volume in the bank-to-non-bank dealer market for U.S. government securities repo is less than half of 2012 levels. European repo market liquidity has also deteriorated.
Repo market efficiency is an important ingredient in the general liquidity of developed bond markets. I will suggest some policy changes in this area, and discuss the implications of other ongoing changes in bond market structure, such as the changing roles of high-frequency trading and electronic trade platforms.
Academic Luncheon Keynote
Prof Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University’s Graduate School of Business. He is a Fellow and member of the Council of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Academy of Arts and Sciences, and a member of the board of directors of Moody’s Corporation since 2008. Read More
Prof Allaudeen Hameed is a Provost`s Chair and Professor in the Department of Finance at the National University of Singapore (NUS) Business School. He is currently the Head of Department of Finance at NUS Business School and serves on the board of the NUS-Risk Management Institute. Dr Hameed has also held visiting positions at the University of North Carolina at Chapel Hill and the University of Texas at Austin. Read More
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Prof Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University’s Graduate School of Business. He is a Fellow and member of the Council of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Academy of Arts and Sciences, and a member of the board of directors of Moody’s Corporation since 2008.
Duffie was the 2009 president of the American Finance Association. He currently chairs the Market Participants Group, charged by the Financial Stability Board with recommending reforms to Libor, Euribor, and other interest rate benchmarks. Duffie’s recent books include How Big Banks Fail (Princeton University Press, 2010), Measuring Corporate Default Risk (Oxford University Press, 2011), and Dark Markets (Princeton University Press, 2012).
Prof Allaudeen Hameed is a Provost`s Chair and Professor in the Department of Finance at the National University of Singapore (NUS) Business School. He is currently the Head of Department of Finance at NUS Business School and serves on the board of the NUS-Risk Management Institute. Dr Hameed has also held visiting positions at the University of North Carolina at Chapel Hill and the University of Texas at Austin.
Dr Hameed`s research interests include return-based trading strategies, stock return co-movement, liquidity, role of financial analysts and international financial markets. His research work has been published in leading finance journals such as The Journal of Finance, Journal of Financial Economics, The Review of Financial Studies and The Journal of Financial and Quantitative Analysis. He serves on editorial boards of several academic journals including the Financial Management, the International Review of Finance and the Pacific-Basin Finance Journal.
Dr Hameed has won numerous awards including the University of North Carolina Kenan-Flagler Alumni Merit Award (2011), Outstanding Researcher Award (2015 and 2003) from NUS Business School, and Best Paper Awards at the SGF Conference, Swiss Society (2014) and China International Finance Conference (2008).
He completed his Bachelor of Business Administration (Honours) at NUS Business School and PhD in Finance at the University of North Carolina in Chapel Hill.×
Rohit Sipahimalani joined Temasek in 2008 and is currently Co-Head, Investment Group, Head, Portfolio Strategy and Head, India.
Prior to Temasek, Rohit spent 11 years with Morgan Stanley holding senior positions across its Mumbai and Hong Kong offices, including Co-Head of the Asia Pacific M&A business in Hong Kong, before his most recent appointment as Managing Director & Head of South East Asia Investment Banking in Singapore.
Rohit has worked on transactions in several Asian countries, including China, South Korea, Singapore, Indonesia, Thailand and India.
Rohit started his career with Citibank, Mumbai, after which he spent a few years with McKinsey & Co in India as a management consultant, before he joined Morgan Stanley.
Rohit graduated with a degree in Economics from St. Stephens College, Delhi and received an MBA from the Indian Institute of Management, Ahmedabad.×
Ms. Abdel Majeid is Senior Vice President, Chief of Strategy and Head of Business Intelligence at E*TRADE Financial. In her role, Ms. Abdel Majeid is responsible for corporate strategy development, performance management, business analytics and customer information management.
Prior to joining E*TRADE, Ms. Abdel Majeid was a management consultant at Booz & Company where she advised retail and commercial financial institutions on key strategic, performance improvement and organizational decisions.
Ms. Abdel Majeid began her career in real estate investment lending at Smith Rothchild Financial. She served as Director of Lending Operations where she oversaw credit analysis, underwriting and overall portfolio management. Ms. Abdel Majeid holds an MBA from the Kellogg School of Management at Northwestern University, and a Bachelors of Science in Finance and Economics from Elmhurst College. ×
Ms Alexa Lam was the Deputy Chief Executive Officer of the Securities and Futures Commission (SFC) and Executive Director, Investment Products, International & China, having stepped down on 28 February 2015. In that role, she covered the regulation of the Hong Kong retail investment products market, SFC's policies on international engagements, and market development in Mainland China and Hong Kong.
During her time at the SFC, Ms Lam established Hong Kong’s lead as the premier offshore Renminbi (RMB) centre and built Hong Kong into an international asset management hub in Asia, with total assets under management in Ho ng Kong reaching a historic high of over 16 trillion HKD, ahead of other markets in the region. She advocated to the Hong Kong and mainland Chinese authorities the benefits of using Hong Kong to conduct capital market opening experiments for China. Successful initiatives under this strategy included the Shanghai-Hong Kong Stock Connect.
She also designed innovative capital account and market opening tools for China’s market reform experiments, including the RMB Qualified Foreign Institutional Investor (RQFII) scheme, and the soon-to-be-launched Mutual Recognition of Funds between Hong Kong and the mainland. Ms Lam also created a global regulatory framework for the supervision of non-centrally cleared over-the-counter derivatives. Co-chaired, together with the Director of Division of Banking Supervision and Regulation at the U.S. Federal Reserve Board, the Working Group on Margining Requirements and published a framework in 2013, for worldwide implementation in 2016.
Ms Lam is currently the Inaugural Distinguished Visitor at the Lieberthal-Rogel Center for Chinese Studies at the University of Michigan. She will be joining the University of Hong Kong as a professor of legal practice in May 2015.
Qualified as a lawyer in Hong Kong, New York and the UK, Ms Lam has 20 years of experience in corporate and commercial law practice in Hong Kong, Chicago and New York, and 16 years of securities regulatory experience.
Professor Joseph Cherian is Practice Professor of Finance and Director of the Centre for Asset Management Research & Investments (CAMRI) at NUS Business School, where he also serves on the School's Executive Education Board. He was formerly an Executive-in-Residence at Cornell University’s Johnson Graduate School of Management, where he remains a two-term member of the Johnson Dean’s Advisory Council.
Prior to that, Joe was Managing Director, Global Head, and CIO of the Quantitative Strategies Group within Credit Suisse Alternative Investments in New York, where he had direct responsibility for over US$67 billion in client assets managed to a quantitative discipline. While at Credit Suisse, Joe also served on the Global Executive Committee and various senior management, investments, and risk committees of the Asset Management division. Joe joined Credit Suisse in 2004 from Banc of America Capital Management, also in New York, where he was Managing Director and Senior Portfolio Manager of their asset allocation funds.
Previously, Joe was an Associate Professor of Finance at Boston University. He has authored numerous articles for financial journals, and serves on the Scientific Advisory Boards of Nipun Capital, a boutique hedge fund based in San Francisco. Joe has or had appointments at the Ministry of Manpower's CPF Advisory Panel, the Singapore International Mediation Centre’s Panel of Technical Experts, the National Research Foundation's Early Stage Venture Fund Evaluation Panel in Singapore, and the Journal of Alternative Investments’ Editorial Board. He formerly served as a review board member of the Research Foundation of the CFA Institute, and on the Scientific Advisory Boards of net Decide Corp., Orissa Group, a pioneer in the development and dissemination of liquidity-based data and analytical products across multiple asset classes, and SKG Inc., all based in the US. Joe holds a B.S. in Electrical Engineering from MIT, and M.S. and Ph.D. degrees in Finance from Cornell University. ×
Carmen M. Reinhart is the Minos A. Zombanakis Professor of the International Financial System at Harvard Kennedy School. Previously, she was the Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics and Professor of Economics and Director of the Center for International Economics at the University of Maryland. Professor Reinhart held positions as Chief Economist and Vice President at the investment bank Bear Stearns in the 1980s. She spent several years at the International Monetary Fund. Reinhart is a Research Associate at the National Bureau of Economic Research, and a member of the Congressional Budget Office Panel of Economic Advisers and the Economic Advisory Panel of the Federal Reserve Bank of New York. She has been listed among Bloomberg Markets Most Influential 50 in Finance.
Reinhart has written on a variety of topics in macroeconomics and international finance. She has served on numerous editorial boards and has testified before congress. Her work has helped to inform the understanding of financial crises for over a decade. Her best-selling book (with Kenneth S. Rogoff) entitled This Time is Different: Eight Centuries of Financial Folly documents the striking similarities of the recurring booms and busts that have characterized financial history and has been translated to over 20 languages and won the 2010 Paul A. Samuelson TIAA-CREF Institute Award, among others.
Andrew K. Rose is the B.T. Rocca Jr. Professor of International Business in the Economic Analysis and Policy Group, Haas School of Business at the University of California, Berkeley; he serves as Associate Dean for Academic Affairs, and Chair of the Faculty. He is also a Research Associate of the National Bureau of Economic Research (based in Cambridge, MA), and a Research Fellow of the Centre for Economic Policy Research (based in London, England). He received his Ph.D. from the Massachusetts Institute of Technology, his M.Phil. from Nuffield College, University ofOxford, and his B.A. from Trinity College, University of Toronto.
American Economic Review, the Quarterly Journal of Economics, the Review of Economic Studies, and the Journal of Finance. His research addresses issues in international trade, finance, and macroeconomics, and has received more than 30,000 citations. His teaching is in the areas of international macroeconomics; he has won two teaching awards.
Rose was the managing editor of The Journal of International Economics from 1995 through 2001, and was the founding director of the Clausen Center for International Business and Policy at Haas and the Risk Management Institute at the National University of Singapore. He has organized over forty-five academic conferences.
Rose is interested in the theory and practice of economic policy, and most of his work is applied and driven by "real world" international phenomena. A citizen of three countries, he has worked on six continents and at a number of international economic agencies, including: the International Monetary Fund, the World Bank, and the Asian Development Bank. He has also worked at a number of national agencies, including: the US Department of Treasury, HM Treasury (UK), the Canadian Department of Finance; and the central banks of: Australia, Canada, England, Europe, Hong Kong, Israel, Italy, Japan, Netherlands, New Zealand, Singapore, Spain, and the United States. He has visited a number of other universities, including Cape Town, EUI, FUB, INSEAD, London School of Economics, Melbourne, NUS, Princeton, SHUFE, SMU, Stockholm, Tel Aviv, Tsinghua, ULB, and Victoria.
Professor Tan Chorh Chuan was appointed President of the National University of Singapore in December 2008. He concurrently serves as the Chairman of the Board of the National University Health System. Prof Tan's additional appointments include Deputy Chairman of Singapore's Agency for Science, Technology and Research (A*STAR); Senior Advisor to the Governing Board of Duke-NUS Graduate Medical School; and Member, Board of Directors of the Monetary Authority of Singapore.
A renal physician, he obtained his medical training at NUS, and research training at the Institute of Molecular Medicine, Oxford. He was Dean of the NUS Faculty of Medicine from 1997 to 2000. He served as the Director of Medical Services, Ministry of Health, from 2000 to 2004, in which capacity he was responsible for leading the public health response to the 2003 SARS epidemic. He held the positions of NUS Provost, then Senior Deputy President from 2004 to 2008. He also played a key role in setting up the Duke-NUS Graduate Medical School, in his capacity as Deputy Chairman of the Governing Board from 2004 to 2007. As the inaugural Chief Executive of the National University Health System in 2008, he brought the NUS Medical and Dental Schools and the National University Hospital under single governance.
Prof Tan is a key leader in Singapore's Biomedical Sciences Initiative since its inception in 2000, for which he was awarded the National Science and Technology Medal in 2008. He also received the Public Service Star in 2003 for outstanding contributions to overcoming SARS in Singapore, and the Public Administration Gold Medal in 2004 for his work as Director of Medical Services in the Ministry of Health. Other awards include the Dr John Yu Medal from the George Institute for Global Health, Australia; the Albert Schweitzer Gold Medal from the Polish Academy of Medicine; Honorary Doctor of Medicine from King's College; Honorary Doctor of Science from Duke University; Honorary Doctor of Science from Loughborough University; Achievement Medal from the Singapore Society of Nephrology and the 1996 Singapore Youth Award.
Prof Tan, who has been a member of the World Economic Forum's Global University Leaders Forum (GULF) since 2008, was appointed Chair of GULF in 2014 for a two-year term. He also sits on the World Economic Forum's Science Advisory Committee. He was the Chairperson of the International Alliance of Research Universities, a consortium of 10 leading research-intensive universities from 2008 - 2012. Prof Tan was previously a Commonwealth Medical Fellow, Wellcome Fellow, University of Oxford, and a Visiting Scholar to Wolfson College, Oxford. He is a Fellow of the Royal College of Physicians of Edinburgh, Royal College of Physicians of London, the American College of Physicians, elected Fellow of the Polish Academy of Medicine and Fellow of the Royal Geographical Society, UK.