Quote of the Week: "There is a huge demand for all kinds of fixed-income securities, and Wall Street is very innovative in creating supply to meet the demand." -Donald Marron, head of private equity firm Lightyear Capital and former CEO of PaineWebber (Wall Street Journal 3/21/06).
AMD Discusses NASD TRACE Proposal
In a meeting yesterday, the AMD Market Practices and Standards Subcommittee, Chaired by Richard Weil of PIMCO agreed that a recent TRACE proposal moves out of the realm of price transparency and into the territory of trade transparency. The proposal put forth by NASD, if adopted, would indicate whether the reporting party is "buying" or "selling" the securities and whether their counterparty is a "broker/dealer" or a "customer."
From this initial meeting, the Subcommittee felt that the proposal was vague and that it could be detrimental to the businesses of asset management firm insofar as buy side investment strategies might be revealed in certain circumstances under the proposed disclosure.
The Asset Managers Division and the Corporate Credit Markets Division of The Bond Market Association will work together to provide feedback and comments to the NASD on this recent TRACE proposal.
Click here for information on TRACE and its proposal
Furthermore, the AMD Market Practices and Standards Subcommittee discussed revisions to the group's draft documentation relating to best execution guidelines and reviewed the status of the Major Dealers concerning long-term swaps trading and processing solutions.
COOs and other senior executives at asset management firms are invited to become engaged in these activities through the AMD. Please contact Joseph Sack at 646.637.9200 for additional information.
FSA Proposal: Asset Managers to Report on Hedge Fund Activities
On March 23, 2006, Financial Services Authority ("FSA") published its feedback to a Discussion Paper (issued in April 2005) on the impact of hedge funds on the UK's wholesale market. According to a press release issued yesterday, the FSA explained that it was seeking to "increase its understanding of the activities of those asset managers using hedge fund techniques." The FSA proposes that asset managers report, through regulatory filings, their prime broker, third party administrator and the fund auditor.
The FSA will be examining the possible conflicts of interest around the asset valuation process for hedge funds and side letters (which are agreements between individual clients that could result in some investors receiving preferential treatment).
Click here for FSA Press Release
Click here to read FSA Feedback Paper on Hedge Fund Risks
Click here to read April 2005 FSA Discussion Paper on Risk and Regulatory Engagement of Hedge Funds
The Asset Managers Division will monitor this issue and discuss its potential impact on the business activities of asset management firms.
Proposed Netting Facility - 3/27 Call-in
At the March Steering Committee Meeting of the AMF, a representative from the Emerging Markets Trade Association ("EMTA") announced that it is proposing to sponsor a Multilateral Netting Facility to address the longstanding backlog in the settlement of transactions in Venezuela Oil Obligations entered into before January 2, 2002. The Facility, which will be cash-settled at a settlement price to be determined on the basis of a polling of all participating firms, is expected to be completed before June 30, 2006.
A special conference call has been scheduled for Monday, March 27 at 3 p.m. EST to discuss the involvement of the asset management community. Specifically, the conference call will address:
1. The background of the current warrant fails problem
2. Internal and External Reconciliation of Warrant Positions and Payments relating thereto
3. Multilateral Netting / What constitutes critical mass for this process?
Click here for additional details on EMTA's proposed Multilateral Netting Facility
The call-in details are as follows:
Date: Monday, March 27, 2006
Time: 3 p.m. EST
Call-in: 1-800-283-1476
Confirmation: 875-350
Aviva Werner, Senior Legal Counsel of EMTA, will be a presenter during the conference call. Please email Diane Trupia to confirm your participation in this conference call.