Markets today: who controls the earth’s axis?

The secret of the world financial market

In brief: Operations on the world markets is not controlled by brokers or companies, it all depends on computer networks.

Every working day at 11.00 AM New York time, begins a strange and incomprehensible ritual. On the screens appear Reuters information on the official “market average” value of dollar swaps. Changes in prices for dollar swaps – in fact, derivative instruments tied to yields on government bonds – determines not only the situation on Wall Street.

They are used as a factor in setting prices for a number of corporate bonds, and moreover, they affect the cost of some private investment portfolios and pensions. And their pricing is very vague process, which is operated by a handful of banks. Meanwhile, prices, supposedly determined by the market matured and published in the pages of the largest interdealer broker Reuters ICAP, also broadcast in syndication feed Bloomberg and for some reason sometimes differ from prices published elsewhere on Bloomberg, reflecting a more general trade for the same types of swaps. Such differences appear to be suspicious: perhaps up to 11 hours prices move as it is profitable big banks and ruinous to their clients, as well as financial groups are not among the elect. Amid the financial crisis, regulators around the world trying to deal with this convenient for some alignment.

Thus, the majority of concerns related to it was customary to allow a group of major banks to set prices, and that it defines a set of changes proposed for the derivatives markets in the U.S.. Should operations Swaps serve only the banking sector, or they should be more transparent and used for the benefit of the economy and consumers in general? This is just one of the questions addressed to the inhabitants of Capitol Hill, who are almost ready to demand more openness from banks in respect of swaps. And most likely, they will require, as recently, Paul Volcker, former Federal Reserve chairman, does not agree with this idea, several softened its stance. That is why the looming outline of the reforms had started by the Congress so much worried about Wall Street.

Ukrainian Globalist
2010-06-20 14:54, Economics.

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