DOCSLIB.ORG

Regulatory Information Bulletin

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Regulatory Information Bulletin REGULATORY INFORMATION BULLETIN RB-12-16 February 8, 2012 TO: ETP Holders SUBJECT: VelocitySharesTM ETNs due February 3, 2032 (8 issues) Compliance and supervisory personnel should note that, among other things, this Information Bulletin discusses customer suitability regarding purchases of these exchange traded notes (“ETNs”) issued by the Credit Suisse AG (the “Issuer”). Please forward this Information Bulletin to other interested persons within your organization. The following ETNs have been approved for listing on NYSE Arca and will commence trading on February 8, 2012: Exchange-Traded Notes Symbol VelocitySharesTM 3x Inverse Brent Crude ETN linked to the S&P GSCI® DOIL Brent Crude Index Excess Return due February 3, 2032 VelocitySharesTM 3x Long Brent Crude ETN linked to the S&P GSCI® UOIL Brent Crude Index Excess Return due February 3, 2032 VelocitySharesTM 2x Inverse Copper ETN linked to the S&P GSCI® SCPR Copper Index Excess Return due February 3, 2032 VelocitySharesTM 2x Long Copper ETN linked to the S&P GSCI® Copper LCPR Index Excess Return due February 3, 2032 VelocitySharesTM 3x Inverse Natural Gas ETN linked to the S&P GSCI® DGAZ Natural Gas Index Excess Return due February 3, 2032 VelocitySharesTM 3x Long Natural Gas ETN linked to the S&P GSCI® UGAZ Natural Gas Index Excess Return due February 3, 2032 VelocitySharesTM 3x Long Crude ETN linked to the S&P GSCI® Crude UWTI Oil Index Excess Return due February 3, 2032 VelocitySharesTM 3x Inverse Crude ETN linked to the S&P GSCI® Crude DWTI Oil Index Excess Return due February 3, 2032 Background Information on the Securities As more fully explained in the Registration Statement No. 333-158199-10 for VelocitySharesTM ETNs due February 3, 2032 (the “Securities”), the ETNs are senior medium-term notes of the Issuer. The ETNs are linked to the performance of the applicable Index during the term of such ETNs. The ETNs are designed to reflect a leveraged long (2x or 3x) or leveraged inverse RB-12-16 February 8, 2012 Page 2 of 5 (minus 2x or minus 3x) exposure, as applicable, on a daily basis, to the S&P GSCI® Brent Crude Index ER, the S&P GSCI® Crude Oil Index ER, the S&P GSCI® Natural Gas Index ER or the S&P GSCI® Copper Index ER (each such index, an “Index” and collectively the “Indices”). Each Index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI® Index (the “S&P GSCI”). The fluctuations in the values of the Indices are intended generally to correlate with changes in the prices of such physical commodities in global markets. The S&P GSCI® Brent Crude Index ER, the S&P GSCI® Crude Oil Index ER, the S&P GSCI® Natural Gas Index ER and the S&P GSCI® Copper Index ER are composed entirely of Brent crude oil, WTI crude oil, natural gas and copper futures contracts, respectively. The Indices are determined, composed and calculated by Standard & Poor’s (“S&P” or the “Index Sponsor”). Payment at Maturity For each Security, unless previously redeemed or accelerated, on the Maturity Date investors will receive for each $50 stated principal amount of the investor’s ETNs a cash payment equal to the applicable Closing Indicative Value of such ETNs on the Final Valuation Date (the “Final Indicative Value”), as calculated by the Calculation Agents. If the Final Indicative Value is zero, the Maturity Redemption Amount will be zero. Closing Indicative Value The Closing Indicative Value for each series of ETNs on the Inception Date will equal $50 (the “Initial Indicative Value”). The Closing Indicative Value on each calendar day following the Inception Date for each series of ETNs will equal (1)(a) the Closing Indicative Value for such series of ETNs on the immediately preceding calendar day times (b) the Daily ETN Performance for such series of ETNs on such calendar day minus (2) the Daily Investor Fee for such series of ETNs on such calendar day. The Closing Indicative Value will never be less than zero. If the Intraday Indicative Value for any series of ETNs is equal to or less than zero at any time or the Closing Indicative Value is equal to zero on any Index Business Day for such series of ETNs, the Closing Indicative Value for such series of ETNs on that day, and all future days, will be zero. If any series of ETNs undergoes a split or reverse split, the Closing Indicative Value for such series of ETNs will be adjusted accordingly. VelocityShares Index & Calculation Services, a division of VelocityShares LLC or its affiliate is responsible for computing and disseminating the Closing Indicative Value. The Closing Indicative Value for each series of ETNs will be calculated and published each calendar day. Principal Risks Investment in the Securities will involve significant risks. The Securities are not secured debt and are riskier than ordinary unsecured debt securities. Significant risks include credit risk of Credit Suisse AG; acceleration risk; long holding period risk; commodity risk; index risk; concentration risk; leverage risk; regulatory risk; early redemption risk; and interest rate risk. In addition, as noted in the Prospectus, the Securities may trade at market prices that may differ from RB-12-16 February 8, 2012 Page 3 of 5 their NAV. The NAV of the Securities will fluctuate with changes in the market value of the Indices. The market prices of the Securities will fluctuate in accordance with changes in NAV as well as the supply and demand for the Securities on the Exchange. As stated in the Registration Statement for the ETNs, the ETNs are intended to be daily trading tools for sophisticated investors to manage daily trading risks. They are designed to achieve their stated investment objectives on a daily basis, but their performance over different periods of time can differ significantly from their stated daily objectives. The ETNs are riskier than securities that have intermediate or long-term investment objectives, and may not be suitable for investors who plan to hold them for a period other than one day. Accordingly, the ETNs should be purchased only by knowledgeable investors who understand the potential consequences of investing in the applicable Index and of seeking daily compounding leveraged long or leveraged inverse investment results, as applicable. Investors should actively and frequently monitor their investments in the ETNs, even intra-day. Additional risks are described in the Prospectus for the ETNs. Exchange Rules Applicable to Trading in the Securities The ETNs are considered equity securities, thus rendering trading in the securities subject to the Exchange’s existing rules governing the trading of equity securities. Trading Hours The Securities will trade on NYSE Arca in the Opening, Core and Late Trading Session or from 4:00 a.m. ET until 8:00 p.m. ET in accordance with NYSE Arca Equities Rule 7.34(a). Extended Hours Trading ETP Holders are reminded of NYSE Arca Equities Rule 7.34(e) regarding Customer Disclosure and that trading in the ETNs during the Exchange’s Opening and Late Trading Sessions may result in additional trading risks which include: (1) that the current underlying index value may not be updated during the Opening and Late Sessions, (2) the intraday indicative value may not be updated during the Opening and Late Trading Sessions, (3) lower liquidity in the Opening or Late Trading Sessions may impact pricing, (5) higher volatility in the Opening or Late Trading Sessions may impact pricing, (6) wider spreads may occur in the Opening or Late Trading Sessions, and (7), since the intraday indicative value is not calculated or widely disseminated during the Opening and Late Trading Sessions, an investor who is unable calculate an implied value for the ETNs in those sessions may be at a disadvantage to market professionals. Suitability NYSE Arca Equities Rule 9.2(a) (Diligence as to Accounts) provides that an ETP Holder, before recommending a transaction in any security, must have reasonable grounds to believe that the recommendation is suitable for the customer based on any facts disclosed by the customer as to RB-12-16 February 8, 2012 Page 4 of 5 its other security holdings and as to its financial situation and needs. Further, the rule provides, with a limited exception, that prior to the execution of a transaction recommended to a non-institutional customer, the ETP Holder must make reasonable efforts to obtain information concerning the customer’s financial status, tax status, investment objectives, and any other information that such ETP Holder believes would be useful to make a recommendation. ETP Holders that carry customer accounts are reminded that, in recommending transactions in the ETNs, they must have a reasonable basis to believe that (1) the recommendation is suitable for a customer given reasonable inquiry concerning the customer’s investment objectives, financial situation, needs, and any other information known by such member, and (2) the customer can evaluate the special characteristics, and is able to bear the financial risks, of an investment in the ETNs. ETP Holders must make reasonable efforts to obtain the following information: (1) the customer’s financial status; (2) the customer’s tax status; (3) the customer’s investment objectives; and (4) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer. FINRA has implemented increased sales practice and customer margin requirements for FINRA members applicable to leveraged exchange-traded products (which include the ETNs) and options on such products, as described in FINRA Regulatory Notices 09-31 (June 2009), 09-53 (August 2009) and 09-65 (November 2009).
Load more

Recommended publications
  • Evaluation of Risk Elements in Real Estate Investment in Nigeria: the Case of Uyo Metropolis, Akwa Ibom State
    IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 18, Issue 10. Ver. II (October. 2016), PP 70-75 www.iosrjournals.org Evaluation of Risk Elements In Real Estate investment In Nigeria: The Case Of Uyo Metropolis, Akwa Ibom State Dr. Francis P. Udoudoh, Department of Estate Management, University of Uyo, Nigeria Dr. Usen P. Udoh, Department of Architecture, University of Uyo, Nigeria* Abstract: Risk is a common feature of all forms of investment including real estate which involves the creation of new income yielding assets from land and its resources based on capital analysis of expected costs and benefits within a given time. While some real estate investments have a high-risk profile, others have low-risk profile depending on the type, location and lease term. This study was designed to evaluate the different elements of risk in relation to different stages of real estate development in Uyo Metropolis, Akwa Ibom State. A total of 200 project sites were randomly selected and visited for data collection. Accordingly, 200 sets of questionnaire containing items bordering on types of risk/ project development were administered to the private estate developers while simple percentages was employed to analyse data. Findings indicated that the nature of risk encountered by investors varied according to the stages of project development, especially during preparation of development plans and building construction. Majority of respondents identified lack of access to project finance, delay in issuance of C-of-O and default in rent payment as the major risk elements in their investment.
    [Show full text]
  • Risk Disclosure Regarding Complex Or Leveraged Exchange-Traded Products
    RISK DISCLOSURE REGARDING COMPLEX OR LEVERAGED EXCHANGE-TRADED PRODUCTS Interactive Brokers ("IBKR") is furnishing this disclosure to clients to provide additional information regarding the characteristics and risks associated with Complex or Leveraged exchange-traded products ("ETPs"). Complex or Leveraged Exchange-Traded Products ("ETPs") are funds or notes that trade on an exchange but have very different characteristics from shares of stock or ordinary exchange-traded funds (ETFs) such as an S&P 500 Index ETF. Complex or Leveraged ETPs may include, but are not limited to: (1) leveraged ETFs and ETPs; (2) inverse ETFs and ETPs; (3) volatility-linked ETFs and ETPs; (4) Exchange-Traded Notes ("ETNs"); (5) cryptocurrency ETFs and ETPs; and (6) any other ETP that uses derivatives, that contains imbedded leverage, or that is based on an exotic or volatile underlying commodity or index or financial product. In addition to providing this disclosure, IBKR strongly encourages clients to carefully review the prospectus, Key Information Document or other available disclosures relating to the specific ETF, ETN or other ETP before investing, to understand its unique features, risks, fees, tax treatment and other characteristics. LEVERAGED FUNDS As the name implies, leveraged mutual funds and ETFs seek to provide leveraged returns at multiples of the underlying benchmark or index they track. Leveraged funds generally seek to provide a multiple (i.e., 200%, 300%) of the daily return of an index or other benchmark for a single day excluding fees and other expenses. In addition to using leverage, these funds often use derivative products such as swaps, options, and futures contracts to accomplish their objectives.
    [Show full text]
  • Exchange Traded Notes, Each Linked to a Different Equity Index BMO Capital Markets
    Registration Statement No. 333-237342 Filed Pursuant to Rule 424(b)(3) Prospectus Addendum, dated April 20, 2020 to Product Supplements and Prospectus Supplements of Various Dates, and the Prospectus Dated April 20, 2020 Exchange Traded Notes, Each Linked to a Different Equity Index This prospectus addendum relates to several issuances of outstanding exchange traded notes that Bank of Montreal has issued. We will use this prospectus addendum and the applicable pricing supplement and prospectus supplement, each dated as of various dates, in connection with the continuous offering of these notes. These notes were initially registered, and all or a portion of them were initially offered and sold, under registration statements that we previously filed. When we initially registered each of these notes, we prepared a prospectus supplement, each referred to as the “original prospectus supplement” relating to the applicable notes, and in some cases, a product supplement (each referred to as the “original product supplement”). The applicable original prospectus supplement (and product supplement, if applicable) is accompanied by a “base” prospectus. We have prepared a new “base” prospectus dated April 20, 2020. This new base prospectus replaces the applicable previous base prospectus relating to each of the notes. Because the terms of each series of notes otherwise have remained the same, we are continuing to use the original prospectus supplement (and if applicable, the original product supplement). Accordingly, you should read the original prospectus supplement (and any applicable product supplement) for the applicable notes, together with the new base prospectus. When you read these documents, please note that all references in the original prospectus supplement or product supplement to the base prospectus dated as of a date prior to April 20, 2020 or to any sections of the prior base prospectus, should refer instead to the new base prospectus, or to the corresponding section of that new base prospectus.
    [Show full text]
  • Aligning the Enterprise Risk Management Framework to the Personal Financial-Planning Domain
    Aligning the Enterprise Risk Management Framework to the Personal Financial-Planning Domain Vinay Kumar Dutta Presented at the: 2013 Enterprise Risk Management Symposium April 22-24, 2013 © 2013 Casualty Actuarial Society, Professional Risk Managers’ International Association, Society of Actuaries Page 1 of 28 Aligning the Enterprise Risk Management Framework to the Personal Financial Planning Domain Vinay Kumar Dutta* Abstract Individuals face many risks during different phases of their financial life cycle. These risks in turn have major financial implications on their wealth creation, wealth preservation, and wealth distribution aspirations. Traditionally risk taking is viewed negatively in relation to the personal financial-planning domain. In fact, most of the studies linking risk management to personal financial-planning focus primarily on investment- and insurance-related risks. In contrast, enterprise risk management takes a portfolio view of risks right from the personal level to the organization level. However, the existing literature on enterprise risk management is seen as an essential feature of corporate world. Even risk management experts acknowledge that there is not much literature available that explicitly addresses the issue of aligning the enterprise risk management framework to the whole spectrum of personal financial planning. In this backdrop, it seems logical to develop an in-depth study on aligning an enterprise risk framework to a personal financial-planning domain. Accordingly, this conceptual paper, avoiding mathematical jargon, extensively examines the extent to which enterprise risk management can be aligned to the personal financial-planning domain. The study concludes by suggesting how individuals should identify, aggregate, evaluate, and address risks across the whole spectrum of the personal financial-planning domain.
    [Show full text]
  • Dealer Behavior in Highly Illiquid Risky Assets
    Dealer Behavior in Highly Illiquid Risky Assets Michael A. Goldstein Babson College 320 Tomasso Hall Babson Park, MA 02457 [email protected] 781-239-4402 Edith S. Hotchkiss Boston College Fulton Hall, Room 340 Chestnut Hill, MA 02467 [email protected] (617) 552-3240 September 15, 2015 Abstract This study examines dealer behavior in a sample of 14,749 corporate bonds that vary in credit rating and liquidity. Our unique data set allows us to identify purchases and sales by individual dealers, enabling us to determine how long a dealer holds a bond purchase in inventory, how much of that initial purchase is sold to customers, spreads on those sales to customers, and how these vary with the credit rating and liquidity of the bond in the prior 30 days. We find that previous liquidity has little effect on the spreads dealers charge customers; for some rating categories, observed spreads are higher for the most actively traded bonds. Consistent with this finding, dealers’ holding periods do not necessarily decline as liquidity increases; in fact, dealer’s holding periods are lowest for some of the most illiquid bonds. Dealers are also more likely to sell all of an initial purchase of bonds on the same day for the less liquid bonds. These effects become stronger as credit quality decreases. Overall, our results suggest that dealers endogenously adjust their behavior to mitigate inventory risk from trading in illiquid securities. The authors are indebted to David Pedersen for extensive research assistance. We thank seminar participants at The Queen’s University – Belfast. REVISION NOTES: THE PAPER IS CURRENTLY BEING UPDATED USING RECENT DATA FROM FINRA TO EXTEND OUR SAMPLE PERIOD THROUGH 2015.
    [Show full text]
  • Asset Allocation
    Chapter 6 The Meaning and Measurement of Risk and Return Learning Objectives • Define and measure the expected rate of return of an individual investment. • Define and measure the riskiness of an individual investment. • Compare the historical relationship between risk and rates of return in the capital markets. 6-2 © 2017 Pearson Education, Inc. All rights reserved. Learning Objectives • Explain how diversifying investments affects the riskiness and expected rate of return of a portfolio or combination of assets. • Explain the relationship between an investor’s required rate of return on an investment and the riskiness of the investment. 6-3 © 2017 Pearson Education, Inc. All rights reserved. EXPECTED RETURN DEFINED AND MEASURED 6-4 © 2017 Pearson Education, Inc. All rights reserved. Holding-Period Return Historical or holding-period or realized rate of return Holding-period return = payoff during the “holding” period. Holding period could be any unit of time such as one day, few weeks or few years. 6-5 © 2017 Pearson Education, Inc. All rights reserved. Holding-Period Return • You bought 1 share of Google for $524.05 on April 17 and sold it one week later for $565.06. Assuming no dividends were paid, your dollar gain was: 565.06 – 524.05 = $41.01 6-6 © 2017 Pearson Education, Inc. All rights reserved. Holding-Period Rate of Return Holding-period rate of return Google rate of return: 41.01/524.05 = .0783 or 7.83% 6-7 © 2017 Pearson Education, Inc. All rights reserved. Expected Return Expected Cash Flows and Expected Rate of Return • The expected benefits or returns an investment generates come in the form of cash flows.
    [Show full text]
  • Strategic Asset Allocation with Liabilities: Beyond Stocks and Bonds
    Roy Hoevenaars Roderick Molenaar Peter Schotman Tom Steenkamp Strategic asset allocation with liabilities: Beyond stocks and bonds Discussion Papers 2005 – 006 February 2005 Strategic Asset Allocation with Liabilities: Beyond Stocks and Bonds Roy Hoevenaars Roderick Molenaar Peter Schotman Tom Steenkamp This version: February 2005 Abstract: This paper considers the strategic asset allocation of long-term investors who face risky liabilities and who can invest in a large menu of asset classes including real estate, credits, commodities and hedge funds. We study two questions: (i) do the liabilities have an important impact on the optimal asset allocation? (ii) do alternative asset classes add value relative to stocks and bonds? We empirically examine these questions using a vector autogression for returns, liabilities and macro-economic state variables. We find that the costs of ignoring the liabilities in the asset allocation are substantial and increase with the investment horizon. Second, the augmented asset menu adds value from the perspective of hedging the liabilities. Keywords: strategic asset allocation, asset liability management JEL codes: G11, C32. Affiliations: Maastricht University, ABP Investments, Vrije Universiteit Amsterdam, CEPR. Corresponding author: R. Hoevenaars Department of Quantitative Economics Maastricht University P.O. Box 616 6200 MD Maastricht Netherlands email: [email protected] ∗ We thank Michael Brandt, Rob van der Goorbergh, Ralph Koijen, Franz Palm, Luis Viceira, colleagues at ABP, and participants of the Erasmus Finance Day for helpful comments. ∗∗ The views expressed in this paper are those of the authors and do not necessarily reflect those of ouremployerandourcolleagues. 1Introduction Many years ago Samuelson (1969) and Merton (1969, 1971) derived the conditions under which optimal portfolio decisions of long-term investors would not be different from those of short-term investors.
    [Show full text]
  • Finance, Financial Services, and Economics Growth How Does the Size of the Financial Sector and Different Types of Financial Services Impact Economic Growth?
    Skidmore College Creative Matter Economics Student Theses and Capstone Projects Economics 2017 Finance, Financial Services, and Economics Growth How Does the Size of the Financial Sector and Different Types of Financial Services Impact Economic Growth? Abd-Alrahman Al-Asaad Skidmore College Follow this and additional works at: https://creativematter.skidmore.edu/econ_studt_schol Part of the Finance Commons Recommended Citation Al-Asaad, Abd-Alrahman, "Finance, Financial Services, and Economics Growth How Does the Size of the Financial Sector and Different Types of Financial Services Impact Economic Growth?" (2017). Economics Student Theses and Capstone Projects. 42. https://creativematter.skidmore.edu/econ_studt_schol/42 This Thesis is brought to you for free and open access by the Economics at Creative Matter. It has been accepted for inclusion in Economics Student Theses and Capstone Projects by an authorized administrator of Creative Matter. For more information, please contact [email protected]. 1 Finance, Financial Services, and Economics Growth How Does the Size of the Financial Sector and Different Types of Financial Services Impact Economic Growth? Student Researcher: Abude Alasaad Faculty Sponsor: Professor Monica Das May 4th 2017 This thesis is submitted in partial fulfillment of the requirements for the course Senior Seminar (EC 375), during the Spring semester of 2017 While writing this thesis, I have not witnessed any wrongdoing, nor have I personally violated any conditions of the Skidmore College Honor Code. Name: Abd-Alrahman AL-Assad Signature: AAA 2 Introduction: This paper studies the relationship between finance, financial services, and economic growth. More particularly, this study attempts to answer the following two questions: What is the relationship between the size of the financial sector and economic growth? And how do different types of financial services impact economic growth? Understanding the dynamics between the financial sector and economic growth is extremely important from an intellectual as well as practical perspective.
    [Show full text]
  • Regulatory Outlook 2021 and Beyond
    Regulatory Outlook 2021 and Beyond 2 | BROADRIDGE Staying up-to-date on evolving regulations is an essential requirement for TABLE OF CONTENTS financial institutions large and small. Yet, continuous regulatory changes, delays, United States 4 and additions can complicate an already challenging task. Canada 8 Take advantage of our Regulatory Outlook 2021 and Beyond to quickly assess International 9 what’s new regarding regulations around the globe. You’ll gain insights into Europe 10 how you can proactively prepare and respond to recent shifts in the regulatory landscape. You’ll also learn about the expertise and solutions that can improve Asia Pacific 14 your processes, increase efficiency — and ultimately bring some ease to the Conclusion 15 complicated world of compliance. 3 | BROADRIDGE UNITED STATES California Consumer Dodd-Frank Wall SEC Corporate Privacy Act (CCPA) Street Reform Disclosures Following on the heels of the European Union’s and Consumer Public companies must keep their shareholders General Data Protection Regulation (GDPR), the CCPA informed on a regular basis. The Securities and grants consumers new rights concerning the collection Protection Act Exchange Commission (SEC) requires all publicly of their personal information. It grants a consumer the traded companies to disclose certain types of business Dodd-Frank is a massive piece of financial reform right to request that a business disclose the categories and financial data to the SEC and to the company’s legislation targeting the sectors of the financial system and specific pieces of personal data that it collects stockholders. These documents must be filed so that were believed to have caused the 2008 financial about them, the categories of sources from which they can be made publicly available on the SEC’s crisis, including banks, mortgage lenders, and credit that information is collected, the business purposes EDGAR website and subject to review by SEC staff for rating agencies.
    [Show full text]
  • Forging Best Practices in Risk Management
    Officce of Finnancial Researcch WWorkingg Paper #0002 Marchh 26, 20012 Forgging BBest Practices in Risk MManaggement Mark JJ. Flannery1 Paul Glassermman2 DDavid K.A. Morddecai3 Clifff Rossi44 1 University of Florida annd the Office oof Financial Ressearch, [email protected] 2 Columbia University annd the Office oof Financial Ressearch,* [email protected] 3 Risk Economics, Inc. annd NYU Courannt Institute of MMathematical SSciences, davidd_mordecai@risk‐econ.com 4 University of Marylandd, Department of Finance Exeecutive‐in‐Resiidence, and thee Office of Finaancial Research,* crossi@@rhsmith.umdd.edu The Officce of Financial Research (OFR) Working Paper Seeries allows staff and thheir co‐authoors to disseminaate preliminaary research findings in aa format inttended to geenerate discuussion and ccritical commentts. Papers in tthe OFR Working Paper Seeries are workks in progresss and subject to revision. Views and opinions exxpressed aree those of thee authors andd do not neccessarily reprresent officiaal OFR or Treasuury positions or policy. CComments are welcome aas are suggeestions for immprovementss, and should bee directed to the authors. OFR Workingg Papers mayy be quoted wwithout addittional permisssion. www.treasury.gov/oofr * This papeer was produceed while Paul GGlasserman and Cliff Rossi weere under conttract with the Office of Finanncial Research. Forging Best Practices in Risk Management Mark J. Flannerya, Paul Glassermanb, David K.A. Mordecaic, Cliff Rossid Abstract This paper approaches risk management from three perspectives: firm-level risk measurement, governance and incentives, and systemic concerns. These are three essential dimensions of best practices in risk management; although we discuss each dimension separately, they are interrelated. The paper begins with a brief review of salient changes and unmet challenges in risk measurement in the wake of the financial crisis.
    [Show full text]
  • Dealer Behavior in Highly Illiquid Risky Assets
    PRELIMINARY DRAFT: PLEASE DO NOT CIRCULATE WITHOUT AUTHORS’ PERMISSION First Draft: March 2, 2010 This Draft: January 4, 2011 Know When to Hold Them, Know When to Fold Them: Dealer Behavior in Highly Illiquid Risky Assets Michael A. Goldstein Babson College 223 Tomasso Hall Babson Park, MA 02457 [email protected] 781-239-4402 Edith S. Hotchkiss Boston College Fulton Hall, Room 340 Chestnut Hill, MA 02467 [email protected] (617) 552-3240 Abstract This study examines dealer behavior in a sample of 14,749 corporate bonds that vary in credit rating and liquidity. Our unique data set allows us to identify purchases and sales by individual dealers, enabling us to determine how long a dealer holds a bond purchase in inventory and how much of that initial purchase the dealer sold to customers, and the spread on those sales to customers, and how these vary with credit rating and liquidity of the bond in the past 30 days. We examine 1,477,286 different institutional size purchases by individual dealers and their subsequent sales across 14,749 bonds from August 7, 2002 to July 31, 2008. We find that as dealers holding periods do not necessarily decline as liquidity increases; in fact, dealer’s holding periods for some of the most illiquid bonds (with trades less often than once every three days) are shorter than those bonds that trade five times a day or more. Dealers are also more likely to sell all of their purchase for the less liquid bonds. These effects become stronger as credit quality decreases.
    [Show full text]
  • Helgi C. Walker, Gibson, Dunn & Crutcher LLP Et
    TABLE OF CONTENTS INTRODUCTION .................................................................................................................. 1 BACKGROUND ...................................................................................................................... 4 A. The Small Public Company Coalition ..................................................................... 4 B. Market-Adjustable Convertible Notes .................................................................... 6 1. The Commission Has Long Encouraged Convertible Financing. ............. 8 2. Small Public Companies Rely On Market-Adjustable Convertible Securities To Grow And Thrive. ................................................................... 10 3. Market-Adjustable Convertible Notes Offer Small Public Companies Significant Comparative Benefits. ............................................ 12 4. Market-Adjustable Convertible Notes Are Subject To The Same Or Similar Regulations As Other Forms Of Financing. ............................ 14 5. Market-Adjustable Convertible Notes Are Accompanied By Substantial Investor Disclosures.................................................................... 14 C. The Proposed Rule .................................................................................................. 15 DISCUSSION ......................................................................................................................... 16 I. The Proposed Rule Is Arbitrary And Capricious Because It Is Unnecessary, Ineffective, And Counterproductive.
    [Show full text]