Category: General

Collateral Management and EMIR, DFA Regulation

This is where the focus will be for the next 12 months.

Collateral Management is the task of reducing credit risk. A good paper to indicate the challenge faced by institutions is provided by Foxeye Consultants report, “Benefit from one of the biggest opportunities in 2013: Collateral Management”.

A summary by Sungard – “Are Your Collateral Management and Hypothecation Methods Ready for Prime Time?”

Regulation for EMIR is now required – be ready for 2014, the EMIR timetable is out.

Finally, differences between DFA and EMIR Regulatory Requirements.

Metamaterials and Cloaking – Cool Stuff

Realizing the world’s first 3D cloak of invisibility, engineering professor Andrea Alú explains how the discovery of metamaterials is pushing technology beyond conventional limits, producing vastly new opportunities beyond what nature can offer.
This emerging technology offers extensive applications in bioscience, energy, defense and plenty more we can only imagine from here.

12 months of work to reach this goal – DTCC FX Regulatory – 28th Feb 2012

So 12 months of work and it comes down to this date – to keep a bank in business. Reporting FX trades in realtime to maintan Dodd Frank Act.

2013-02-27 23:59:03,322 363566054 [clearingControlEventExecutor-1] INFO org.perf4j.TimingLogger log - start[1362009542481] time[841] tag[PERF:ClearingControlEventPollingAdapter.doWork(clearing_dtcc_equity)] message[Sent MQ controlevents DTF_DISP_READY successcount=2/2 Count=2 Duration=841(ms) Rate=2.378/sec DurationOne=0.42 sec]

2013-02-28 00:00:36,575 363659307 [clearingControlEventExecutor-1] INFO org.perf4j.TimingLogger log - start[1362009633292] time[3283] tag[PERF:ClearingControlEventPollingAdapter.doWork(clearing_dtcc_fx)] message[Sent MQ controlevents DTF_DISP_READY successcount=122/122 Count=122 Duration=3283(ms) Rate=37.161/sec DurationOne=0.027 sec]

It is one of many major milestones that the FX market place requires as many instituitions realise technology is the key to deliver business agility and success.

JP Morgan CIO Report – Big Whales Is Beached

Taken from ZeroHedge a great summary of the CIO office trade that put a dent in the banks profit for 2012.

In its own words from the Q1 2012 10-Q filing: “the increase in average VaR was primarily driven by an increase in CIO VaRand a decrease in diversification benefit across the Firm.” And furthermore: “CIO VaR averaged $129 million for the three months ended March 31, 2012, compared with $60 million for the comparable 2011 period. The increase in CIO average VaR was due to changes in the synthetic credit portfolio held by CIO as part of its management of structural and other risks arising from the Firm’s on-going business activities.” Keep the bolded sentence in mind, because as it turns out it is nothing but a euphemism for, drumroll,epic, amateur Excel error!
How do we know this? We know it courtesy of JPMorgan itself, which in the very last page of its JPM task force report had this to say on the topic of JPM’s VaR:
… a decision was made to stop using the Basel II.5 model and not to rely on it for purposes of reporting CIO VaR in the Firm’s first-quarter Form 10-Q. Following that decision, further errors were discovered in the Basel II.5 model, including, most significantly, an operational error in the calculation of the relative changes in hazard rates and correlation estimates.Specifically, after subtracting the old rate from the new rate, the spreadsheet divided by their sum instead of their average, as the modeler had intended. This error likely had the effect of muting volatility by a  factor of two and of lowering the VaR…. It also remains unclear when this error was introduced in the calculation.
In other words, the doubling in JPM’s VaR was due to nothing but the discovery that for years, someone had been using a grossly incorrect formula in their excel, and as a result misreporting the entire firm VaR by a factor of nearly 50%! So much for the official JPM explanation in its 10-Q filing that somewhat conveniently missed to mention that, oops, we made a rookie, first year analyst error. As for how long this error was on the books, one can venture a guess: many years?
And if this glaringly amateur error was present in America’s largest bank by assets, and one which proudly boasts a “fortress balance sheet”, an error which just so happens feeds into countless other input cells driven by the firm’s VaR calculation, leading to capital allocation, trading, and overall executive decisions many of which have a direct impact on the firm’s exposure to $72 trillion in over the counter derivatives, what can one say about the thousands of other banks, which are not as closely “supervised” by the Federal Reserve as JPMorgan is (supposedly).
Or how about Europe’s far more troubled banks?
Is there really any wonder why after reading humiliating reports like this one that nobody, and certainly not the banks themselves, trust any other banks, and why the Fed, contrary to false rumors of a recovery, is forced to inject some $85 billion in bank cash every month, most of it going to offshore banks as we previously reported?

In addition to the CIO trade – see how it could have impacted the Lehmans demise back in 2008 – is very interesting reading from ZeroHedge

I need more power Scotty – Performance in the JVM

A series of good articles about the JVM and getting the most out of it from the people who know how to monitor

  1. Become a Java GC Expert
  2. Understanding Java Garbage Collection
  3. How to Monitor Java Garbage Collection
  4. How to Tune Java Garbage Collection
  5. MaxClients in Apache and its effect on Tomcat during Full GC
  6. The Principles of Java Application Performance Tuning


More specifically for Oracle Coherence some special jvm settings are required:

Oracle Coherence JVM Tuning

FB+GS=OS – Internet Bubble (part deux)?

Here we go again, remember the internet bubble of the 1990s and its spectacular pop…. well it looks like a few are taking the first blow of the next one – we had the credit housing bubble of 2000-2010 – so is 2010-2020 going to be the internet bubble part deux?

Goldman and Facebook
Goldman Pitch
Goldman get out clause
LinkedIn and the rest..
What Facebook can learn from Google IPO

So whose next, twitter?

BTW for the record I am not the only one who thinks this.

Update: 10Jan2011

This is how it all began T+5days, an interesting quote from Mr.Z:

“I’m not going to sell anybody’s e-mail address,” he said. “At one point I thought about making the website so that you could upload a resume too, and for a fee companies could search for Harvard job applicants. But I don’t want to touch that. It would make everything more serious and less fun.”

Well it surely is still fun, lets see how long that lasts once it is out in the public landscape.

And here is a useful graphic – something for all those herds on the street.

Update: 12Jan2011
Coming soon to an inbox near you –

“At their annual meeting in Atlanta, Farm Bureau officials on Tuesday said the organization earned $8.5 million by selling a couple of domain names but is barred from identifying the buyer.”

Finance Books of the Year – 2010