Archive for August 23rd, 2007

Why USA economy would continue to thrive

August 23, 2007

This time it is not a speech but an interview.

The interview is of Dallas Fed, Richard Fisher. I had mentioned about it in my Assorted Links today. On reading it, it was like wow, this is what an interview is all about.

Read it for all he says about strengths of US economy, the focus on research, his concern over talented people being allowed education in top Univs in US but not being allowed visas to work.

Clearing Corporations and their role

August 23, 2007

Clearing and Settlement C&S) Systems has a huge role to play in making financial markets more efficient. Most of us are fascinated by traders and there are plenty of books/journals on the successful traders and their strategies. And we do not know/care about the important role C&S play in development of financial markets.

The role of C&S is all the more important as technology has been integrated with trading activity. We now have screen based trading and with just a few clicks can execute a trade in few microseconds. If C&S also does not catch up with the growing trade volumes, the entire market would collapse.

Finance Ministry of India has a nice discussion paper on the role of C&S and how the systems have evolved in India from paper based to electronic systems.

In securities market, there are three distinct activities- Trading, Clearing & Settlement and the stock exchange members did all the activities within themselves.

Now, with demutualisation of exchanges and exchanges, it is important we seperate trading from C&S activity. This would bring transparency and bring more efficiency in the markets.

Hence there is a need to establish Clearing Corporations (CC) that are specialists at this activity. As of now,  NSE (National Stock Exchange) has its own clearing corporation

The paper says in order to further the role of a CC,  there should be competition, no conflict of interest and should have appropriate risk management.

It then discusses what provisions need to be made to recognise CCs, how to regulate clearing members and their role.

The paper also invites comments/suggestions from the public. But unfortunately, the date for doing so has passed. The last date for comments was 31st July, 2007.

However, a decent paper on the topic. Prof. JR Varma (0f IIM-A) shares his thoughts on the same.

Assorted Links

August 23, 2007

1. After Fed’s move to cut discount rates did Banks actually borrow. Yes, they did. MR points to a story. WSJ Blog also covers the story.

2. WSJ Blog points out to a nice interview with Richard Fischer. He doesn’t mince words.

3. Mankiw pointsout to an interesting profile of Susan Athey , the 2006 Clark Medal Winner.

4. Rodrik points to a new book which is making waves.

5. PSD Blog points to an extensive book on migration and economic development.

6. Econbrowser has an excellent post on emergence of slowing investment in US. Top Class.

7. BS says with many MNCs delisting from Indain bourses, the MNC specific MFs are struggling.


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