Zuberi

UBS Chairman Colm Kelleher warned against growing risks in private credit as the market continues to boom.

“There is clearly an asset bubble going on” in the asset class, Kelleher said at the FT Global Banking Summit in London on Tuesday. “What it needs is just one thing to trigger a fiduciary crisis.”

Private credit has become an increasingly sought-after funding tool for buyout firms as banks have pulled back amid a spike in interest rates and a drop in investor risk appetite. Some banks are concerned about this shift as underwriting these types of loans — and then selling them to other investors — is a strong source of revenue for them.

Kelleher is the latest top executive to warn about the rising risks. Pimco executives said earlier this month the market is under-regulated and lacks transparency.

Read More: Pimco Sounds Alarm on Under-Regulated Private Credit Markets

But speaking to Bloomberg TV shortly after Kelleher’s comments, Ares Management Corp.’s co-head of European Credit, Blair Jacobson, dismissed the suggestion.

“There’s no bubble at all in private credit,” he said

. “There’s a lot left to go for in the large-cap side.”

The private credit market has roughly tripled in size since 2015, growing to a $1.6 trillion industry that includes traditional direct lending to smaller companies, buyout financing as well as real estate and infrastructure debt. Last week private credit funds provided a record €4.5 billion ($4.9 billion) loan to back the buyout of Adevinta ASA.

Read More: How Private Credit Gives Banks a Run for Their Money: QuickTake

— With assistance from Silas Brown

For those of you who don't use a Paywall Bypass:

Nov 27 (Reuters) - The U.S. Securities and Exchange Commission on Monday adopted a financial crisis-inspired rule barring traders in asset-backed securities from betting against the same assets they sell to investors.

The SEC move is mandated by the Dodd Frank law, aimed at eradicating behavior seen in the 2008 global financial crisis.

The rule is among the last to be adopted under 2010's Dodd Frank Wall Street reform legislation and faced a winding road to completion. An earlier version on traders' "conflicts of interest" was first proposed in 2011 but never finalized.

The rule blocks "securitization participants" from entering deals that involve shorting or buying credit-default swaps against those same securities. Parties covered by the rule include underwriters, placement agents and sponsors for asset-backed securities.

The rule exempts activities such as hedging risk and market-making.

In a statement, SEC Chair Gary Gensler said the rule applied to a market that "was at the center of the 2008 financial crisis."

In concessions to industry, SEC officials said they had modified the proposal first issued in January to carve out exceptions for affiliates who do not act in concert with traders. Another exception is for investors with "long" positions, as opposed to those who are short, or betting that the securities will decline in value.

Four of the SEC's five members voted to approve the rule. Republican Commissioner Hester Peirce, a frequent critic of the SEC's rulemaking agenda who had approved the January proposal with reservations, voted against it.

Goldman Sachs (GS.N) agreed in 2010 to pay a record $550 million penalty to resolve SEC allegations that it had misled investors. A Senate investigation later revealed how the bank had marketed mortgage-backed securities without disclosing substantial bets that these assets would lose value.

The SEC says it will require compliance with the rule for asset-backed securities with closing dates falling 18 months after the rule appears in the Federal Register.

Reporting by Douglas Gillison; Editing by David Gregorio and Marguerita Choy

"Naked shorting is the illegal practice of short-selling shares that have not been affirmatively determined to exist. Despite being made illegal after the 2008–09 financial crisis, naked shorting continues to happen because of loopholes in rules and discrepancies between paper and electronic trading systems" - Investopedia 2023

"...due to various loopholes in the rules and discrepancies between paper and electronic trading systems, naked shorting continues to happen" - Investopedia 2012

Current Link: https://www.investopedia.com/terms/n/nakedshorting.asp

Wayback to 2012: http://web.archive.org/web/20120709205628/http://www.investopedia.com/terms/n/nakedshorting.asp

Edit: The original I stole had its watermark removed. I reverse imaged searched the image and found the original artist and their tweet!

https://twitter.com/benzaehringer/status/1271064640672411649

https://www.berkeleymews.com

The concept that the 1% (or the most affluent and powerful segment of society) is actively preventing true ownership of the things we buy isn't a universally accepted notion.

Instead, it's often discussed in the context of broader economic systems and practices that can restrict the sense of true ownership.

Here are several ways in which systems, policies, or practices can be seen to limit ownership, which some might attribute to the influence of the very wealthy or powerful corporations:

1. Digital Rights Management (DRM): This technology restricts how digital content (e.g., e-books, video games, music, movies) can be used by consumers. For example, you may not be able to share an e-book or transfer it to another device due to DRM, limiting your control over the purchased product.

2. Software as a Service (SaaS): Many companies have moved away from selling software as a one-time purchase to a subscription model, where users pay to access software on a monthly or annual basis. This means the user never truly owns the software and will lose access if they stop their subscription.

3. End User License Agreements (EULAs): These agreements often contain clauses that limit how consumers can use products and can include provisions that prevent ownership transfer, modding, or reverse engineering.

4. Proprietary Parts and Repair Restrictions: Some manufacturers use proprietary components and restrict third-party repairs (also known as "Right to Repair"). This forces consumers to use the manufacturer's own services, which can be more expensive and further distances the owner from truly "owning" their product in terms of being able to maintain or modify it.

5. Planned Obsolescence: Some argue that companies design products with a limited lifespan to encourage consumers to buy newer models. This practice means that even if one "owns" a product, its usefulness is artificially limited.

6. Intellectual Property Laws: These laws can be used to create monopolies over knowledge and innovation, which can limit consumer rights to use and modify the products they purchase.

7. Subscription-based Models: Companies are increasingly pushing towards subscription models for various goods and services, from vehicles to clothing. These models can undermine traditional ownership by making it more financially advantageous or convenient to rent or subscribe rather than own outright.

8. Real Estate Investment Trusts (REITs) and Large Corporate Landlords: There's a perception that these entities buy up substantial amounts of property, making it difficult for individuals to purchase a home due to increased prices and limited supply.

• 00:00 🤔 Market Hearing Expectations

  • Discussion on Thomas Peterffy's absence from the hearing.
  • Anticipation regarding focus areas: insider trading, impact on customers (e.g., Robinhood), potential power abuse by entities like Citadel.

• 00:37 🚨 Systemic Collapse Warning

  • Warning about the perilously close collapse of the entire financial system.
  • Illustration of GameStop's stock fluctuations, emphasizing the risk of a catastrophic system failure.
  • Lack of awareness among the public, Congress, and regulators regarding the severity of the situation.

• 02:17 💡 Systemic Risk Explanation

  • Explanation of the potential chain reaction: short squeezes leading to broker defaults and market chaos.
  • Advocacy for immediate SEC action, proposing daily reporting of short interests and increased margin requirements for shorts based on their interest.
  • Addressing the impact of social platforms on traditional market dynamics, allowing for unconventional market manipulations.

• 03:53 🕵️ Absence of Blame

  • Assertion that nobody is to blame for the market turmoil.
  • Emphasis on the urgent need to address systemic issues, particularly the lack of increased margin requirements for shorts as their interest rises.
  • Clarification that the root cause is not short interest reporting but the absence of heightened margin requirements for shorts.

• 04:28 💸 Payment for Order Flow

  • Brief insight into Thomas Peterffy's trading practices, mentioning that a smaller percentage (around three percent) involves payment for order flow.
  • Contextualizing his approach compared to industry rivals.

• 00:00 🦍 Transparency and Market Issues

  • The apes uncovered issues in the market's transparency.

  • Disclosure and transparency challenges revealed by apes' crowdsourcing.

  • Systemic problems like outdated information and lack of disclosure highlighted.

• 01:02 🌐 Exploring Alternative Systems

  • Discussion on finding a better system than the SEC.

  • Exploration of potential partnerships between SEC and crowdsourcing.

  • Calls for dreaming of a more effective financial system.

• 02:03 🕵️ Decentralization and Whistleblower Programs

  • Senator Grassley's role in advocating decentralization via whistleblower law.

  • Decentralized crowdsourcing success illustrated through whistleblower programs.

  • Acknowledgment of the challenges within the existing system.

• 03:04 ⚖️ SEC Enforcement and Accountability

  • Overview of SEC's enforcement cases and joint criminal investigations.

  • Critique on the effectiveness of financial crime prosecution.

  • Discussion on the need for more individual accountability and deterrents.

• 04:37 🛡️ Strengthening SEC Accountability

  • Exploration of measures to bring more teeth to the SEC.

  • Emphasis on individual accountability as a deterrent.

  • The importance of high-profile cases and focus on gatekeepers for market integrity.