ICYMI – April 3

3 min read

Modern Money

A collection of stories from SmartBrief publications and around the web…

Not really “One Shining Moment” for financial regulators: As the college basketball world heads into Final Four weekend, I can’t help but think of the NCAA when reading the latest tales of dysfunction at HSBC. While the NCAA enforcement division has a track record ranging from incompetent to inconsistent, even it would have know what to do with HSBC by now. If a college president or athletic director went before the NCAA and admitted that rules were “cast-iron certain” to be broken in the future because the institution is simply too big to manage, that school would be slapped with the NCAA’s infamous “lack of institutional control” designation and perhaps given an SMU-style death penalty. As for financial regulators and their “oversight” of HSBC, it seems they aren’t as strong as the always flimsy NCAA.

Michael Lewis reflects on what was missed in the public reaction to “Flash Boys”: Lewis takes a measured approach and makes a number of fair points, including this one that likely makes banks and exchanges cringe.The public response surprised me: the attention became focused almost entirely on high-frequency trading, when—as I thought I had made clear—the problem wasn’t just high-frequency trading. The problem was the entire system. … I honestly don’t feel that strongly about high-frequency trading. The big banks and the exchanges have a clear responsibility to protect investors—to handle investor stock-market orders in the best possible way, and to create a fair marketplace. Instead, they’ve been paid to compromise investors’ interests while pretending to guard those interests. I was surprised more people weren’t angry with them.Ouch.

There are researchers you lobby and researchers you don’t: This story comes out of the oil and gas industry, but there are some reputational risk lessons to be learned for Wall Street. If you are a bank CEO and you want to “inform” researchers delving into the intricacies of financial markets, stick with the researchers who work at think tanks. There are certainly some university academics who welcome “input” from the finance industry (you know who you are), but a bank CEO leaning on the average university researcher is fraught with danger. What is all the more silly is this story is that the University of Oklahoma is a public institution; meaning emails and other correspondence of President David Boren and the researcher involved are likely subject to open access rules. So if you are a bank CEO and you get invited to such a meeting, just say no. (Sidebar: Where is the outrage from the OU faculty? Boren sits on the board at Continental and uses his position at OU to arrange meetings for Continental to influence what is supposed to be independent research.)