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The U.S. Federal Reserve announced yesterday that it had proposed easier rules for when banks must set aside cash to safeguard derivatives trades between affiliates, Reuters reported. The proposal follows a similar plan laid out by another banking regulator, the Federal Deposit Insurance Corporation, in September. The simpler proposal could potentially free billions of dollars at large banks that would no longer have to post upfront margin on internal derivatives trades. The proposal was approved by a vote of four to one as Governor Lael Brainard said the reversal was unjustified and could heighten risk in the financial system.

After the financial crisis, Washington focused on the credit-ratings firms and the conflict of interest that made them “essential cogs in the wheel of financial destruction,” according to the federal government’s report on the crisis. But the government didn’t eliminate the conflict, where the firms are paid by the entities whose bonds they rate, the Wall Street Journal reported. Instead, the Securities and Exchange Commission decided that enabling ratings firms to publish unsolicited ratings on securities they weren’t hired to analyze would be the best solution. The agency crafted a rule to give them access to deal data to publish such ratings. A decade later, the verdict on that plan is in: The program was a failure. Since the plan’s enactment in 2010, there is little evidence of any unsolicited ratings being published under the program, according to the ratings firms, a trade association, the SEC and a committee of bond investors advising the agency. The SEC declined to answer questions about the program, but said in response to a public records request that, after a “thorough search” of its records, it “did not locate or identify” any examples of unsolicited ratings published by ratings firms under the program. Moody’s Corp., S&P Global Inc., Fitch Ratings Inc., and Kroll Bond Rating Agency Inc. all said their respective firms haven’t produced any unsolicited ratings under the SEC’s rule. DBRS Inc. and Morningstar Inc., which recently merged, said that they didn’t produce any unsolicited ratings in 2019 and aren’t expecting to do so in the future.

After MF Global Holdings Ltd. imploded and more than $1 billion of client money went missing in 2011, Washington, D.C., ratcheted up restrictions on what futures brokers could do with customer funds. Now, regulators in the Trump era are examining whether the shackles should be loosened, Bloomberg News reported. The rules in question stiffened limits on brokers’ ability to invest collateral that clients post for trades. The Commodity Futures Trading Commission approved the overhaul after former MF Global Chief Executive Officer Jon S. Corzine made wrong-way bets on European sovereign debt that helped trigger the firm’s collapse and set off a political firestorm. But Wall Street has long complained that the regulations were an excessive overreaction that wouldn’t have even prevented MF Global’s failure. Worse, the industry says that the restrictions are unnecessarily eating away at its profit margins, fueling a decline in the number of futures brokers. One worry: a smaller pool of brokers concentrates risk, potentially exacerbating the harm to the financial system if a firm fails. Those arguments are resonating at the CFTC under Chairman Heath Tarbert, who took over in July as President Donald Trump’s second head of the derivatives regulator. One of Tarbert’s top deputies, Joshua Sterling, said in a speech last month that the agency was evaluating an industry request to ease the requirements, adding that softening them “makes great sense.” The changes Sterling referenced were limited in scope, according to a CFTC spokeswoman.

Fidelity Investments is pulling the $500 million it has invested with Ken Fisher’s investment firm, Bloomberg News reported. The move by the mutual fund giant is part of a growing exodus of big clients in the wake of vulgar comments made by Fisher at an industry conference. Fidelity’s divestment brings the total yanked from Fisher Investments to more than $1.8 billion. Fisher Investments is seeing an intensifying backlash since the firm’s founder made offensive comments about women, spoke of genitalia and then failed to immediately understand the gravity of his words. Fidelity joins pensions in Iowa, Michigan, Boston and Philadelphia that have divested their money. Camas, Wash.-based Fisher, which managed $112 billion as of September, is also facing scrutiny from several other pensions. Fisher Investments was managing about $10.9 billion on behalf of 36 state or municipal government entities, including pension plans, at the end of 2018, according to the firm’s Securities and Exchange Commission registration. That figure is down from $13.2 billion at the end of 2017.

Highland Capital Management LP, once a giant in high-yield debt markets, filed for bankruptcy protection Wednesday as investors and former employees seek more than $200 million from the firm for alleged improprieties, WSJ Pro Bankruptcy reported. The Dallas-based firm, founded by Jim Dondero, helped pioneer trading of corporate loans rated below investment-grade and managed about $39 billion in 2007, but it took heavy losses during the financial crisis and has been embroiled in lawsuits ever since. The company had been trying in recent weeks to settle some of the litigation it faces, warning its adversaries that it would seek bankruptcy protection if they didn’t compromise, people familiar with the matter said. Highland entered chapter 11 in U.S. Bankruptcy Court in Wilmington, Del., listing as its largest debt a disputed $189 million claim from investors in Highland Crusader Fund, a hedge fund that has been in liquidation since the financial crisis. The second-largest creditor is Patrick Daugherty, a former Highland portfolio manager who has been in personal and legal conflict with Dondero since 2012 and has an $11.7 million claim against Highland, according to its bankruptcy filing. A group of investors in Crusader sued Highland in 2016 in Delaware Chancery Court, demanding that Highland be fired as manager for delaying the fund’s liquidation and claiming that Highland wrongfully paid itself $30 million. The group subsequently won an arbitration award that Highland has yet to pay, court documents show.

The business of running malls has been reeling, but Wall Street is learning it isn’t always easy to make money from their troubles. Alder Hill Management LP, which aimed to profit by betting against debt tied to some of the country’s weakest malls, ended this trade over the summer, the Wall Street Journal reported. Eric Yip, a founder of the New York-based hedge fund, is also winding down the entire $300 million hedge fund. While some of Alder Hill’s other trading strategies had been profitable, its two and a half years of losses shorting mall debt convinced Yip to shut down. Alder Hill and other short-sellers — or traders who bet that the price of a bond, stock or other asset will fall — have found that their wagers against commercial mortgage-backed securities tied to retail property didn’t go as planned. That is largely because the rise in retailer bankruptcies and store closures since 2017 didn’t produce a significant increase in missed loan payments by mall owners, according to data from commercial mortgage tracker Trepp LLC. Since a significant number of these loans require interest-only payments, or have a partial interest-only payment schedule until they mature, property owners have been current on their loans despite weaker rents, said Dylan Wall, a research analyst at Trepp.