Overnight benchmark interest rates important for financial markets and monetary policy implementation ECB overnight rate will complement existing benchmark rates produced by the private sector and serve as a backstop to private sector benchmark rates Preparations for rate to be finalised before 2020, including industry consultation The Governing Council of the European Central Bank (ECB)…
AcadiaSoft, an industry provider of margin automation solutions for counterparties engaged in collateral management worldwide, announced that the integration into the AcadiaSoft Hub of the six additional in-scope firms under Phase 2 of the new initial margin (IM) rules for non-cleared derivatives has been completed successfully. The additional firms chose to use the Hub for IM in order…
The Financial Stability Board (FSB) and International Monetary Fund (IMF) today published the second progress report on the implementation of phase two of the G20 Data Gaps Initiative (DGI-2). The report updates on the work undertaken since September 2016 to advance implementation of the twenty recommendations aimed at addressing the data gaps identified after the global financial…
The European Securities and Markets Authority (ESMA) has published today the responses received to its Consultation on guidelines on internalised settlement reporting under Article 9 of CSDR Read the responses
The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on September 20, 2017: The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on required and excess reserve balances at 1.25 percent. As part of…
The European Banking Authority (EBA) launched a public consultation on its discussion paper on significant risk transfer in securitisation. This work builds on the EBA’s monitoring activity of supervisory practices in the area of significant risk transfer, which the Authority started in 2014. The discussion paper aims at seeking stakeholders’ views on how to further…
EquiLend and Trax are collaborating on a full front-to-back Securities Financing Transactions Regulation (SFTR) solution to support mutual clients in their SFTR reporting requirements. The service will cover all SFTR-eligible asset classes. EquiLend will link its trading and post-trade platform to the Trax system to provide client trading and life cycle event information, while Trax…
WASHINGTON, September 18, 2017 – The International Swaps and Derivatives Association, Inc. (ISDA) has published a new survey on margin payments in the over-the-counter derivatives market, which shows that approximately $1.41 trillion of collateral was posted for cleared and non-cleared trades by the end of the first quarter of 2017. Of this amount, initial margin (IM) posted…
New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC – retail and wholesale – and differentiates them…
Come mid-2018, the Bank of New York Mellon will be solely responsible for ensuring almost $2 trillion of securities financed by repurchase agreements are cleared and settled each and every day. With its lone longtime rival, J.P. Morgan, exiting the business, BNY Mellon began the process of moving over clients this summer. The problem isn’t so much…
The International Swaps and Derivatives Association has published recommendations for a comprehensive recovery and resolution framework for central counterparties (CCPs). The recommendations appear in a new paper that sets out the appropriate next steps for CCP resilience, and for implementing robust, unambiguous and predictable recovery and resolution mechanisms. The paper – Safeguarding Clearing: The Need…
MTS, the London Stock Exchange’s fixed income trading arm, has new functionality for the trading of bilateral and centrally cleared repo contracts between sell- and buy-side participants for the first time, in collaboration with the launch of LCH’s Sponsored Clearing model from RepoClear. Sell-side dealers have long benefited from the efficiencies of electronic repo trading. Now,…
As T2S approaches final migration, restrictions on primary dealers are undermining efficiencies. Some sovereign issuers are still instructing primary dealers to maintain accounts at domestic central securities depositories (CSDs) in order to receive government bonds, undermining European Union efforts to create an integrated market for settlement via Target2-Securities (T2S). The pan-European platform, due to link up…
LCH’s RepoClear service has introduced a new model to bring the benefits of clearing repos to the buy side. Insight Investment is the first asset manager to clear a trade, acting for a UK pension fund it manages, as a sponsored member, with NatWest Markets supporting Insight’s trade as the agent member. The first trade…
Under MiFID II rules, which take effect in January, traders in the European Union will have to report a host of information to demonstrate they’re executing clients’ trades at the best prices and in the right venues. Tracking those details is faster and cheaper when the trades are done by computer, rather than by shouting down…
DTCC released a new white paper that suggests ‘real’ price and non-modellable risk factors (‘NMRF’) requirements under the Fundamental Review of the Trading Book (FRTB) will pose significant challenges to market participants, potentially mandating large increases in the capital that banks must maintain for market risk purposes (market risk capital). However, banks have an opportunity…
The top US derivatives regulator has issued a stark warning to the European Union against changes to the way it oversees foreign clearing houses, warning that a unilateral move by the bloc would be “a violation of trust and cooperation.” Chris Giancarlo, chair of the Commodity Futures Trading Commission, on Tuesday urged policymakers in Brussels…
Lipper Alpha Insight’s Monday Morning Memo by Detlef Glow: A topic I hear discussed frequently is securities lending as a modern management technique to increase returns of mutual funds and ETFs. Even though I see some benefits for the markets in general and investors in specific, I think that securities lending is—under the current regulation regime—a…
Eurex Clearing has announced that PGGM is the first buy-side client to become a direct participant of Eurex Clearing’s Securities Lending central counterparty (CCP). The development and implementation of a centrally cleared securities lending solution are part of Deutsche Börse Group’s strategy to incorporate new and innovative offerings that assist members to increase capital and…
All banks meet Basel III minimum and target CET1 capital requirements All G-SIBs meet both fully phased-in liquidity requirements The Basel Committee today published the results of its latest Basel III monitoring exercise based on data as of 31 December 2016. The Committee established a rigorous reporting process to regularly review the implications of the Basel III…
In Japan, kabu.com Securities Co. uses AI to manage stock lending transactions for institutional investors. The ability to quickly present prices and conditions without relying on human input means that the company will not miss out on business when confronted with a large volume of orders. Read the full article
International regulatory best practice places a duty on the administrator of a benchmark to have procedures in place for the potential need for its evolution. The Principles for Financial Benchmarks published by the International Organization of Securities Commissions (IOSCO) recommend benchmark administrators regularly review conditions in the benchmark’s underlying market in order to determine whether changes to the design…
MONTRÉAL, Sept. 7, 2017 /CNW/ – Canadian Derivatives Clearing Corporation (CDCC), Canada’s national central clearing counterparty (CCP) for exchange-traded derivative products, certain over-the-counter (OTC) products and repurchase agreements (repos), announced today a proposal to expand its fixed income service to enable certain Canadian buy-side firms to clear cash or repos trades directly through CDCC. CDCC’s…
Eris Exchange has been awarded a patent that enables a cash-settled futures product to replicate the convexity of an OTC swap by incorporating interest on collateral within daily variation margin payments. Eris is a US-based futures exchange group that offers swap futures as a capital efficient alternative to traditional OTC interest rate swaps. The exchange uses the invention…
Stanley Fischer submitted his resignation Wednesday as Vice Chairman and as a member of the Board of Governors of the Federal Reserve System, effective on or around October 13, 2017. He has been a member of the Board since May 28, 2014. “Stan’s keen insights, grounded in a lifetime of exemplary scholarship and public service,…
Triparty collateral management services (TCMS) provided by triparty agents (TPAs) allow counterparties to optimise the use of their portfolios of securities when collateralising credit and other exposures across different products and instruments (repo, securities lending, central bank credit, secured loans, and exposures arising from OTC transactions). As part of their daily operations, TPAs provide services such as…
SIFMA supports the move to T+2. Shortening the US settlement cycle will provide a number of benefits including reducing operational, systemic and counterparty risk and lowering liquidity needs, while aligning the US with other T+2 settlement markets across the globe. A shorter settlement cycle will enhance market structure by improving safety and efficiency for investors….
We are now living in a world where banks are sounder and better regulated than before, yet spreads in the financials space are wider than they were before the financial crisis hit, so why are some investors hesitant to put their money into this sector? To understand whether there is potential for returns in the…
Leading up to 2014, US banks increased their holdings of high quality liquid assets (HQLA) in part to comply with the liquidity coverage ratio (LCR) requirement. However, once the requirement was met, some banks shifted the compositions of their HQLA portfolios. This raises the question: What is the optimal composition of a given quantity of HQLA? Researchers from…
The search for a market design that ensures stable bank funding is at the top of regulators’ policy agenda. This paper empirically shows that the central counterparty (CCP)-based euro interbank repo market features this stability. Using a unique and comprehensive data set, researchers from the Swiss Finance Institute show that the market is resilient during…
The Federal Reserve Board on Friday adopted a final rule to enhance financial stability by requiring US global systemically important banking institutions (GSIBs) and the US operations of foreign GSIBs to amend qualified financial contracts to prevent their immediate cancellation or termination if the firm enters bankruptcy or a resolution process. Qualified financial contracts (QFCs)…
OCC’s securities lending CCP activity in August 2017 was up 25% in new loans from August 2016 with 200,844 transactions. Year-to-date stock loan activity is up 22% from 2016 with 1,526,762 new loan transactions in 2017. The average daily loan value cleared by OCC in August was $141,528,979,748. Read the full release
LONDON, Aug 31 (Reuters) – A London Stock Exchange Group takeover of “hidden jewel” Euroclear would make financial sense and give rival Deutsche Boerse a run for its money, UBS analysts said on Thursday. UBS analysts Michael Werner and Alex Leng said they looked at the merits of a merger between LSE and Euroclear in…
Goldman Sachs Asset Management and Federated Investors have become the first money market fund managers to clear their US Treasury repo trades at the Fixed Income Clearing Corporation, a subsidiary of the Depository Trust & Clearing Corporation. The transactions were cleared via FICC’s revamped sponsored repo service, which received regulatory approval on May 2, with Bank of New York Mellon acting as the…
In this latest report, ISLA builds upon previously observed themes, particularly around the role of government bond lending and how collateral is flowing around the system. From the report: Through the closer monitoring of collateral profiles, for example, we see how institutions are changing the asset mix they hold on their balance sheet as they respond to requirements of prudential capital regimes such as Basel…
Recent data for the tri-party repo market, which represents a significant part of the entire US repo market, indicates that US government securities account for approximately 54.3% by dollar value of the most common collateral types, agency mortgage-backed securities and collateralized mortgage obligations account for 26.3%, and equities make up 6.9%. In addition, corporate bonds account for 5% non-agency mortgage-backed and asset-backed…
Interactive Brokers plans to use technology and low prices to make inroads in securities lending, cashless transactions and other services. If customers let the firm lend their shares to short sellers, Interactive Brokers will split any money earned, generating extra yield on long stock positions. Many brokerage houses unilaterally lend customers’ stocks to short sellers and…
Fed Chair Janet Yellen delivered a speech, Financial stability a decade after the onset of the crisis, at “Fostering a Dynamic Global Recovery,” a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. Here are some excerpts from that speech. ============ The Federal Reserve is committed individually, and in coordination with…
The Federal Reserve Board requested public comment on a proposal for the Federal Reserve Bank of New York, in cooperation with the Office of Financial Research, to produce three new reference rates based on overnight repurchase agreement (repo) transactions secured by Treasuries. The most comprehensive of the rates, to be called the Secured Overnight Financing…
The Financial Benchmark India (FBIL), a private company, is in discussions with the Reserve Bank of India (RBI) and market participants to develop a new benchmark based on repo transactions, which is likely to replace the Mumbai Interbank Offered Rate (MIBOR) in a few years. Although MIBOR is already computed using actual transactions (based on…
In February 2016, the European Commission created a European Post-Trade Forum (EPTF) to assess the evolution of the EU post-trade landscape and progress in removing barriers. The EPTF has today published its report. On the back of releasing the report, the EC has launched a consultation on further reducing barriers to post trade services across…
The last decade has seen a significant uptick in electronic trading across a broad range of asset classes. This growth coincides primarily with the onset of three dynamics: the quest for increasingly elusive profitability; technology advancements; and snowballing regulations that hurled tougher standards on transparency, execution and reporting. There are other factors that are also…
CloudMargin and DTCC-Euroclear Global Collateral have entered into an agreement to connect CloudMargin with GlobalCollateral’s Margin Transit Utility (MTU). The agreement expands CloudMargin’s settlement capability and enables users to access MTU from the cloud, fully automating the entire collateral lifecycle. That means users can have straight-through-processing from call calculation to settlement of collateral in order to…
The shape of any final Brexit deal will have far-reaching consequences for ISDA’s members and the broader derivatives market. This is the opening white paper in a series that will examine Brexit related issues, and highlight the need for a smooth transition. One of the highest profile issues for the financial sector post-Brexit is central counterparty…
From the Microsoft Q2 2017 10K filing: As of June 30, 2017, collateral received under agreements for loaned securities was $3.7 billion, which was primarily comprised of U.S. government and agency securities. As of June 30, 2016, collateral received under agreements for loaned securities was $294 million, which was primarily comprised of cash. — We…
Editor’s Note: Now this is a curious thing. The complaint is not yet publicly available but we’ll look forward to analyzing it shortly. The initial wording gives rise to some early suspicions about what’s going on but we’ll have to wait until more information becomes available before commenting. From the Mortgage Professional America magazine website:…
One of the Federal Reserve’s top policymakers has attacked attempts to reverse the post-crisis drive for tougher regulation, calling efforts to loosen constraints on banks “dangerous and extremely short-sighted”. Stanley Fischer, the vice-chairman of the Fed’s board of governors, said in an interview with the Financial Times that 10 years after the crisis there are…
The European Commission (EC) published amendments to its Bank Recovery and Resolution Directive (BRRD 2) at the end of last year that are intended to harmonize the use of moratoria powers by resolution authorities in the European Union. But these amendments – which propose to introduce two new moratoria powers – will put European financial institutions at a severe…
CloudMargin has released the FlightPlan microsite designed to help financial institutions navigate uncleared margin rules and other regulations impacting their collateral management function. The site enables visitors to identify and tailor information most pertinent to their business and plan for the continued roll-out through 2020 of regulations and mandates, including those coming into effect in September. The…