Bloomberg has upgraded the legal status of its credit trading business in Europe, falling into line with rivals as they prepare for new rules that will revamp the region’s markets. The US data and information group is among several of Europe’s big trading venues that have begun rolling out their new systems five months ahead…
Lending out ETFs is where institutions and individuals could be making a lot more money. While providers of exchange-traded funds battle for customers by offering the lowest fees on their products, there’s another way of reducing the cost of owning them where demand is booming. It’s the lending market, where institutions have long buttressed their bottom…
Regulators say the cost of research is in bid-offer spread Industry warns of less coverage, higher costs under MiFID II European bond investors are stuck in a quandary: how much should they pay banks for credit research after insisting for years that it has no price? With less than six months left before the start date…
Macropru is new. Although many countries have now used macroprudential tools, there is no well-established guidebook to help policymakers develop their reaction functions. The principles behind macroprudential strategy are still being explored, with recent speeches by Alex Brazier, Vitor Constancio, and a review by the IMF,FSB & BIS. This post illustrates how the balancing act at the heart of…
Euroclear released its figures for the first half of 2017, with record collateral outstandings of €1.2 trillion and increased investment in regulatory-driven and cyber security initiatives. Client assets held in safekeeping increased to €28.4 trillion and the group processed securities worth a total value of €369 trillion, benefitting from buoyant conditions in the markets served….
The European Securities and Markets Authority (ESMA) has published an opinion to the European Commission, the Council, and the Parliament (EU institutions) under Article 34 of the ESMA Regulation. The purpose of the opinion is twofold: to provide an EU framework with strong client asset protection, especially in insolvency, for the safe-keeping of assets which are, in…
The Bank of England has published a consultation Paper (CP) which sets out the Prudential Regulation Authority’s (PRA’s) proposals on a cash flow mismatch risk (CFMR) framework and other PRA methodologies for assessing firms’ liquidity risk, under the Pillar 2 liquidity framework. This CP is relevant to UK banks, building societies and PRA-designated investment firms. Of note to…
Counterparties benefit from execution at or near UK base rate over June quarter-end Elixium offered average Bid/Offer spreads 3bps around mid vs reported 40-50 bp spreads in traditional markets for buy side counterparties A number of counterparties trading regularly Counterparty list continues to expand – liquidity building Elixium, the leading global all-to-all secured financing and…
Interest rate benchmarks should in future be based on actual market transactions and not banks’ judgments, Bank of England Governor Mark Carney said in minutes of a meeting at the BoE’s Roundtable on Sterling Risk-Free Reference Rates. In the aftermath of the LIBOR fixing scandal, the BoE and other central banks started considering alternatives based on…
The recent disappearance of a five-year maturity gap from the set of bonds deliverable to the Chicago Board of Trade Treasury bond futures has resulted in a distinctive configuration, whereby a single T-bond will have the shortest remaining maturity in the delivery basket of bonds for a five-year period. This situation would be inconsequential were…
A six-year push to impose a tax on financial transactions in Europe may have run its course, with Germany and France dragging their feet as they prepare for Brexit and a redrawing of the financial map that has already begun. French Finance Minister Bruno Le Maire said earlier this month that Brexit could bring “thousands…
The Bank of England has developed a model of dealer intermediation in bond markets that takes account of how changing regulatory requirements for banks since the financial crisis, in particular, the introduction of minimum leverage ratio requirements, affect the cost and ability of dealer banks to provide intermediation services. The framework considers two distinct dealer…
IHS Markit has released their Q2 2017 Securities Finance Quarterly Review “Lending out government bonds has been one of the few industry bright spots of the last 12 months. While the rest of the securities lending industry has suffered from a general lack of demand and weak pricing power, government bonds have enjoyed a strong 20% increase in…
Modern economies run on the back of a monetary and financial system through which most transactions ultimately settle in central bank money. As the ultimate issuers of money, central banks are imbued with substantial power to influence financial markets and the real economy. It is important to understand how they use this power and the…
“Use of CCPs: banks reported that the use of CCPs for securities financing transactions had increased somewhat further over the three-month reference period for many types of collateral and both average and most-favoured clients. The use of CCPs remained basically unchanged only when convertible securities, equities and asset-backed securities were used as collateral.” Results of…
ESMA has issued a public consultation regarding its future technical advice to the European Commission (EC) on the Short Selling Regulation (SSR). ESMA publishes this consultation paper to seek the views of market participants on the three main elements of its advice to the EC: the scope and functioning of the exemption for market making…
In the past months, the European Commission has suggested possible improvements in the way the European Union deals with third countries in the area of financial services. Such areas of improvement include: i) access to information, and ii) timely identification of changes in third-country legal and regulatory frameworks, practices or infrastructures and supervisory approaches. Considering the impact of the…
Managers are considering embedding a new repricing feature in US Collateralized Loan Obligation (CLO) funds that would protect firms from regulation that requires them to hold 5% of their funds and save money on full refinancings. The US$458bn CLO market is still analyzing new structures and features to help it to comply with rules in…
Katherine Tew Darras, General Counsel at ISDA, discusses the work to select new risk-free rates and the plans to transition to them. Watch from link
NEX Optimisation, which helps clients reduce complexity and optimize resources across the transaction lifecycle, launched an automated credit rebalancing tool that specifically addresses limit over-allocation by prime brokers. Rebalancer went live across five major ECNs on 2 July 2017, with further platforms going live throughout the year. Designed in close partnership with Citi, Rebalancer enables…
The International Organization of Securities Commissions (IOSCO) published today the consultation paper titled Recommendations of Liquidity Risk Management for Collective Investment Schemes, which seeks to address structural vulnerabilities arising from asset management activities, as part of its mission to protect investors and mitigate systemic risk in global financial markets. IOSCO also published today another consultation paper…
This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to Consultation Paper (CP) 46/16 ‘IFRS 9: changes to reporting requirements’ (‘the CP’). It sets out final rules intended to update regulatory reporting requirements, and expectations, in light of the introduction of International Financial Reporting Standard 9 (IFRS 9) from 1 January 2018….
The Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) today released the consultative document Criteria for identifying simple, transparent and comparable short-term securitisations (the short-term STC criteria), which is available on the BCBS and IOSCO websites. The short-term STC criteria maintain and build on the principles in the Criteria for identifying simple,…
Today the Basel Committee on Banking Supervision published reports assessing the implementation of the Liquidity Coverage Ratio (LCR) in China, the European Union and the United States. Overall, the LCR regulations in China and the United States are assessed as “compliant” with the Basel framework. This is the highest of the four possible grades. The EU LCR regulations are found to…
Full, timely and consistent implementation of Basel III remains fundamental to building a resilient financial system, maintaining public confidence in regulatory ratios and providing a level playing field for internationally active banks. This report updates G20 leaders on progress and challenges in the implementation of the Basel III regulatory reforms since August 2016, when the Basel Committee…
The Financial Stability Board (FSB), the Committee on Payments and Market Infrastructures (CPMI), the International Organization of Securities Commissioners (IOSCO) and the Basel Committee on Banking Supervision (BCBS) today published three guidance documents and two reports as part of their joint workplan on central counterparty (CCP) resilience, recovery and resolvability. CCPs are an increasingly important…
The Financial Stability Board (FSB) today published a report to G20 Leaders on progress under its action plan to assess and address the decline in correspondent banking. In addition, the FSB released a data report which provides new data on the trends, drivers, and effects of the decline in the number of correspondent banking relationships. A decline in the…
The European Securities and Markets Authority (ESMA) has issued today an opinion with interim transparency calculations for non-equity instruments in relation to the implementation of the Markets in Financial Instruments Directive/Markets in Financial Instruments Regulation (MiFID II). These calculations specify the transparency regime applicable to trading in secondary markets from 3 January 2018, when MiFID II will…
OCC’s securities lending activity in June 2017 was up 27 percent in new loans with 204,340 transactions. Year-to-date stock loan activity is up 20 percent from 2016 with 1,142,708 new loan transactions. The average daily loan value cleared by OCC in June was $154,409,839,841. The equity derivatives clearing house makes two stock loan programs available to its…
CHICAGO – July 3, 2017 – OneChicago, LLC (OneChicago), a securities finance exchange, today announced its June 2017 volume of 1,774,332, an increase of 32% year-over-year. OneChicago is a CFTC and SEC regulated exchange offering Single Stock Futures (SSF), a Delta One product, on approximately 1,800 equities, including ADRs and ETFs. June 2017 highlights include: June…
The third annual report for G20 Leaders provides a comprehensive assessment on the implementation and effects of the agreed financial regulatory reforms. The report concludes that implementation progress continues but is uneven across the four core reform areas, and that the evidence on the effects of reforms to date shows that higher resilience is being…
The Financial Stability Board (FSB) published today, ahead of the G20 Summit in Hamburg on 7-8 July, a letter from its Chair Mark Carney to G20 Leaders. The FSB is also publishing today its third Annual Report on the Implementation and Effects of the G20 Financial Regulatory Reforms and, to further enhance the analysis in future, a framework for…
The number of credit institutions with headquarters in the EU has continued to decrease from 3,277 end of 2015 to 3,167 at the end of 2016 according to the Consolidated Banking Data (CBD). Meanwhile also the total assets of these institutions decreased slightly from € 33,798 bn to € 33,410 bn. This decrease was driven by…
The post-crisis period has seen a considerable shift in the composition and drivers of international bank lending and international bond issuance, the two main components of global liquidity. The sensitivity of both types of flows to US monetary policy rose substantially in the immediate aftermath of the global financial crisis, peaked around the time of…
The Basel III/CRD IV reforms to the banking system following the financial crisis of 2008–09 required banks to raise significantly both the quality and quantity of capital on their balance sheets. This econometric study provides evidence of both the long and short-term implications for ongoing activity in the UK economy of a change in the…
The European Securities and Markets Authority (ESMA) has issued a statement updating on its work in relation to the sale of contracts for differences (CFDs), binary options and other speculative products to retail investors. Statement Text: ESMA has been concerned about the provision of speculative products such as CFDs, rolling spot forex and binary options to retail investors…
New York/London/Singapore/Hong Kong/Sydney, June 29, 2017 – The Depository Trust & Clearing Corporation (DTCC), the premier post-trade market infrastructure for the global financial services industry, today announced that the new Centrally Cleared Institutional Tri-Party (CCIT) Service of its Fixed Income Clearing Corporation (FICC) subsidiary is live, and the first trade has been executed between Citadel and Morgan Stanley….
LONDON–(BUSINESS WIRE)–IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions, today announced the launch of RPA Manager, a comprehensive service helping asset managers acquire investment research in compliance with MiFID II. To reduce the potential for conflicts of interest, MiFID II requires asset managers to separate payments for research from trading…
Banque de France, in close cooperation with the Eurosystem, will introduce, on a trial basis, a daily auction scheme to lend its PSPP holdings of French government bonds (Obligations Assimilables du Trésor, OATs) against cash collateral. The objective of this trial is to gain experience with the use of auctions in carrying out, streamlining and…
The Federal Reserve Board on Wednesday announced it has completed its review of the capital planning practices of the nation’s largest banks and did not object to the capital plans of all 34 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). However, the Board is requiring one firm to address weaknesses…
Market Liquidity after the Financial Crisis Tobias Adrian, Michael Fleming, and Or Shachar The possible adverse effects of regulation on market liquidity in the post-crisis period continue to garner significant attention. In a recent paper, we update and unify much of our earlier work on the subject, following up on three series of earlier Liberty Street Economics posts in August 2015, October 2015,…
The Financial Policy Committee (FPC) prepares and publishes a Financial Stability Report (FSR) twice per calendar year. The FSR sets out the FPC’s assessment of the outlook for financial stability in the United Kingdom. To do this, the FPC identifies the risks faced by the UK financial system and weighs them against the resilience of the system….
Financial Stability Board Financial Stability Implications from FinTech The FSB has been analysing the potential financial stability implications from FinTech with a view to identifying supervisory and regulatory issues that merit authorities’ attention. Ten areas have been identified, of which the following three are seen as priorities for international collaboration: the need to manage operational…
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) have today published for public comment a consultative report on Harmonisation of critical OTC derivatives data elements (other than UTI and UPI) – third batch. The report seeks general and specific comments and suggestions from respondents by 30 August 2017 using the dedicated response form. The completed…
The PRA publishes CP11/17 Consultations by the FPC and PRA on changes to the UK leverage ratio framework relating to the treatment of claims on central banks – CP11/17 This document contains two consultations. The first consultation sets out the Financial Policy Committee’s (FPC) proposed Recommendation to the Prudential Regulation Authority (PRA) to exclude claims…
The global buy-side community finds itself under intense liquidity and funding pressures in 2017. Across the world, financial institutions face new mandates to collateralize OTC derivatives trades, requiring them to source large volumes of highly-rated securities and cash to post as margin. At the same time, bank counterparties – the traditional liquidity providers – are…
Plans to roll back financial regulations are “disastrous and deeply dangerous.” The House’s CHOICE Act would take a flame thrower to laws regulating the financial industry, the ashes of which could wreak havoc on the system — and the economy. The Senate and president should recall what occurred leading up to 2008 before making a…
Remarks Governor Jerome H. Powell At the Salzburg Global Seminar, Salzburg, Austria — I will highlight five key areas of focus for regulatory reform. The first is simplification and recalibation of regulation of small and medium-sized banks. We are working to build on the relief we have provided in the areas of call reports and…