Ice Benchmark Administration intends in the coming weeks to begin the process of transitioning LIBOR panel banks to the Waterfall Methodology. LIBOR panel banks will transition on a gradual basis, in order to minimize operational and technology risks. IBA expects the transition to be completed by no later than the first quarter of 2019. As part of LIBOR’s…
In a raft of releases this week, ISDA published results of the margin survey and a practical guide to navigating derivatives trading on US and EU recognized trading venues. A Practical Guide to Navigating Derivatives Trading on US/EU Recognized Trading Venues The announcement in October 2017 that the European Commission (EC) and US Commodity Futures Trading Commission (CFTC) had…
ISLA has published the results of a settlement survey undertaken with a number of member firms. The objective of the survey was to understand how the market undertakes pre-matching and manages loan settlements, and whether the adoption of a best practice could help post-trade efficiencies. ISLA believes that increased efficiencies in these important processes could aid the…
The chairman of Deutsche Bank supports plans for another restructuring of the lender’s investment bank in a move to cut back under-performing areas, according to members of the bank’s executive and supervisory board. The lender’s aim is to cut costs by shedding low return business that absorbs a lot of capital. Among the potentially affected…
The International Swaps and Derivatives Association (ISDA) has published a new academic paper that analyzes the regulatory initial margin framework for the non-cleared derivatives market. The academic paper, sponsored by ISDA, was written by Rama Cont, Chair of Mathematical Finance at Imperial College London. The paper examines the rationale for the 10-day liquidity horizon applied under…
The ISDA Future of Derivatives Survey considers the issues facing the industry, in order to gauge how the derivatives market will develop and evolve. While the survey shows that participants are largely optimistic about the future of the derivatives market, several key challenges are likely to focus industry attention and resources, including ongoing regulatory compliance,…
Clearstream is expanding its offering in the funds space by acquiring Swisscanto Funds Centre, London (SFCL), from Zürcher Kantonalbank. The transaction, for a high double-digit million euro amount, is expected to close within Q3 2018. SFCL operates ZKB’s Swisscanto Fund Desk, which offers banks a centralized fund trading service – with straightforward order placement and execution, plus…
The boards of ION and Fidessa announced they reached an agreement on the terms of a recommended all cash offer for Fidessa Group by ION Capital UK. ION will acquire Fidessa for £38.70 per share, valuing it at some £1.5 billion. The offer beat out competitor Temenos, which was also in the running to acquire Fidessa. In a filing, ION…
Deutsche Bank AG made an accidental $35 billion payment to Eurex Clearing when it inadvertently transferred €28 billion to one of its outside accounts, Bloomberg News has revealed. While the blunder was quickly reversed and caused no financial harm, it’s a stark reminder of the vulnerability of even the most sophisticated financial firms. The routine…
The April 2018 Global Financial Stability Report (GFSR) finds that short-term risks to financial stability have increased somewhat since the previous GFSR. Medium-term risks are still elevated as financial vulnerabilities, which have built up during the years of accommodative policies, could mean a bumpy road ahead and put growth at risk. Higher inflation may lead central banks…
Deutsche Börse Group’s post-trade services provider Clearstream has successfully migrated the Belgian, Dutch, French, Italian and Luxembourgish markets onto its new TARGET2-Securities (T2S) Investor-CSD model. It thereby brings the first real cross-border volume onto the ECB’s pan-European settlement platform. With this move, the vision of a harmonized settlement landscape for securities across national borders finally…
Financial markets should start accelerating efforts to ditch Libor in favour of the Bank of England’s revamped interest rate benchmark being launched next week, a senior BoE official said. Last year, banks and other market participants in London backed the daily Sonia or Sterling Overnight Index Average as a substitute for sterling-denominated Libor to price…
Intercontinental Exchange announced that its UK-based futures unit plans to launch a new three month, cash-settled futures contract based on the Sterling Overnight Index Average (SONIA) rate on June 1, 2018. The launch follows the introduction of the ICE One Month SONIA futures contract near the end of last year and complements ICE’s liquid and diverse range of interest…
Bolsas y Mercados Argentinos announced its incorporated short selling as a new type of operation and has also updated the conditions of securities loan transactions, which will be in accordance with best international practices and regulations, promoting the possible re-entry of our country to emerging market status, according to a company statement. Both transactions may be performed…
The federal banking agencies (Federal Reserve, FDIC, OCC) proposed a revision to their regulatory capital rules to address and provide an option to phase in the regulatory capital effects of the new accounting standard for credit losses, known as the Current Expected Credit Losses (CECL) methodology. Last week, the Fed announced it had approved a rules…
The World Federation of Exchanges, the industry group for exchanges and central counterparties (CCPs), published its annual WFE IOMA Derivatives Market Report today, which shows the total volume of derivatives traded in 2017 declined by 0.2%. Stock markets worldwide and the global economy ended 2017 on a strong note. Benchmark market indices soared to record-high levels across…
ISLA’s response to the European Commission’s consultation on the finalisation of Basel III identified a need to clarify the scope of minimum haircuts, and warned against making the application too complex that liquidity is driven from the market. “ISLA understands the intent of the proposals to regulate levels of haircut applied to non-centrally cleared SFT’s, but…
The US House of Representatives passed the Volcker Rule Regulatory Harmonization Act. The Volcker Rule prohibits banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private-equity funds. The bill amends the Bank Holding Company Act of 1956 to exempt from the Volcker Rule banks with total assets: (1) of…
The Federal Reserve Bank of New York received feedback that the bilateral repurchase agreement (repo) volumes underlying the Secured Overnight Financing Rate (SOFR) appeared to be higher than some had expected. Following a thorough review of this issue with the data provider, it was discovered that forward-settling (that is, overnight repo transactions conducted on previous…
The Federal Reserve Board announced it had approved a proposal to revise its regulatory capital rules to address and provide an option to phase in the regulatory capital effects of the new accounting standard for credit losses, known as the “Current Expected Credit Losses” (CECL) methodology. The proposal addresses the regulatory capital treatment of credit…
Northern Trust Hedge Fund Services announced the launch of Cash Optimization, an automated service for viewing and efficiently managing cash across all currencies and counterparties to meet funding needs, maintain target reserves and generate alpha by investing excess cash. Developed in partnership with Hazeltree, a treasury solutions provider, the new service offers a comprehensive approach to…
Securities fintech provider Pirum Systems, announced the expansion of its US operation with the addition of Kristen Dove and Dominique Rose joining the New York team. In addition Edward Sharpe will be transferring to New York. Kristen will be responsible for business development for the Americas and Dominique will head up our client services function…
AFME published a new study, Impact of Regulation on Banks’ Capital Markets Activities: An ex-post assessment, which was produced in collaboration with PwC. While there have been many forward-looking studies examining how banks may respond to regulatory reforms, this study is the first that examines how banks have actually responded to regulations 10 years on from the global financial crisis. The study…
The Federal Reserve Board and the Office of the Comptroller of the Currency (OCC) proposed a rule that would further tailor leverage ratio requirements to the business activities and risk profiles of the largest domestic firms. Currently, firms that are required to comply with the “enhanced supplementary leverage ratio” are subject to a fixed leverage…
Three equity derivatives sales and trading professionals have left Goldman Sachs in London and New York City. Ning Sun, an equity derivatives trader who joined Goldman in 2011 after graduating from Imperial College is understood to have left the firm in London. In New York, Goldman has lost Kathryn Gandolfo, an equity trader turned saleswoman who joined…
The World Federation of Exchanges, the global industry group for exchanges and central counterparties (CCPs), published a joint report with global management consultancy Oliver Wyman on the pivotal role of exchanges and CCPs in supporting market integrity. The report – entitled Market infrastructures and market integrity: A post-crisis journey and a vision for the future…
The American Financial Exchange and University of Chicago’s law school recently convened leading figures in law and economics and international finance to discuss how the new benchmark will affect rate-setting by banks, mortgage lenders, credit cards companies and other financial institutions—and the impact on hundreds of millions of consumers. The law shool’s Coase-Sandor Institute of Law and Economics co-sponsored…
DTCC and Euroclear’s JV, GlobalCollateral, and NEX are partnering to streamline and improve OTC derivatives margin call processes. As a new member of the GlobalCollateral Partner Program, NEX is currently working to link its triResolve Margin web-based collateral management solution with GlobalCollateral’s Margin Transit Utility (MTU) to provide mutual clients with a centralized view across…
DataLend’s research publication, The Purple, features market data, analyses and features on the global securities finance industry. In its fourth issue, topics include: how beneficial owners use market data; SFTR opportunities and challenges; and standardizing performance management. Read the publication
The International Capital Market Association (ICMA) published the 2018 updates to the ICMA GMRA legal opinions which support the Global Master Repurchase Agreement (GMRA), the standard agreement for international repo transactions. The 2018 opinions cover the use of the GMRA in over 60 jurisdictions worldwide. The 2018 opinions cover both the enforceability of the netting…
ISLA’s CEO Andrew Dyson talks about Securities Financing Transactions Regulation
In April 2015, the G20 finance ministers and central bank governors asked the Financial Stability Board to work with the CPMI, IOSCO, and the Basel Committee on Banking Supervision to develop and report back on a workplan for identifying and addressing any gaps and potential financial stability risks relating to CCPs that are systemic across…
Last week, the Federal Reserve Bank of New York (New York Fed), in cooperation with the Treasury Department’s Office of Financial Research, began publishing three reference rates based on overnight repurchase agreement (repo) transactions collateralized by Treasury securities: the Secured Overnight Financing Rate (SOFR), the Broad General Collateral Rate (BGCR), and the Tri-Party General Collateral Rate (TGCR). Shortly…
On February 27, the US House of Representatives passed H.R. 4296, which aims to reduce the operational capital requirements imposed on financial institutions. The bill passed with a vote of 245-169. As is typical with deregulatory legislation, only 19 Democrats supported the bill, while only three Republicans voted against it. H.R. 4296 tightens the circumstances…
The International Swaps and Derivatives Association, Inc. (ISDA), the European Banking Federation (EBF), International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA) have published a whitepaper on the benefits of post-trade risk reduction services as a crucial risk management tool. Post-trade risk reduction services like compression and counterparty rebalancing play an increasingly…
Canadian Derivatives Clearing Corporation (CDCC), Canada’s national central clearing counterparty (CCP) for exchange-traded derivative products, certain over-the-counter (OTC) products and repos, announced the launch of its new direct-clearing model for Canadian buy-side firms. With the establishment of a new membership category called Limited Clearing Members (LCMs), consisting of pension funds and crown corporations, CDCC has extended the…
Creating a SONIA offering and developing a risk-free rates based ecosystem will be a key objective to facilitate adoption, according to the minutes of the Bank of England’s Working Group on Sterling Risk-Free Reference Rates. It was suggested that examining SONIA based notes issuance and enabling FRNs to be based on risk-free rates should be a focus…
How can an index ETF beat the index? By earning some money on the side to offset its annual fees. Securities has found new life in the world of ETFs. Index funds play a game of inches. Because fees are so low and funds often track identical or very similar benchmarks, winning funds often beat…
The FCA released a statement expressing it is “aware” of a growing number of UK firms offering so-called cryptocurrencies and cryptocurrency-related assets. Cryptocurrencies are not currently regulated by the FCA provided they are not part of other regulated products or services. Cryptocurrency derivatives are, however, capable of being financial instruments under the Markets in Financial…
A new report provides technical guidance to authorities on harmonized definitions, formats and usage of a set of critical data elements for over-the-counter (OTC) derivative transactions reported to trade repositories, excluding the Unique Transaction Identifier (UTI) and the Unique Product Identifier (UPI). Entitled Harmonisation of critical OTC derivatives data elements (other than UTI and UPI), the report…
SoftBank Group, the Japanese technology giant, used its stake in online retailer Alibaba Group as collateral for an $8 billion loan from a group of banks in what is one of the biggest deals of its kind, according to people familiar with the matter. Morgan Stanley, Citigroup, Goldman Sachs, Bank of America and J.P. Morgan were among…
CME Group will launch monthly and quarterly Secured Overnight Financing Rate (SOFR) futures on May 7, 2018, pending regulatory review. The futures will be based on the Alternative Reference Rates Committee-endorsed SOFR index, which is published daily by the Federal Reserve Bank of New York in cooperation with the US Office of Financial Research beginning. Although correlated with LIBOR and effective federal…
The Board of the International Organization of Securities Commissions (IOSCO) published its recommendations for improving the information on secondary corporate bond markets available to both regulators and the public. The recommendations seek to ensure that regulators have better access to information so they can perform their functions more effectively, and to enhance cross-border information sharing and…
Shares of companies loaded with floating-rate debt are feeling the pinch from the climb in LIBOR. The 3-month London interbank overnight rate has risen to 2.3%, outpacing the speed at which the Federal Reserve has raised its benchmark interest rate. The sharp climb in LIBOR hasn’t changed the bullish outlook for equity analysts at Goldman Sachs,…
In March, Eurex Clearing’s OTC Interest Rate Derivatives (IRD) segment saw record activity under the new Partnership Program. Volumes increased around elevenfold compared to March 2017 with a total of €1.7 trillion notional cleared. The total notional outstanding reached €4.7 trillion compared to €1.2 trillion in March 2017. Eurex Clearing’s Partnership Program is designed to…
CME Group and GCSA Capital are developing the Prefunded Treasury Facility (PTF) as a permitted form of collateral at CME Clearing for performance bond (initial margin) requirements for clearing members’ proprietary positions in futures and options contracts. The PTF is a letter of credit issued by a bankruptcy-remote trust that is fully collateralized and secured…
The EU Alternative Investment Fund (AIF) industry is highly concentrated around a few large participants and asset classes, a recent report by the European Securities and Markets Authority (ESMA) shows. The Trends, Risks, Vulnerabilities (TRV) Report (TRV), also found that the vast majority of European AIFs are managed cross-border using passporting rights. The AIFMD data show…
In a Banca d’Italia discussion paper, researchers Michele Manna and Stefano Nobili examine the holdings of government securities by domestic banks along with those of five other sectors: foreign banks, foreign non-banks, the official foreign sector, the domestic central bank and domestic non-banks. They use data for 21 advanced economies from 2004 Q1 to 2016 Q2. The results offer…
LCH CDSClear now clears single name CDS referencing their clearing broker in so-called ‘clients self-referencing transactions’. The new service allows clients to clear all components of index basis packages on iTraxx Main and Senior Financials. “To clear our index arbitrage trades, we need the IM (initial margin) of the package to reflect the full offset…