Credit Exposure

Credit Exposure, Securities Lending, Technology

blockchain, Securities Lending, topstory

Coindesk ran an interesting article showing two opposing views on the use of blockchain for securities lending at State Street. Nick Delikaris, head of global trading and algorithmic strategies, supports the…

US Treasury fintech report: four impacts to securities finance

August 2, 2018

Artificial Intelligence, Big Data, Collateral Management, Credit Exposure, Regulatory, US

collateral, fintech, technology, topstory, US Treasury

The US Treasury issued the fourth report in their series, “A Financial System That Creates Economic Opportunities”; this one focuses on Fintech. Some of the recommendations speak to matters that…

Capital markets should be watching Alibaba’s Ant Financial very closely (Premium)

July 12, 2018

Asia, Cloud, Credit Exposure, Technology

Alibaba, Amazon, Ant Financial, Ant Financial Group, Facebook, Google, topstory

Alibaba’s Ant Financial Group is about the most innovative financial services company we’ve seen in quite a while. Although Asian companies have been advanced in offering financial services to their…

US single counterparty credit limit rules finalized – there are some important nuances here (Premium)

June 19, 2018

Credit Exposure, Federal Reserve, Regulatory, US

credit limits, Federal Reserve, Regulatory, SCCL, topstory

The Federal Reserve has released final rules for single counterparty credit limits (SCCL) to go live for GSIBs on January 1, 2020. The headlines are clear: a 15% credit exposure…

Are changing views of credit intermediation in the best interest of beneficial owners? Part 2 of 2

April 10, 2018

Credit Exposure, Securities Lending

FISL, Securities Lending, topstory

As we prepare for the Finadium Investors in Securities Lending conference in New York tomorrow, we continue our deep dive into whether current practices in credit intermediation, including indemnification, are…

Are changing views of credit intermediation in the best interest of beneficial owners? Part 1 of 2

April 9, 2018

Credit Exposure, Securities Lending

FISL, Securities Lending, topstory

For securities lending, credit intermediation is a central part of the business. The historical preference of beneficial owners to lend to banks instead of directly to hedge funds has shaped…

New research on dollar funding shows Japanese banks pay a 3bp premium on repo – what’s going on here?

March 27, 2018

Asia, Credit Exposure, Money Market Funds, Repo, Risk Management

BIS, Japanese banks, Money Market Fund Reform, money market funds, Repo, topstory

A recent paper published by the BIS, “Business models and dollar funding of global banks” examined the changes in the types of business that European and Japanese banks did post-crisis (specifically…

Finadium: Solving the Credit Risk Exposure Problem for the Buy-side in Securities Finance

March 14, 2018

Credit Exposure, Investments, Repo, Securities Lending

buy-side, credit intermediation, Finadium, Repo, Securities Lending

Unlocking unutilized lender supply would change the landscape for both securities finance and capital markets in general, but finding new credit support structures that securities lenders will accept is a…

The Changing Market Structure of Equity Repo Financing

February 5, 2018

mstan

CCP, Credit Exposure, Europe, Operations, Repo

bilateral, CCP, counterparty credit, equity repo, Europe, ICMA, Nik Todorovic, SIX, STP, topstory

Equity repo is different from its more well-known cousin, government bond repo: the operations of the trade are the same but the collateral and the rationale for engagement can vary…

Do EU margin requirements on anti-procyclicality for CCPs help or hurt risk management?

January 15, 2018

CCP, Credit Exposure, Derivatives, ESMA, Europe, OTC Derivatives Clearing, Pro-cyclicality, Regulatory, Risk Management

CCPs, Clearing, ESMA, Procyclicality, topstory

EMIR wants CCPs to hold more margin, in effect making CCPs into virtual fortresses. But the costs associated are high and the potential to push risk into markets or firms…

Bank of England on hedge fund and PB risk: better than it used to be but issues remain

January 4, 2018

Bank of England, Credit Exposure, Europe, Hedge Funds, Investments, Prime Brokerage, Pro-cyclicality, Risk Management, Systemic Risk

Bank of England, hedge funds, Initial Margin, prime brokers, Procyclicality, topstory

A recent publication from the Bank of England shows that hedge fund systemic risk is generally lower than it used to be; that’s a good thing for the markets. Hedge…

Could Amazon or Facebook become a CCP?

November 13, 2017

CCP, Credit Exposure, Technology

CCPs, credit intermediation, innovation, technology, topstory

One problem in financial markets is the willingness of participants to trade with one another. Sometimes this is solved by banks operating as credit intermediaries. Other times an industry utility,…

Inefficiencies in securities lending client set ups can be solved with a bit of effort

October 19, 2017

Credit Exposure, Prime Brokerage, Securities Lending

ALD, AML, Arnesen, BNPP, credit, KYC, Securities Lending, SFTR, topstory

While trading and post-trade processes in securities lending are more efficient than ever, one area remains stubbornly routed in the past: the credit approval and management process for signing on…

ISDA paper highlights concerns over European Bank Recovery and Resolution Directive stay protocols

August 23, 2017

Credit Exposure, Derivatives, Europe, Regulatory, Risk Management, Systemic Risk

BRRD, ISDA, moratoria, stay protocols, topstory

The International Swaps and Derivatives Association (ISDA) published a comment paper this month regarding stay protocols under the European Bank Recovery and Resolution Directive (BRRD). ISDA has strong concerns about…

Who should be counterparties to central banks? (Premium)

August 9, 2017

Credit Exposure, ECB, Federal Reserve

Central Banks, counterparties, European Central Bank, Federal Reserve, primary dealers, topstory

Central banks have shown two models for interacting with counterparties. In the Federal Reserve’s primary dealer system, there are a limited number of participants. On the other hand, the European…

Can Artificial Intelligence in credit risk be the next big leap forward? Fintech startup James offers a case study

July 25, 2017

Big Data, Credit Exposure, Fintech, Market infrastructure, Systemic Risk, Technology

artificial intelligence, counterparty credit exposure, credit risk, fintech, technology, topstory

A Portuguese startup, James (formerly known as CrowdProcess), has gained some investors with deep business experience in the problem of capital markets credit risk. How much does the business need…

Surmounting the onboarding challenge in All to All lending markets

July 24, 2017

Stephen Malekian

Credit Exposure, Repo, Technology

All to All, credit, Credit Exposure, credit risk, Elixium, MRA, Repo, topstory

The idea of starting to trade on a new platform, especially for repo, can seem daunting to the buy-side. In this article, I present the opportunities and challenges for onboarding…

Lessons for Peer to Peer in securities financing from Peer to Peer in cash fixed income (Premium)

June 22, 2017

Credit Exposure, Fixed Income, Investments, Market infrastructure, Repo, Securities Lending, Technology

All to All, direct, MarketAxess, Open Trading, peer to peer, topstory, Tradeweb

Peer to Peer is picking up steam in the cash fixed income world. MarketAxess and Tradeweb now have offerings that have generated real interest from major asset managers. What will…

IBM and Promontory bring Watson AI to regulatory technology

June 21, 2017

Basel III, Big Data, Credit Exposure, Dodd-Frank, Fintech, Regulatory, Risk Management, Technology

artificial intelligence, Digital Reasoning, financial technology, fintech, IBM, Regulatory, topstory

IBM provided a briefing on a major new initiative, announced on June 14th, that they are bringing their Watson technology to the realm of regulatory compliance. Here is what we…

SFM Magazine, Summer 2017, is now online

Securities Finance Monitor Magazine, Summer 2017, is now online. This edition features articles on disruptive fintech, industry collaboration and building a holistic collateral infrastructure. Hard copies will be distributed at…

Fintech from the inside out – Finadium Fintech Focus for technology, product development and operations

May 3, 2017

Credit Exposure, Europe, Market infrastructure, Securities Lending, Technology, US

Finadium Fintech Focus, fintech, fintech focus, technology, topstory

As the business of capital markets financing and collateral management has grown in prominence, it has also grown in complexity. There is now widespread recognition that the business of collateralized…

Finadium Fintech Focus: Private Indemnification Markets in Securities Lending

April 11, 2017

Credit Exposure, Securities Lending, Technology

Finadium report, fintech focus, Indemnification, Securities Lending, technology, topstory

For the securities lending market to grow and diversify, a new form of indemnification would be a helpful addition. We propose a private indemnification market or indemnification facility, where cash…

Finadium: Analysis of Eurex and CME Buy-side Direct Clearing Models

October 13, 2016

CCP, Credit Exposure, Derivatives, Investments

buy-side, Clearing, CME, Eurex, topstory

Collateral Management, Credit Exposure, Securities Lending

This Finadium report presents the direct clearing plans of Eurex’s ISA Direct and the CME’s Direct Funding Participant model. We look at who wins and who loses, impacts on the…

There is Still Significant Money to be Saved in More Efficient Collateral Exposure Management

September 22, 2016

Rajen Sheth

collateral management, exposure management, non-cash, Pirum, Securities Lending, topstory

The securities lending industry is rightly attentive to important issues like collateral optimization and finding the most cost effective use of limited capital. With attention turned towards these larger macro…

Agent lenders in the Direct and Peer to Peer securities finance markets (Premium)

September 21, 2016

Credit Exposure, Repo, Securities Lending

agency lending, direct, peer to peer, Repo, Securities Lending, topstory

Securities lending agents will be critical players in the Direct and Peer to Peer (P2P) markets. In securities lending, investors are looking for indemnification to support their loans. In repo,…

Should CCP default reserves be funded by debt or securitization?

August 17, 2016

Basel III, CCP, cover 2, Credit Exposure, Derivatives, Dodd-Frank, Europe, IOSCO, Market infrastructure, OTC Derivatives Clearing, Regulatory, Risk Management

CCP, Central Counterparties, counterparty risk, systemic risk, topstory

Default reserve funding at CCPs remains an on-going topic of interest in collateralized funding and other centrally cleared markets. In recent years, regulators and others interested in the systemic risks…

JP Morgan exits GCF Repo® clearing – what does this actually mean?

July 25, 2016

Credit Exposure, Primary Dealers, Repo, Tri-Party Repo, US

BNY Mellon, DTCC, Federal Reserve, GCF Repo(R), JP Morgan, topstory

The news came out last week that JP Morgan would be exiting GCF Repo® clearing. Actually, several media organizations reported that JPM was to stop settling government securities, which isn’t…

Regime Change! The democratization of the clearing landscape

June 15, 2016

Michael Cyrus

CCP, Collateral Management, Credit Exposure, Derivatives, Europe, Prime Brokerage, Regulatory

Balance sheet, Clearing, credit intermediation, derivatives, topstory

Banks will see their clearing business become bifurcated by tail–risk and credit intermediation, part of which will stay on their balance sheet, alongside a service and infrastructure piece that will…

What would blockchain mean for "cash" and "credit" in funding? (Premium)

March 8, 2016

Bitcoin, Blockchain, Cash management, CCP, Collateral Management, Credit Exposure, Liquidity Management, Risk Management, Securities Lending, Technology

blockchain, cash management, Credit Exposure, credit intermediation, Settlements, topstory

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The German Maple tax probe: what happened and lessons for the future (Premium)

February 29, 2016

Basel III, Credit Exposure, Europe, Risk Management, Shadow Banking, Systemic Risk

Basel capital rules, counterparty risk, Credit Exposure, Maple Financial, taxation, topstory

On February 7th 2016, the German financial authority BaFin ordered German operations of Maple Financial frozen. According to publicly available reports, between 2006 and 2010, Maple is alleged to have…

Finadium report: The Capital Cost Calculator

January 21, 2016

Credit Exposure, Derivatives, Repo, Securities Lending, Technology

Balance sheet, capital costs, Credit Exposure, Finadium, topstory

Finadium has produced a business plan template for institutions wanting to create their own Capital Cost Calculator. This is a new idea in financial markets that gives traders, treasury groups…

Finadium releases analysis of Basel revisions to credit risk rules

January 14, 2016

Basel III, Credit Exposure

Basel Committee, credit risk, Finadium, topstory

Finadium has released a market practitioner’s reading of the Basel Committee’s recent consultation paper on credit risk. This report is part of the Finadium Executive Briefing series, providing briefings and…

The DTCC old stock borrow program could be a solution to new capital problems (Premium)

January 11, 2016

CCP, Credit Exposure, Market infrastructure, Securities Lending

CCPs, Central Securities Depositories, DTCC, Securities Lending, topstory

What if there was a centrally cleared facility through a US Central Securities Depository (CSD) that would automatically allow a broker with excess availability to lend securities to another broker…

US securities based lending: Reg T and Reg U intent versus reality

January 6, 2016

Credit Exposure, Glass-Steagall, Regulatory, Risk Management, US

fire sale risk, Margin financing, non purpose lending, Regulation, securities based borrowing, taxation, topstory

Securities based lending products have gained popularity in the US under the auspices of Reg T and Reg U, two of the core regulations governing securities transactions. These regulations are…

Free from Finadium: Securities Lending, Market Liquidity and Retirement Savings: The Real World Impact

November 16, 2015

Basel III, Credit Exposure, Risk Management, Securities Lending

Basel III, Finadium, Liquidity, Securities Lending, topstory, transaction costs

This paper looks at the contributions of securities lending to financial markets with an emphasis on transaction costs, market liquidity and incremental revenue. We identify US$61 billion in increased annual…

Extending the 48 hour collateral liquidation stay to financing trades: cash lenders won’t be happy

November 12, 2015

Collateral Management, Credit Exposure, Liquidity Management, Money Market Funds, Repo, Risk Management

collateral liquidation, FDIC, FSB, OLA, safe harbor, topstory

ICMA, FSB, ISDA and Bloomberg are talking about the extension of the 48 hour rule in derivatives – where if a counterparty goes bust, liquidating the collateral is subject to…

Inter-clearer FICC tri-party trading at DTCC will come to an end in July, 2016. Did the Fed just get impatient?

November 11, 2015

CCP, Collateral Management, Credit Exposure, Federal Reserve, Regulatory, Repo, Systemic Risk, Tri-Party Repo

BNY Mellon, FICC, JP Morgan, Repo, topstory, tri-party repo

Last week DTCC made an announcement they would, as of July 15, 2016, no longer support FICC trades that go across clearing banks. The text of the announcement can be…

Derivatives, Securities Financing and the Law of Conservation: Transforming Counterparty Risk into Liquidity Risk

November 3, 2015

Basel III, CCP, Cleared Interest Rate Swaps, Credit Exposure, Derivatives, Dodd-Frank, Liquidity Management, Regulatory, Repo, Risk Management

Law of Conservation, Physics, topstory

A former physicist, now Wall Street risk and regulation quant, said at a recent conference that when thinking about regulation, he is reminded of the Law of Conservation. That is…

Prime Brokerage and Balance Sheet Optimisation: Lessons from the Societe Generale Experience

October 19, 2015

mstan

Basel III, Collateral Management, Credit Exposure, Derivatives, Prime Brokerage, Regulatory

Balance sheet, CCPs, hedge funds, Prime Brokerage, Societe Generale, topstory

The industry-wide topic of balance sheet optimisation has hung in the air like a fog for the last three years. We at Societe Generale are now seeing what this means…

Should we stop talking about collateral optimization now in favor of something bigger? (Premium Content)

October 7, 2015

Collateral Optimisation, collateral optimization, Collateral Transfer Pricing, fund transfer pricing, topstory, yield enhancements

Big Data, Blockchain, Collateral Management, Credit Exposure, Liquidity Management, Market infrastructure, Operations, Technology

We’ve had several discussions over the last two weeks about collateral optimization and its role in the market. One result of these conversations is that maybe collateral optimization is largely…

Are relationships still important in securities lending? (Premium Content)

September 30, 2015

Basel III, Credit Exposure, Securities Lending

CRD IV, Dodd-Frank, Equilend, Securities Lending, SunGard, topstory

Securities lending used to be a relationship driven business to the point where if you didn’t know someone, you could not borrow a security if the world depended on it.…

Finadium: Can the Blockchain Work for Securities Finance, OTC Derivatives and Other Collateralized Transactions?

Finadium has released a new research report on blockchain, a potentially exciting new technology in financial markets. Blockchain promises to be revolutionary, disruptive and a way to fundamentally change financial…

Five reasons why prime brokers say different things about balance sheet scarcity to their hedge fund clients (Premium Content)

September 23, 2015

Basel III, Credit Exposure, Hedge Funds, Investments, Liquidity Management, Prime Brokerage, Regulatory

Balance sheet, corporate bond liquidity, hedge funds, Liquidity, prime brokers, Regulation, topstory

We were recently asked why prime brokers are reporting different information to their hedge fund clients on why balance sheets have been tightening. The “balance sheet is scarce” story might…

Finadium report: Guarantees vs. Collateral: Risk in ABCP, Collateralized Commercial Paper and New Structured Products

A new report from Finadium looks at the risk profiles of Asset-backed Commercial Paper (ABCP), Collateralized Commercial Paper and short-term products with new names but similar economic outcomes. Investors must…

A buy-side cost/benefit analysis for securities lending CCPs

September 10, 2015

Gerard Denham

CCP, Credit Exposure, Investments, Securities Lending

buy-side, CCPs, Eurex Clearing, Indemnification, Lending CCP, Securities Lending, topstory

A recent survey of asset managers in securities lending showed that executives were interested in CCPs but lacked the information necessary to create a cost/benefit analysis and build their business…

Derivatives trades have moved from the US to Europe: has counterparty risk management kept up? (Premium Content)

September 1, 2015

Credit Exposure, Derivatives, Europe, US

CFTC, guarantees, ISDA, OTC derivatives, Reuters, topstory

Reuters published an excellent piece in August on US derivatives dealers moving trades away from the US to overseas affiliates, largely in Europe. The story had all the pieces we…

Updates on netting, CCPs and the Leverage Ratio (Premium Content)

August 17, 2015

Basel III, CCP, Credit Exposure, Europe, Regulatory, US

Basel Committee, CCPs, Comprehensive Approach, Leverage Ratio, netting, PRA, Supplementary Leverage Ratio, topstory

One of our big themes for 2014 and 2015 has been netting rules: what they are now, how they are evolving, and how banks (and hence hedge funds, insurance companies,…

Eased Chinese margin requirements used to prop up market. Where does the risk go?

July 14, 2015

Asia, China, Credit Exposure, Shadow Banking

Chinese Securities Finance Corp, margin debt, SHCOMP:IND, topstory

Chinese margin requirements were eased to prop up the equities market. But all this does is transfer the risk to the lenders. In this case, one of the lenders is the…

Fitch zeros in on corporate tri-party repo, fire sale risk, and rising interest rates

June 24, 2015

Collateral Management, Credit Exposure, Federal Reserve, Lehman, Repo, Risk Management, Tri-Party Repo

corporate bond liquidity, fire sale risk, Fitch, topstory