Derivatives

Technological advances have made a “Semantic Blockchain” feasible. This is the ability to map smart contracts on the blockchain to qualitative information about the underlying data. It’s a realistic solution…

It’s go time for signing stay resolution agreements in securities finance (Premium)

October 3, 2018

Derivatives, Regulatory, Repo, Securities Lending, US

automatic stays, ISDA, QFCs, Qualified Financial Contracts, stay resolutions, stays, topstory

Deadlines are approaching: since securities finance contracts were included in the definition of a Qualified Financial Contract (QFC), the market knew that one day the great paperwork review would come.…

Rebuilding tri-party repo for an open architecture model

September 4, 2018

Giancarlo Novello

Custodians, Derivatives, Market infrastructure, Securities Lending, Tri-Party Repo

OTC derivatives, Repo, Securities Lending, SIX, topstory, tri-party

The tri-party repo market was initially developed in the US in the late 70s, early 80s to drive efficiency gains in settlement and reduce operational risks. It then moved across…

European roundup: some weighty news for the end of July (Premium)

August 1, 2018

CCP, Cleared Interest Rate Swaps, Derivatives, ESMA, Europe, Securities Lending

Clearing, Deutsche Bank, Deutsche Borse, ESMA, Europe, FT, Securities Lending, topstory

As July wound down, European market participants released some important news items. We look at Euro clearing moving to Frankfurt, UCITS funds and collateral and the FT’s article on SFTR.…

Market consolidation in derivatives and financing on both sides of the Atlantic (Premium)

July 11, 2018

Derivatives, Europe, Repo, US

consolidation, derivatives, Repo, topstory

Market consolidation of banks and dealers has been discussed for a while, but we’re now seeing some moves that make us think we are at the beginning of a significant…

Top five trends in collateral management for 2018

May 30, 2018

Bimal Kadikar

Collateral Management, Derivatives, Highlighted, Technology

Bimal Kadikar, collateral management, technology, Transcend Street

Collateral management has broadened far past simple margin processing; collateral now impacts a majority of financial market activity from determining critical capital calculations to impacting customer experience to driving strategic…

The potential for dollar funding stress at Japanese banks is causing regulatory concern (Premium)

May 23, 2018

Asia, Derivatives, Investments

dollars, Japan, Lehman, Swaps, topstory

Interest rates in Japan have remained at historic lows, as the Bank of Japan continues to hope for inflation of 2% at some time in the future. Meanwhile, both private…

The BIS numbers on the size of the OTC derivatives market show continued declines in Gross Market Value

May 14, 2018

Jonathan Cooper

Central Counterparties, CFTC, Derivatives

BIS, CFTC, Gross market value, notional value, OTC derivatives, topstory

The Bank for International Settlements (BIS) recently released “Statistical release: OTC derivatives statistics at end-December 2017”. Just looking at notional values, the OTC derivatives market is little changed. But we…

Lessons from FISL 2018: alpha generation in securities lending takes on new importance (Premium)

April 18, 2018

Anna Reitman

Derivatives, FISL, Securities Lending, Total Return Swaps

Alpha generation, buy-side, financial technology, FISL NYC 2018, topstory, Total Return Swaps

“Alpha” in the context of securities lending is itself a controversial term, with some participants arguing that it’s a euphemism for optimizing transaction costs. But in a purely definitive sense,…

Manmohan Singh’s latest, “Leverage – A Broader View,” shows that build up in the banking system from off-balance sheet trades is huge

Manmohan Singh and Zohair Alam of the IMF have written an important white paper “Leverage—A Broader View” (March 19 2018, IMF Working Paper WP/18/62) that looks at off-balance sheet leverage.…

US tax code section 871m is making changes in the swaps markets

April 4, 2018

Derivatives, Tax, US

871m, topstory, Total Return Swaps

In the world of tax reform and financial markets, 871m is an important one to keep track of. This change to the US Internal Revenue Code aims to stop an…

Is Asia coming of age in securities finance and collateral at last?

March 1, 2018

Asia, Collateral Management, Derivatives, Repo, Securities Lending

Asia, EquiLend NGT, Repo, Securities Lending, topstory, Variation Margin

For more years than we can remember, the promise of Asia as a securities finance marketplace has been bigger than the reality. Without getting too optimistic this time around, there…

The ‘wriggle parameter’ in derivatives: futures pricing formula takes on new importance

February 26, 2018

Vincent Maury

Derivatives, Highlighted, Repo

dealers, derivatives, forwards, Repo, Societe Generale, wriggle factor

Aside from specialist trading desks, the wriggle parameter is little-known in financial markets. Yet, this part of a derivatives formula now plays a critical role in understanding pricing dynamics at…

SFM Magazine, Winter 2018, is now online

Securities Finance Monitor Magazine, Winter 2018, is now online. This edition, our Technology Special, features articles on what protectionism means for efficiency in global capital markets, a proposal for smart…

New data on prime brokerage financing revenues (Premium)

January 24, 2018

Derivatives, Prime Brokerage, Securities Lending

Prime Brokerage, Securities Lending, synthetic financing, synthetic prime brokerage, topstory, Total Return Swaps, TRS

As part of our report this month on Total Return Swaps (TRS), we sized prime broker revenues for physical (cash) financing and synthetic financing. We were aided in this task…

The US Senate’s obvious Volcker Rule arbitrage for trading and financing

January 23, 2018

Derivatives, Dodd-Frank, US

Proprietary Trading, topstory, US Senate, Volcker Rule

The rationale is justifiable: reduce the regulatory burden for banks with under US$10 billion in assets. But the upshot from a US Senate bill now passed the Senate Banking Committee…

What’s the true cost of future funding? A new methodology for a stock borrow rate curve

January 22, 2018

Robert Levy

Big Data, Derivatives, Investments, Securities Lending

exchange-derived data, future funding, Hanweck, rate curve, topstory

Stock borrowing is an inherent element of any leveraged equities trading strategy. Whether the trade is as simple as a traditional short or as complex as a long hedge against…

Finadium: Evolution of the Total Return Swaps Market

January 17, 2018

Delta One, Derivatives, Repo, Securities Lending, Total Return Swaps

Finadium, Repo, Securities Lending, topstory, Total Return Swaps, TRS

In this report, we examine the current state of the Total Return Swaps (TRS) market through conversations with major market participants and a review of bank financial statements. Our conversations…

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

January 15, 2018

Jonathan Cooper

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…

Artificial Intelligence is one way of several to bridge the manual to STP gap (Premium)

January 9, 2018

Artificial Intelligence, Collateral Management, Derivatives, Operations, Technology

AI, artificial intelligence, ION Trading, STP, Straight-through processing, topstory, True-PTS

Big banks, established vendors and start-ups are seeing a similar opportunity: technology should be used to get manual and voice transactions into electronic systems for post-trades processing, particularly for collateralized…

A quick primer on “settled-to-market” vs. “collateralized-to-market” in counterparty credit risk (Premium)

December 18, 2017

Basel III, Central Counterparties, Collateral Management, Derivatives

capital, CEM, collateralized to market, Leverage Ratio, Settled to market, topstory

CCPs have changed or are changing their rules on Variation Margin to allow “settled-to-market” (STM). This is a useful change that will save money, and complements the desire of firms…

The EU’s proposals on CCP location open the door to staggering new risks

November 28, 2017

Jonathan Cooper

Bank of England, CCP, Central Counterparties, Derivatives, Europe

CCPs, European Commission, extraterritoriality, topstory

The European Commission’s proposals to force large CCPs to submit to supervision or even move to the EU may send some shivers down the neck of anyone trading via a…

CM2025: the physical market rebounds

It’s the year 2025. Following the passage of Dodd-Frank and related Basel III capital rules, banks did what they were supposed to do: they reduced Shadow Banking risk by cutting…

Finadium Big Ideas Quarterly Q4 2017 now online

November 6, 2017

Asia, Collateral Management, Derivatives, Europe, Regulatory, Repo, US

big ideas, collateral management, derivatives, Finadium, Repo, Securities Lending, topstory

Our quarterly presentation on research, news and events. Finadium Securities Finance, Collateral and Derivatives subscription clients can log in and download the presentation here If you are already logged in,…

Debating solutions to the US Supplementary Leverage Ratio problem (Premium)

November 1, 2017

Basel III, Derivatives, Liquidity Management, US

SLR, Supplementary Leverage Ratio, topstory, US, US Treasury

The US Supplementary Leverage Ratio (SLR) isn’t working very well, that much we know. As a non-risk based measurement of risk, it captures every asset with the same risk weighting…

An activities-based approach to regulation from the US Treasury report on asset managers and insurance companies (Premium)

October 31, 2017

Derivatives, Dodd-Frank, Investments, Liquidity Management, Regulatory, SEC, US

asset managers, derivatives, Dodd-Frank, insurance companies, Liquidity, topstory, US Treasury

The US Treasury has released its third major report on core principles for financial markets. The first two covered capital markets and banks; the latest is on asset managers and…

Finadium: The Global Tri-party Services Market in 2017: A Finadium Survey

October 30, 2017

Collateral Management, Derivatives, Operations, Repo, Securities Lending

collateral management, Finadium, Repo, Securities Lending, topstory, tri-party

The global tri-party market size is US$4.65 trillion, up from US$4.3 trillion in 2014, according to a new survey from Finadium. Tri-party services continue to evolve by product and region,…

Our analysis of the US Treasury October 2017 report on Capital Markets (Premium)

October 10, 2017

Derivatives, Dodd-Frank, Regulatory, Repo, Securitization, US

Core Principles, derivatives, Dodd-Frank, Regulatory, Securitization, topstory, US Treasury

Last week the US Treasury released “A Financial System That Creates Economic Opportunities: Capital Markets,” part two of their major review of regulations in financial markets. Here’s our analysis of…

Highlights from ISDA’s 2017 margin survey

October 4, 2017

CCP, Cleared Interest Rate Swaps, Collateral Management, Derivatives, OTC Derivatives Clearing, Regulatory, Systemic Risk

Cleared Derivatives, Initial Margin, ISDA, ISDA Margin Survey, Non-Cleared OTC Derivatives, topstory, Variation Margin

The International Swaps and Derivatives Association (ISDA) has resumed its annual survey on margin. Initial Margin (IM) and Variation Margin (VM) requirements on certain types of derivatives contracts are now…

Merging financing desks: what do clients get out of it?

September 28, 2017

Christophe Bensoussan

Delta One, Derivatives, Repo, Securities Lending

derivatives, Natixis, Repo, securities finance, Securities Lending, topstory

The idea of consolidating equities and fixed income financing desks seems like a logical strategy for banks to use their balance sheet more efficiently, but for clients the results may…

Will mandatory stays on defaults decrease confidence in securities finance? (Premium)

September 11, 2017

Derivatives, Europe, Repo, Securities Lending, US

Bank Recovery and Resolu, BRRD, European Commission, Federal Reserve, QFCs, securities finance, stays, topstory

A new rule approved by the Federal Reserve ensures that counterparties can’t terminate derivatives contracts (QFCs) on large banks that that are in default or a resolution process. A proposal…

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…

LCH’s CollateralSeg should reduce gray areas of collateral ownership

LCH announced on August 10th that it will support a new account type representing pledged collateral for it’s SwapClear service. This should help reduce the risk that ownership rights can become…

SEC weighs in on DAOs – yes digital tokens are indeed securities

August 14, 2017

Bitcoin, Blockchain, Derivatives, Fintech, Market infrastructure, Regulatory, SEC, Securitization, Technology, US

blockchain, cryptocurrencies, DAO, Ethereum, sec

In what may be a seminal ruling, the Securities and Exchange Commission (SEC) has said that a so-called digital token qualifies as a security under the Securities Exchange Act of…

Finadium: Liquidity Trends in Listed Equity Derivatives Markets

August 8, 2017

Derivatives, Regulatory, Technology

Equities, futures, listed derivatives, options, securities finance, technology, topstory

Use the Current Exposure Method, SA-CCR, or just cut out margin from the Leverage Ratio altogether? Answering this question, and soon, is a core challenge and opportunity for global equity…

Finadium Big Ideas Quarterly Q3 2017 now online

August 1, 2017

Collateral Management, Derivatives, Repo, Securities Lending

collateral, derivatives, Finadium, Repo, Securities Lending, technology, topstory

Our quarterly presentation on research, news and events. Finadium research clients can log in and download the presentation here

Finadium’s strategic plan for 2017-2018

July 27, 2017

Derivatives, Fintech, Fixed Income, Repo, Securities Lending, Technology

collateral, derivatives, Finadium, fintech, Fixed Income, securities finance, topstory

Financial markets are changing at a rapid pace; from front to back office and across products, anyone can see that today’s markets are not what they were 10 years ago.…

Finadium: Tri-party Repo in Asia: OTC Collateral Demand and Structural Change

July 18, 2017

Asia, Derivatives, Repo, Tri-Party Repo

Asia, Initial Margin, OTC derivatives, Repo, topstory, tri-party, Variation Margin

This Finadium research report evaluates the market conditions that are pushing Asian investors towards repo as a mechanism for obtaining cash that can be used as OTC derivatives collateral, especially…

CM2025: will securities loans still need a borrower in 2025?

July 17, 2017

Derivatives, Regulatory, Securities Lending

CM2025, futures, securities loans, topstory

CM2025 is our series on what capital markets will look like in the year 2025. In this edition, we project the world of securities lending trading eight years ahead. Will…

The FSB pushes hard on making trade reporting operational and legal (Premium)

July 10, 2017

Derivatives, EMIR, Financial Stability Board, Market infrastructure, OTC Derivatives Clearing, Regulatory, Systemic Risk

Financial Stability Board, legal data, OTC derivatives, Regulatory reform, topstory, trade reporting

The Financial Stability Board (FSB) has been busy, with 10 substantive letters and reports released in the run up to the recent G20 summit. For this article, we took a look…

Title Transfer Collateral Arrangements – European and US rules

June 19, 2017

Basel III, Collateral Management, Derivatives, Europe, Re-Hypothecation, Regulatory, Repo, Securities Lending

Basel capital rules, MiFID II, Regulatory, title transfer collateral arrangement, topstory, TTCA

Title Transfer Collateral Arrangements (TTCA) are executed between parties engaged in bilateral securities lending, bilateral repo or bilateral derivatives. While these arrangements are not new, having been enshrined in regulation…

The Five Cs of Bank and Client Success in Securities Finance

June 15, 2017

Anand Krishnan

Basel III, Cash management, Central Counterparties, Collateral Management, Derivatives, Hedge Funds, Investments, Repo

ALM, CCPs, collateral, Natixis, Repo, topstory

Today’s global investment banking market continues to be shaped by the need for innovation and synergies driven by an evolving regulatory landscape. We have identified the Five Cs for success…

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…

Synthetic Securities Finance can Unlock the Key to more Financing Supply… If Inventory is Well Managed

June 12, 2017

Etienne Ravex

Derivatives, Prime Brokerage, Repo, Securities Lending, Technology

blockchain, derivatives, infrastructure, Murex, Prime Brokerage, Repo, Synthetic Finance, topstory

The obstacle of regulatory balance sheet restrictions in physical securities finance is prohibiting the normal flow of business. While there is a natural alternative in synthetic financing markets, firms must…

Finadium report: The Challenge of Standardizing Collateral Schedules in OTC Derivatives

May 23, 2017

Central Counterparties, Collateral Management, Derivatives, Market infrastructure, OTC Derivatives Clearing

collateral management, CSAs, Finadium, OTC derivatives, topstory

A push/pull situation between dealers, ISDA and the buy-side has reached a new crescendo in recent months as Basel Committee/IOSCO rules have forced a large-scale repapering of bilateral Credit Support…

Next Steps for Hedge Funds in Cost Management

May 22, 2017

mstan

Basel III, Derivatives, Hedge Funds, Investments, Repo, Securities Lending

hedge funds, Prime Brokerage, Societe Generale, topstory

These are legitimately complex times for hedge funds. Between macropolitical turmoil, negotiating fees and managing their daily activities, hedge fund managers must pay attention to a wide range of factors…

Collateralised Financing for the Real Economy

May 18, 2017

Dennis Mullany

Collateral Management, Derivatives, Europe, Repo, Securities Lending

collateral management, digitisation, digitization, Euronext, peer to peer, Repo, topstory

Financial markets were designed to support the real economy: that’s their job. Within their collateral services offering, Euronext is working to bring commodities and investment funds into the electronic collateralized…

Repealing Dodd-Frank: understanding the revised Financial CHOICE Act (Premium)

May 9, 2017

Derivatives, Dodd-Frank, US

Dodd-Frank, Leverage Ratio, OTC derivatives, repeal, topstory, US

The US House of Representatives Financial Services Committee recently passed a revised Financial CHOICE Act for discussion. This is the big Republican plan for repealing/replacing Dodd-Frank rules, including the proposed…

EU relaxes derivatives rules – smart economic policy or a reaction to global competition?

May 8, 2017

Central Counterparties, Collateral Management, Derivatives, EMIR, Europe, Investments

CCPs, Clearing, collateral, derivatives, EMIR, Europe, topstory