Derivatives

Derivatives, Hedge Funds, Technology

Burton-Taylor, CBOE, coronavirus, hedge funds, Hercules Investments, topstory, VIX, volatility

There’s only one thing that’s certain about the markets: volatility is back. We talk to a hedge fund trading it, and dig into some of the most recent stats, strategies…

Global force majeure creep into the collateral world (Premium)

March 3, 2020

Collateral Management, Derivatives, Repo

China, collateral management, coronavirus, Force majeure, Repo, topstory

China’s Council for the Promotion of International Trade (CCPIT) has issued a record number of force majeure certificates, now at 1,615, covering $15.7 billion in transactions. An expansion of the…

Higher swaps margin costs + lower RWA for CCPs = more securities finance volumes (Premium)

February 6, 2020

CCP, Derivatives, Securities Lending, Total Return Futures, Total Return Swaps

CCPs, DTCC, Eurex, securities finance, topstory, Total Return Futures, Total Return Swaps

In the most positive turn of events for securities finance in some time, there is reason to think that the next few years should see a nice uptick in volumes…

The door opens for an SA-CCR in securities finance

January 16, 2020

Derivatives, Pro-cyclicality, Regulatory

ESRB, Margin, OTC derivatives, SA-CCR, securities finance, topstory

The European Systemic Risk Board published last week an innocuously titled document called “Mitigating the procyclicality of margins and haircuts in derivatives markets and securities financing transactions“. The early pages,…

We size the global collateral markets at $19.8 trillion (Premium)

January 7, 2020

CCP, Collateral Management, Derivatives, Repo, Securities Lending

collateral, OTC derivatives, Repo, Securities Lending, topstory

Finadium conducted a market sizing exercise of the global collateral markets, including a diversity of collateral product types held by private sector market participants. Here’s what we found. Continue reading

US adoption of SA-CCR means easing for derivatives clearers and incremental liquidity for big banks

November 21, 2019

Basel III, Derivatives, Federal Reserve, Regulatory, US

Current Exposure Method, SA-CCR, topstory, US

Collateral Management, Derivatives, Tri-Party Repo

You could hear the collective sigh of relief: at last US regulators have issued final rules for adopting the Standardized Approach for measuring counterparty credit risk (SA-CCR). Here’s a review…

The representative model: a key UMR solution to support sell-side pledging to the buy-side

November 11, 2019

Olivier Grimonpont

Euroclear, Representative Model, topstory, triparty, UMR

The introduction of Uncleared Margin Rules (UMR) for Phase 5 and 6 firms presents a new challenge to the financial services market: how to meet the legal, collateral and on-boarding…

SOFR linked paper issuance had a good June but questions remain on curves and pricing

July 30, 2019

CCP, Corporate Bonds, Derivatives, Investments, LIBOR, SOFR

ARRC, CME, SOFR, topstory

SOFR linked issuance is starting to pick up. June data, compiled by the CME and published in the June/July 2019 ARRC newsletter, showed just over a cumulative $123 billions of paper…

LIBOR to SOFR: what will make the swaps market transition?

July 16, 2019

Derivatives, Federal Reserve, LIBOR, Regulatory, Repo, SOFR

Alternative Reference Rates Committee, ARRC, interest rate benchmarks, LIBOR, SOFR, topstory

The SOFR swaps data isn’t pretty. In the week ending July 5, 2019, as per the ISDA SwapsInfo data, a notional of $9.2 billion in SOFR swaps and $0.1 billion…

SGX launches Total Return Futures: why Asia, why now and what’s next (Premium)

June 26, 2019

Derivatives, Total Return Futures

Asia, balance sheet trends, SGX, Singapore Exchange, topstory, Total Return Futures, Total Return Swaps

Singapore Exchange is first to launch a Total Return Futures product in Asia, following in the footsteps of CME in the US and Eurex in Europe. It’s based on the…

Is there any value in uncleared margin rules for phase 5 market participants?

June 10, 2019

Collateral Management, Derivatives, IOSCO, Regulatory

Basel Committee, IOSCO, Phase 5, topstory, UMR, uncleared margin rules

1

Uncleared margin rules (UMR) for phase 4 and 5 market participants are coming, and service and infrastructure are rolling out a host of solutions to help buy-side firms be prepared.…

Finadium Big Ideas Quarterly Q2 2019 now online

May 7, 2019

Custodians, Derivatives, Repo

Custodians, Data, market data, topstory, Total Return Futures

Our quarterly presentation on research, news and events. Finadium Securities Finance, Collateral and Derivatives subscription clients can log in and download the presentation here. This edition covers: Reports Total Return…

Finadium: Total Return Futures, Total Return Swaps and the Repo Market

April 24, 2019

CCP, Derivatives, Repo, Total Return Futures, Total Return Swaps

Finadium, Repo, topstory, Total Return Futures, Total Return Swaps

Total Return Futures (TRF) are emerging as a competitive product to repo and Total Return Swaps, as reported by Delta One trading desks and witnessed at exchanges and CCPs that…

Three ways to read the ENSO Data Insights launch (Premium)

April 17, 2019

Big Data, Derivatives, Regulatory, Securities Lending, Technology

CME, Enso, securities finance data, topstory

ENSO, now a division of CME Group, announced yesterday a new securities finance data product based on hedge fund collected rates. This could be a significant new entrant in the…

Three ways to jump-start securities finance volumes (Premium)

April 10, 2019

CCP, Derivatives, Securities Lending

CCPs, securities finance, topstory, Total Return Futures, Total Return Swaps

Securities finance volumes are in the doldrums after a robust Q1-Q3 2018, leaving some market participants wondering when revenues will return. Solutions are around the corner however, and can reasonably…

Maybe term SOFR based on repo rates doesn’t really matter

March 27, 2019

Derivatives, Interest rates, Repo, SOFR

Federal Reserve, futures, SOFR, topstory

An important part of the Alternative Reference Rates Committee’s (ARRC) work on the adoption of the Secured Overnight Financing Rate (SOFR) has been the creation of a term SOFR. Repo…

Five predictions for securities lending for 2019 (Premium)

January 14, 2019

CCP, Derivatives, Securities Lending

CCPs, Securities Lending, SFTR, topstory, Total Return Futures, Total Return Swaps

2018 was a good year for securities lending both financially and in the evolution of the business. 2019 promises to offer more interesting times. We offer our predictions for market…

Panelists: options products will get easier to understand but process complexity will remain

December 19, 2018

Derivatives

Black-Scholes-Merton, derivatives, derivatives clearing, Derivatives contracts, options, Options Clearing Corporation, risk management, topstory

The future of options is going to reflect demands for the financial industry to pivot towards neutralizing moral hazard in a post-financial crisis world, said panelists at a conference reviewing…

The buzz on Total Return Futures (Premium)

December 13, 2018

CCP, Derivatives, Total Return Futures, Total Return Swaps

CCPs, CME, Eurex, Euronext, securities finance, topstory, Total Return Futures, Total Return Swaps

The markets are starting to talk more about Total Return Futures (TRF) as a realistic alternative to Total Return Swaps (TRS), which themselves are competition for securities finance products. TRFs…

Why it’s time to stop quoting 30 year LIBOR (Premium)

November 27, 2018

Derivatives, Interest rates, LIBOR, SOFR, SONIA

LIBOR, SOFR, SONIA, topstory

It’s hard to take LIBOR seriously anymore in its current formulation. We analyzed some recent data and find a lack of credibility in overnight LIBOR rates compared to the Secured…

Several blows this week to London as a financial center post-Brexit (Premium)

October 11, 2018

CCP, Derivatives, Europe, Risk Management

back-to-back, Brexit, ECB, FT, ISDA, London, topstory

The odds for London thriving as a financial center post-Brexit got worse this week. Here’s what happened and where things seem to be going. Continue reading

Introducing the Semantic Blockchain in Capital Markets

October 4, 2018

Narasimha Kodihalli

Big Data, Blockchain, Derivatives, Technology

CDM, Common Domain Model, ISDA, OpenRisk, OpenRisk Technologies, OTC derivatives, semantic blockchain, topstory

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, 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

CCP, 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

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, 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

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, CCP, 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

Bank of England, CCP, 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