News and Notes

Basel Committee, Benchmarks, FSB, LIBOR

Continued reliance of financial markets on LIBOR poses clear risks to global financial stability. Transition away from LIBOR by end-2021 requires significant commitment and sustained effort from both financial and…

ISLA writes ESMA and NCAs with technical concerns on SFTR Phase 1 data submission

July 10, 2020

ISLA, SFTR

A few days from now, many ISLA member firms will begin submitting SFT data to their preferred Trade Repositories, as directed under the Securities Financing Transactions Regulation (SFTR). The preparation…

Get the weekly SFM update – our July 10 newsletter is online

July 10, 2020

Top Stories: DTCC’s Project ION: the argument for blockchain’s benefit to brokers and the buy-side (Premium); Fintech scandals under scrutiny as calls for regulatory intervention grow (Premium); Does the world…

ESMA issues statement of coordination on external support of money market funds

July 9, 2020

ESMA, MMFs, money market funds

MMFs may enter into transactions with third parties, including affiliated or related parties provided the requirements of Article 35 of the MMF Regulation are met. For that purpose, it is…

ESMA consults on guidelines on calculation of positions under SFTR

July 9, 2020

ESMA, SFTR

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has launched a consultation on draft Guidelines on the calculation of positions by Trade Repositories (TRs) under the…

European Investment Bank joins LCH SA as first supranational clearing member

July 9, 2020

European Investment Bank, LCH, RepoClear

European Investment Bank live accessing €GCPlus at LCH RepoClear First supranational institution to become a clearing member of LCH SA LCH, a leading global clearing house, today announced that the…

Risk: Mind the tax when hedging TRS

July 9, 2020

risk, Total Return Swaps

Total return swaps (TRS) rarely appear in the pages of Cutting Edge. This is partly because they do not require complex pricing models. However, their valuation is still affected by…

CrossBorder Capital: China’s support for US dollar can no longer be relied upon

July 8, 2020

China, CrossBorder Capital, dollar

When things cannot go on forever, they stop. And so it is with China’s support of the US dollar. Foreigners sold more than $500bn of US government bonds during the second quarter, and…

ARRC releases guide for moving internal systems and processes away from LIBOR

July 8, 2020

alternatives to LIBOR, ARRC

The Alternative Reference Rates Committee (ARRC) released the “Internal Systems and Processes: Transition Aid for SOFR Adoption” to support market participants transitioning to the Secured Overnight Financing Rate (SOFR), the…

UK Competition and Markets Authority raises concerns on ION-Broadway deal

July 8, 2020

Broadway, Ion, UK Competition and Markets Authority

The CMA has decided, on the information currently available to it, that it is or may be the case that this merger has resulted or may be expected to result…

ISDA documents depth of customization for non-cleared swaps

July 8, 2020

ISDA, non-cleared swaps

ISDA: Interest Rate Swaps: Cleared and Customized As policymakers in emerging and frontier markets consider the regulatory framework for financial markets in their jurisdictions, the need for customized risk management…

OCC Implements Phase III of Financial Safeguards Framework

July 8, 2020

clearing fund, Cover Two, OCC, SIFMU

Enhancing its resiliency as a Systemically Important Financial Market Utility (SIFMU), OCC, the world’s largest equity derivatives clearing organization, today announced that the U.S. Securities and Exchange Commission (SEC) approved…

Arthur Cox: Is AIFMD II on the way?

July 8, 2020

The European Commission has published its report on the operation of the Alternative Investment Fund Managers Directive (EU/2011/61) (“AIFMD”) and is expected to issue a consultation on proposed amendments to…

TriOptima Extends Collaboration with DTCC to Meet Client Securities Financing Transactions Reconciliation Needs

July 8, 2020

DTCC, SFTR, TriOptima

TriOptima, a leading infrastructure service that helps to lower costs and to mitigate risk in OTC derivatives markets, has extended data connectivity between The Depository Trust & Clearing Corporation (DTCC)…

Phil Morgan named CEO of Pirum Systems

July 7, 2020

Pirum Systems, the leading provider of post-trade market infrastructure technology for the global securities finance industry, has promoted Phil Morgan to be chief executive effective 10 August. Phil joined Pirum…

Clearstream and LCH EquityClear collaborate on new post-trade connection

July 7, 2020

Clearstream, LCH, settlement

LCH Ltd-cleared equities contracts to be eligible for settlement via Clearstream Global depository receipts and exchange-traded products in scope Clearstream Banking and LCH have agreed to make LCH-cleared equities contracts…

Tradeweb’s repo ADV up 11.9% YoY to $238.6bn in June

July 6, 2020

electronic repo, Money Markets, Tradeweb

Tradeweb just reported that its average daily volume (ADV) in June was $780.9 billion, a decrease of 8.9% year over year (YoY). For the second quarter of 2020, ADV was…

ISLA Publishes CSDR Mandatory Buy-in & Cash Penalties Regimes FAQs

July 6, 2020

CSDR, ISLA

ISLA is pleased to announce the publication of the CSDR Mandatory Buy-in & Cash Penalties Regimes FAQs. Produced in association with Clifford Chance, the FAQs explain the legislative background and…

Get the weekly SFM update – our July 3 newsletter is online

July 3, 2020

Top Stories: Singapore’s Variable Capital Company plan is a tax play worth watching (Premium); ESG in secfinance: how Natixis is navigating sustainable investment (Premium); Client Webinar July 15: Revenues and…

Global custodians piling into DTCC’s Exception Manager ahead of CSDR

July 2, 2020

CSDR, Custodians, DTCC

The Depository Trust & Clearing Corporation (DTCC) announced that its Exception Manager global custodian community has grown to a total of 11, including BNY Mellon, Brown Brothers Harriman, Caceis, CIBC…

DataLend: global seclending revenue down to $3.9bn in H1 2020, Americas buck downtrend

July 2, 2020

DataLend, revenues, Securities Lending

The global securities finance industry generated $3.89 billion in revenue for lenders in the first six months of 2020, according to DataLend, the market data division of fintech EquiLend. The…

BIS annual report reflects on 90-year history, pandemic present, and future innovation

July 1, 2020

annual report, BIS, Central Banks

Recent events have underscored how rigorous analysis, enriched by the variety of international experiences, can help central banks have better informed exchanges of views and learn from each other’s experience.…

FSB statement on the impact of COVID-19 on global benchmark reform

July 1, 2020

alternative benchmarks, benchmark reform, FSB

The Financial Stability Board (FSB) has discussed the impact of COVID-19 on global benchmark transition. The FSB’s Official Sector Steering Group (OSSG) is monitoring the developments closely and recognizes that…

OCC securities lending CCP activity increases 16% in June 2020 year over year

July 1, 2020

OCC, Securities Lending CCPs

The average daily loan value at OCC in June 2020 was $76,216,532,318.42, an 8.19 percent decrease compared to June 2019. Securities lending CCP activity increased by 16.44 percent in new…

Cboe completes EuroCCP acquisition, plans European derivatives market in H1 2021

July 1, 2020

acquisitions, CBOE, derivatives, EuroCCP

Cboe Global Markets announced it has completed its acquisition of pan-European clearinghouse EuroCCP. The acquisition paves the way for the planned launch of Cboe Europe Derivatives, a new Amsterdam-based futures…

SEC Charges BNP Paribas with Violations of Regulation Sho

June 30, 2020

BNPP, Reg SHO, sec

The Securities and Exchange Commission today announced settled charges against BNP Paribas Securities Corp. (f/k/a BNP Paribas Prime Brokerage Inc.), a New York-based broker-dealer, for loaning securities to a customer…

Reuters: Bank of Korea plans to provide dollars to financial firms via repo operations

June 30, 2020

Bank of Korea, Repo, South Korea

South Korea’s central bank said on Tuesday it plans to provide dollar funds to local financial firms via repurchase agreements to stabilise the foreign exchange market if volatility rises due…

AcadiaSoft and OpenGamma team up for UMR compliance

June 30, 2020

AcadiaSoft, OpenGamma, UMR

AcadiaSoft announced a partnership with derivatives analytics firm OpenGamma to simplify the workflow for compliance of Phases 5 and 6 of the Uncleared Margin Rules (UMR). The partnership will integrate…

Fed blog: banks again taking advantage of Leverage Ratio arbitrage

June 30, 2020

Federal Reserve, Leverage Ratio, Liberty Street Economics

Leverage limits as a form of capital regulation have a well-known, potential bug: If banks can’t lever returns as desired, they can boost returns on equity by shifting toward riskier,…

ISDA derivatives survey: 96% reported declines in liquidity before central bank intervention

June 30, 2020

derivatives, Greenwich Associates, ISDA

ISDA has teamed up with Greenwich Associates to conduct a survey that explores the impact of the coronavirus pandemic on derivatives market liquidity. The survey investigates the causes of the…

WSJ: Money-Market Shifts Are Bad News for Profit-Starved Global Banks

June 30, 2020

fidelity, Money Markets, WSJ

Last week, Fidelity Investments said it would close two institutional prime money-market funds with a total of around $14 billion in net assets. That’s an ominous portent for some non-U.S.…

Get the weekly SFM update – our June 26 newsletter is online

June 26, 2020

Top Stories: Working through the practicalities of the UK decision to cancel CSDR’s settlement discipline regime (Premium); SFTR readiness: COVID crisis boosts electronic trading, but data pipes need work; We…

Fed releases stress test results, coronavirus sensitivity analyses, halts buybacks and caps dividends

June 25, 2020

coronavirus, Federal Reserve, stress tests

The Federal Reserve Board on Thursday released the results of its stress tests for 2020 and additional sensitivity analyses that the Board conducted in light of the coronavirus event. “The…

US regulators finalize amendments to margin rules for inter-affiliate swaps and LIBOR legacy swaps

June 25, 2020

collateral management, inter-affiliate swaps, LIBOR, Margin, Swaps, US

Five federal agencies have finalized changes to their swap margin rule to facilitate the implementation of prudent risk management strategies at banks and other entities with significant swap activities. Under…

US regulators modify Volcker Rule to allow some covered fund investments

June 25, 2020

covered funds, hedge funds, private equity, US regulators, Volcker Rule

Five federal regulatory agencies today finalized a rule modifying the Volcker rule’s prohibition on banking entities investing in or sponsoring hedge funds or private equity funds—known as covered funds. The…

CPMI and IOSCO issue paper on CCP default management auctions with three categories for follow up

June 25, 2020

auctions, CCPs, CPMI, defaults, IOSCO

CPMI and IOSCO are today publishing an updated document entitled “Central counterparty default management auctions – Issues for consideration”. The purpose of this document is to provide a more complete…

EU authorities reach political agreement on CCP recovery and resolution

June 25, 2020

CCPs, Europe

The EU is stepping up its rules to make clearing houses safer and address systemic risk that could arise from their potential failure. The Presidency of the Council and the…

New Eurosystem repo facility to provide euro liquidity to non-euro area central banks

June 25, 2020

ECB, Repo

Eurosystem repo facility for central banks (EUREP) introduced as precautionary backstop to address pandemic-related euro liquidity needs outside euro area EUREP to allow broad set of central banks to borrow…

DTCC’S SFTR Community Jumps to 250 as Firms Ready for Forthcoming Regulation

June 24, 2020

DTCC, SFTR

With the deadline for the European Securities Financing Transactions Regulation (SFTR) quickly approaching, The Depository Trust & Clearing Corporation (DTCC), the premier post-trade infrastructure for the global financial services industry,…

ECB postpones T2-T2S consolidation project

June 24, 2020

ECB, T2S

Following requests by the European financial community, the Market Infrastructure Board has reviewed the timeline of the T2-T2S consolidation project and has concluded that postponing its go-live by one year,…

SIX Launches a New Triparty Agent to Enhance Collateral and Liquidity Management

June 24, 2020

collateral, collateral management, SIX, tri-party

The new comprehensive solution Triparty Agent from the Swiss Stock Exchange incorporating the Collateral Cockpit™, streamlines front and back office processes to provide seamless and effective collateral management for its…

American Banker: Two US Senators ask regulators to undo change to Supplementary Leverage Ratio

June 23, 2020

Supplementary Leverage Ratio, US

Warren and Brown urge regulators to undo recent capital change Two Democratic senators are calling on regulators to reverse their recent decision to ease a key capital requirement for banks.…

Cancelled: SFTR for UK’s NFCs and CSDR settlement discipline, as Brexit plans start appearing

June 23, 2020

Brexit, HM Treasury, SFTR

The UK will not be taking action to incorporate into UK law the reporting obligation of the EU’s Securities Financing Transactions Regulation for non-financial counterparties (NFCs), which is due to…

SmartStream launches API for firms requiring fast access to reference data for meeting the SFTR deadline

June 23, 2020

APIs, data management, SFTR, SmartStream

SmartStream Technologies extended its Reference Data Utility (RDU) Securities Financing Transactions Regulation (SFTR) service to include an API for firms requiring fast access to the technology and data needed to…

ISLA publishes EU roadmap and COVID-19 regulatory impacts

June 23, 2020

coronavirus, European Commission, ISLA, Regulation

ISLA launched two new landing pages to the ISLA website; the ‘EU Expected Developments Roadmap’, and the ‘COVID-19 Impacts on EC Priorities’ table. The focus on financial services by global…

Fed blog: Japan’s Experience with Yield Curve Control

June 22, 2020

Japan, Liberty Street Economics, yield curve control

In 2016, the Bank of Japan augmented its large-scale asset purchase program with a commitment to keeping the yield on ten-year government bonds at “around zero percent.” Though this policy…

Central banks to reduce frequency of US dollar liquidity operations

June 19, 2020

Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Swiss National Bank, US dollar liquidity

In view of the improvements in US dollar funding conditions and the low demand at recent 7-day maturity US dollar liquidity-providing operations, the Bank of England, the Bank of Japan,…

Get the weekly SFM update – our June 19 newsletter is online

June 19, 2020

Top Stories: Will Basel IV’s complexity mean the end of internal market models? (Premium); Broadway Technology’s CTO on outsourcing repo tech (Premium); Finadium: The Impact of COVID-19 on Collateral Management;…

Fed SCOOS: dealers have tightened prices and nonprice terms for SFTs and OTC derivatives across all counterparties

June 18, 2020

Federal Reserve, OTC derivatives, SCOOS, SFTs