News and Notes

Federal Reserve, Liberty Street Economics

The Value of Opacity in a Banking Crisis – Liberty Street Economics Haelim Anderson and Adam Copeland During moments of heightened economic uncertainty, authorities often need to decide on how…

Opalesque: Impact of the Fed’s programs on credit markets

April 2, 2020

Credit Markets, Federal Reserve, Finadium, Opalesque

Interview with Josh Galper, Managing Principal, Finadium The Federal Reserve said last week it would launch several several programs to “support households, businesses, and the U.S. economy overall in this…

BIS: Leverage and margin spirals in fixed income markets during the Covid-19 crisis

April 2, 2020

BIS, Leverage, Margin, US Treasuries

Key takeaways For a two-week period in mid-March 2020, government bond markets experienced uncharacteristic turbulence, sometimes selling off sharply in risk-off episodes when they would normally attract safe haven flows. Evidence in…

OCC seclending CCP activity up 2% in March 2020 year over year

April 1, 2020

CCP, OCC, Securities Lending

The average daily loan value at OCC in March 2020 was $76,174,841,455 a 2.03 percent increase compared to March 2019. Securities lending CCP activity increased by 4.04 percent in new…

Hazeltree and HedgeLegal collaborate on comprehensive UMR guide

April 1, 2020

Hazeltree, the leading provider of integrated treasury management and portfolio finance solutions, and HedgeLegal, the emerging leader in trading document negotiation for the buy-side, published “Clearing up the Uncleared Margin…

BIS: Dollar funding costs during the Covid-19 crisis through the lens of the FX swap market

April 1, 2020

BIS, dollar funding, FX Swaps

Key takeaways Since the start of the Covid-19 pandemic, indicators of dollar funding costs in foreign exchange markets have risen sharply, reflecting both demand and supply factors. The demand for…

DataLend launches daily securities finance market overview

March 31, 2020

DataLend, securities finance, Securities Lending

Equities data for March 30, 2020 For more DataLend updates, visit https://datalend.com/datalend-daily-market-overview/

Fed launches temporary repo facility for foreign monetary authorities’ US Treasury holdings

March 31, 2020

Federal Reserve, Repo, US Treasuries

The Federal Reserve on Tuesday announced the establishment of a temporary repurchase agreement facility for foreign and international monetary authorities (FIMA Repo Facility) to help support the smooth functioning of…

FT: Regulators across Europe clash over bans on short selling

March 31, 2020

Europe, FT, Short selling

France, Spain and Italy issued one-day prohibitions against betting on falling share prices for selected companies — and then longer bans of between one and three months, applied to all stocks…

FT: Wobbles in collateralised loan obligations pose problems for lenders

March 31, 2020

CLOs, FT

Lenders on both sides of the Atlantic have upwards of 100 open credit lines to vehicles known as collateralised loan obligations, which are among the biggest sources of funds for businesses…

SIFMA calls for regulatory relief from RegSHO, physical securities processing

March 30, 2020

back office, coronavirus, Regulation SHO, Securities and Exchange Commission, SIFMA

The Securities Industry and Financial Markets Association (SIFMA) and its member firms sent a letter to the Securities and Exchange Commission’s Division of Trading and Markets director, Brett Redfearn, asking…

Risk: Asia CCPs forced to hike margins rapidly during equities rout

March 30, 2020

Asia, CCPs

Asia’s largest clearing houses had to hike margins dramatically during the March coronavirus equities rout, forcing clearing members to meet large intraday margin top-up calls – and vindicating long-held concerns…

Alphacution: Parplus demise attributed to equity collateral, variance swaps and Ronin relationship

March 30, 2020

Alphacution, equity collateral, Parplus, Ronin, variance swaps

Parplus Impersonates LTCM, Drags Ronin Down The overlay – the “plus” in Parplus – is believed to have been variance swaps comprised of strips of short VIX options (at the…

Basel Committee postpones Basel III implementation

March 30, 2020

The Basel Committee’s oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed a set of measures to provide additional operational capacity for banks and…

FIS Astec shows European equity seclending volumes up 110% since Feb 1, US equities seclending up 16%

March 27, 2020

FIS, Securities Lending

The world is getting shorter: the last two months have seen asset borrowing volumes rise fast. European equity volume is up 110 percent since February 1, with US equities rising…

US regulators speed up adoption of SA-CCR, extend CECL

March 27, 2020

CECL, Federal Reserve, SA-CCR

The federal bank regulatory agencies today announced two actions to support the U.S. economy and allow banking organizations to continue lending to households and businesses: Allowing early adoption of a…

Standard Chartered creates new Financing and Securities Services unit

March 27, 2020

Standard Chartered announced today that it is combining Securities Services (currently within Transaction Banking) with Portfolio Risk Management in the Financial Markets business to form the new Financing and Securities…

ESMA launches consultation on EMIR REFIT trade reporting

March 27, 2020

EMIR Refit, ESMA, Trade repositories

This Consultation paper covers the technical standards on reporting requirements, procedures to reconcile and validate the data and access by the relevant authorities under EMIR REFIT. Additionally, ESMA proposes to…

21 industry associations ask regulators to delay Initial Margin phase-in timeline

March 27, 2020

In response to the COVID-19 pandemic, ISDA submitted a letter on behalf of 21 industry associations and their members requesting BCBS, IOSCO and global regulators to suspend the current timeline…

Bloomberg: Japan Repo Rates Hit Most Expensive on Record in Dollar Rush

March 26, 2020

Bank of Japan, Bloomberg, Japan, Repo

Rates in Japan’s repurchase market — where bond holders connect with investors looking to borrow them — hit a record Tuesday. The introduction of cheaper, more regular dollar-swap auctions has…

Bloomberg: J.P. Morgan’s equity derivatives team makes $1.5bn YTD

March 26, 2020

coronavirus, equity derivatives, J.P. Morgan

J.P. Morgan’s equity derivatives traders have generated roughly $1.5 billion in revenue so far this year, according to a person with knowledge of the situation who asked not to be…

Axios: US first major economy with non-policy driven negative bond yields

March 26, 2020

negative interest rates, US Treasuries

US Treasury yields on one-, two- and three-month maturities all turned negative as investors continued to favor short-term debt that functions like cash. “What you are seeing today is an…

ABN AMRO Clearing posts $200 million net loss on closing out Parplus Partners positions

March 26, 2020

As a result of the unprecedented volumes and volatility in financial markets following the outbreak of COVID 19, ABN AMRO Clearing will incur a USD 250 million pretax incidental loss…

Hazeltree reports hedge fund leverage down from 230% pre-crisis to under 200% in March 2020

March 26, 2020

HazelTree, hedge funds, Leverage

Are we living through another 2008 crisis? Is it a deeper crisis? How long will it last? Are you betting that the safeguards put in place to protect against global…

Banking Law: Fed Beats Narrow Bank Lawsuit

March 26, 2020

Federal Reserve, Narrow Bank

A New York federal judge on Wednesday threw out a lawsuit from a “narrow bank” startup that alleges federal regulators have unfairly blocked it from opening a business-critical account at…

ESMA clarifies position on SFTR backloading

March 26, 2020

ESMA, SFTR

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has issued a revised version of its 19 March Public Statement on coordinated supervisory actions on the application…

Bank of Japan announces additional measures to stabilize repo and securities lending markets

March 25, 2020

Bank of Japan, Repo, Securities Lending

The Bank of Japan released “Market Operations toward the End of March” and announced measures to maintain stability of the repo market on March 13. In addition, the Bank has…

Reuters: Fed hires BlackRock to help execute mortgage-backed securities purchases

March 25, 2020

Blackrock, Federal Reserve, mortgages

Over the past week, the central bank has released a volley of measures to boost liquidity in the financial markets and get cash into the hands of small businesses and…

CFTC’s Tarbert: derivatives markets acting as shock absorbers in volatility

March 24, 2020

CFTC, derivatives, volatility

CFTC chair Heath Tarbert made the following comments in a recent article published by the Wall Street Journal: “[F]ar from amplifying risk throughout the financial system, the derivatives markets have…

Bank of England launches Contingent Term Repo Facility

March 24, 2020

Bank of England, Repo

In response to financial market conditions the Bank of England is today activating the Contingent Term Repo Facility (CTRF) – a temporary enhancement to its sterling liquidity insurance facilities. This…

Agency REITs see margin stress in mortgage and repo markets

March 24, 2020

FT: The mortgage Reits entered the coronavirus crisis owning an estimated $500bn of bonds backed by property loans and have come under pressure because they use short-term borrowings to squeeze…

SEC issues temporary rules allowing mutual funds to borrow funds from affiliates and to make collateralized loans

March 24, 2020

coronavirus, mutual funds, sec

The current outbreak of coronavirus disease 2019 (COVID-19) has disrupted activities around the world. In light of the current situation, we are issuing this Order providing exemptions from certain requirements…

ESMA approves Austria’s short selling ban

March 24, 2020

Austria, ESMA, short selling ban

In particular, FMA notifies that the concerned measure bans any legal or natural person from entering into or increasing a short sale or a transaction other than a short sale…

ICMA Euro commercial paper (ECP) materials to be made available to the wider market

March 23, 2020

Bank of England, Commercial Paper, coronavirus, ICMA

Following the announcement of the Bank of England’s Covid Corporate Financing Facility (CCFF) and in the interest of supporting the overall market, the International Capital Market Association (ICMA) is making…

Basel Committee says use liquidity buffers and HQLA to support real economy, absorb losses

March 23, 2020

BIS, coronavirus, FSB, HQLA, liquidity buffers

The Basel III framework includes capital and liquidity buffers that are designed to be used in periods of stress. These include the capital conservation buffer and, by extension, the countercyclical…

Fed revises TLAC requirements for US banks

March 23, 2020

Federal Reserve, TLAC

In light of recent disruptions in economic conditions caused by the coronavirus disease 2019 (COVID-19) and current strains in U.S. financial markets, the Board is issuing an interim final rule…

Federal Reserve announces more extensive measures to support US markets

March 23, 2020

coronavirus, Federal Reserve

The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time. The coronavirus pandemic is causing…

The Desk: bond pricing battle shutters Nordic funds

March 23, 2020

coronavirus, corporate bond liquidity, Fixed Income, liquidity risk

Several Nordic fund managers have been shuttering fixed income funds, mainly in the corporate bond space, to allow them to get prices from banks for their holdings, as illiquidity bites.…

European Commission to activate suspension of EU budget rules

March 22, 2020

coronavirus, European Commission

The European Commission proposed the activation of the general escape clause of the Stability and Growth Pact (SGP) as part of its strategy to respond quickly, forcefully and in a…

Treasury Borrowing Advisory Committee wants Fed to expand purchases including MBS

March 22, 2020

Federal Reserve, Treasury Borrowing Advisory Committee

Reuters: Members of the Treasury Borrowing Advisory Committee believe the central bank will need to take further drastic action to get credit into the hands of small businesses and American…

FT: BNY Mellon steps in to support money market fund after outflows

March 21, 2020

BNYM Mellon, Dreyfus, money market funds

BNY Mellon stepped in to support one of its money market funds amid sharp outflows from parts of the sector this week, buying $1.2bn of the fund’s assets so it…

Ronin LLC fails, positions auctioned by CME

March 21, 2020

CME Group confirmed that, pursuant to its rules, CME Clearing auctioned off portfolios of Ronin, LLC. The auction process was completed this morning, March 20, 2020. Though Ronin is a…

Bloomberg: Before Fed Acted, Leverage Burned Hedge Funds in Treasury Trade

March 21, 2020

basis trade, Bloomberg, hedge funds, Leverage, Repo

When coronavirus panic kicked off unprecedented turmoil in Treasuries last week, hedge fund leverage was lurking. The firms use borrowed money from the repurchase market for the popular basis trade,…

UK approach to SFTR in line with ESMA – delay to July

March 20, 2020

Financial Conduct Authority, SFTR

The European Supervisory and Markets Authority (ESMA) has published a statement addressing the challenges firms are facing to meet their reporting requirements under the Securities Financing Transactions Regulation (SFTR) before…

Panetta: ECB could expand list of intermediaries for refinancing operations

March 20, 2020

coronavirus, ECB, Fabio Panetta

In an interview with Italian daily Corriere della Sera, Fabio Panetta, member of the Executive Board of the European Central Bank, answered questions on market conditions. Q: Can you explain…

bfinance: snapshot of liquid alternative strategies in stressed markets

March 20, 2020

bfinance, hedge funds, liquid alternatives

It’s now time for “liquid alternatives” to stand up and be counted. The last real opportunity for many hedge funds and liquid alternative strategies to demonstrate their diversification benefit was…

Six central banks increase frequency of dollar swap lines from weekly to daily

March 20, 2020

Bank of England, dollar swaps, Federal Reserve, Liquidity

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action…

Fed to provide liquidity for state and muni bonds

March 20, 2020

Federal Reserve, MMLF, munis

The Federal Reserve Board on Friday expanded its program of support for the flow of credit to the economy by taking steps to enhance the liquidity and functioning of crucial…

Bank of England actions to combat coronavirus downturn

March 20, 2020

Bank of England, Basel III, coronavirus