Thursday news roundup: who wins in 2020; ring-fencing; T+2

A roundup of news and reports we haven’t otherwise gotten to covering, including a report from SWIFT and Oliver Wyman on who wins in the new capital markets environment, the Bank of England’s new proposal on bank ring-fencing, and a primer on T+2. As usual, we offer content, links and commentary.

A report from SWIFT and Oliver Wyman, “The Capital Markets Industry: The Times They Are A-Changin’,” covers a lot of old ground but then gets to something really interesting: a mapping of Oliver Wyman’s projections of who wins in the new capital markets industry in 2020 (page 23). The chart isn’t an easy read, but spend a minute with it and OW is saying that the sell-side is moving into securities services, that Exchanges and CSDs are moving into post-trade data and analytics, and custodians are moving into execution. Our take is that this is a classic case of “whose client is whose”: value chains are merging and overlapping with uncertain business model consequences. The chart of page 25 takes this a step further and shows OW’s views on which types of firms are actually ready for expansion and which need work.

The Bank of England has released a consultation paper, “The implementation of ring-fencing: consultation on legal structure, governance and the continuity of services and facilities“. The paper presents some details on the legal and governance issues related to ring-fencing. Box 2 on page 8 lays out the ground rules, including “ensuring as far as reasonably practicable that the [ring-fenced body] would be able to continue to carry on core activities in the event of the insolvency of one or more other members of its group.” That’s really the point, isn’t it? This is good reading for anyone interested in the ring-fencing debate and probable regulations.

For readers not yet up to speed on European T+2 settlement, we recommend that you get there. It’s not as industry-shaking s that other T (T2S), but its still important. One helpful document is HSBC’s T+2 update website. T+2 is driven by a desire to harmonize settlement cycles across the EU. Why T+2? According to HSBC, “In the vast majority of European markets, the settlement period for securities is currently the transaction date plus three business days, often referred to as T+3. The move to T+2 and a shorter settlement cycle would mitigate counterparty risk for all industry participants. The European Commission set up the Harmonisation of Settlement Cycles Working Group in 2009. The group decided that T+1 would not work due to the high use of paper and low levels of straight-through processing in the industry.The group therefore recommended T+2, which would harmonise with foreign exchange settlement periods.” This will apply for all cleared products as well as their listed and unlisted derivatives. Check out the T+2 Impact tab for what this all means. We note that for liquidity and funding managers, there is now one day less to get your house in order. For more on T+2, also see ICMA’s quarterly report from Q4 2014, page 27.

Related Posts

Previous Post
Fed's Potter outlines how they will raise rates….using higher IOER as a magnet. We think RRP is a better tool.
Next Post
IMF: Risk Taking, Liquidity, and Shadow Banking

Fill out this field
Fill out this field
Please enter a valid email address.


Reset password

Create an account