Its been a big week in securities finance news with many notable points that we haven’t gotten a chance to cover yet. When stories like Fed Governor Tarullo talking about liquidity regulation and the launch of the BNYM/CME tri-party repo indices are out there, other news can get crowded out. Today’s news roundup brings coverage on corporate bond liquidity, the leverage ratio, CCP stress tests, asset managers on capital requirements, and a new industry partnership of note.
Corporate bond liquidity: the ICMA published yesterday “The current state and future evolution of the European investment grade corporate bond secondary market: perspectives from the market.” We see one of the more important points as “As a result of more active capital allocation within the banks, there is a shift to holding smaller quantities of bonds in inventory, but seeking to increase turnover through smarter, more active trading on an agency basis.” Corporate bond liquidity will be a recurring conversation through 2015.
The rationale for the Leverage Ratio: the Bank of England’s Martin Taylor spoke last week about why the Leverage Ratio is necessary. As he notes, ““We’re trying to give ourselves more ways of reading the financial weather. Come to think of it, wasn’t it always very strange to believe that all that is known about the risk characteristics of an immensely complex bank could be boiled down to a single ratio?” His speech from November 20 2014 is available here.
CCP stress tests: coming soon to a theater near you. The Bank of England again comments on why CCP stress tests are important and what they should look like. The BoE’s David Bailey gave a speech entitled “The Bank of England’s perspective on CCP risk management, recovery and resolution arrangements.” the conclusions of his talk were to be expected: “CCPs must therefore put in place well-considered and appropriate recovery arrangements and resolution authorities should be provided with a full suite of tools that will deal with the unique risks posed by CCPs.” But the details of how this happens are awfully important.
UK asset managers and capital requirements: a new survey by KPMG found the expected. According to the study, “When it came to the FCA’s Client Money and Asset Protection rules (CASS), the report found that some firms are worryingly underestimating the impact that the recent FCA’s CASS policy statement, published in June 2014, will have on their businesses as they work towards full compliance with the amended rules by 1 June 2015.” Yup.
Industry partnership: we are pleased to note that our colleagues at InteDelta have partnered with Deriv Asia to offer a broader and deeper global service. Finadium also participates in this partnership arrangement. As the press release noted, the Deriv Asia join up “follows on from InteDelta’s recent partnership announcement with US research consultancy Finadium in the North American market. Through linking up the US, Asian and European markets, InteDelta is now able to fully service the major global financial markets with its consulting offering.” We have already seen client interest in our joint capabilities.