Latest Blog Posts

Swaps regulation arrives – with a bang and a whimper

Mark Brennan, Fidessa

Oct 02, 2013
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The swaps industry has for some time been fixated on October 2nd, the final date for compliance with SEF rules. But really the key date for market participants is when MAT (the “made available to trade” rule) kicks in and that, according to the industry consensus, is not likely to be before February 2014. With many of the 19 new SEFs only submitting their applications this past month, the drama surrounding the birth of this new market structure continues to play out. Going forward, SEFs will ‘list’ their contracts and, subject to CFTC approval, trades on MAT swaps that fall under the “Required Transactions” classification – that’s most vanilla IRSs and some CDS indices – must transact on SEFs, representing the final decisive break with the bi-lateral past. read more

Technology is the Only Way to Meet Compliance Challenges Head On

David J Csiki, INDATA

Oct 02, 2013
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Interesting industry press this week based on the premise that boutique investment managers could potentially “lose out” against their larger rivals due to the escalation of compliance costs.  The main culprit cited for increased compliance costs is Dodd-Frank, but other regulations, such the Alternative Investment Fund Managers Directive, anti-money laundering regulations, as well as local regulations, are also cause for concern. The article noted that many boutique managers are currently operating on a manual basis with regards to the technology used for compliance, the primary tech tools consisting of Excel spreadsheets. read more

Which are the new metrics for intra-day liquidity?

Fleming Europe

Sep 30, 2013
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Earlier this year, the Basel Committee for Banking Supervision published the final document on supervisory monitoring tools for intra-day liquidity management. Complementing the Basel Committee's overall liquidity risk management framework, the Intra-day Liquidity Document sets forth a new set of metrics. The benefactors of these tools will be the payment and settlement system oversight authorities and national supervisors, who will be able to monitor banks' intra-day liquidity risk and their ability to meet settlement and payment obligations. read more

EMIR timeline push-backs: blessing or curse?

Henner Brüner, Capco

Sep 27, 2013
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The European Securities and Markets Authority (ESMA) has done it again. They quietly published a revised European Market Infrastructure Regulation (EMIR) timeline which postpones commencement of Trade Repository (TR) reporting until February 2014. This is no surprise as the recent third roundof their Questions & Answers (Q&A) still left uncertainty among market participants. There is no doubt that the regulation comes at a significant cost and requires wide-ranging operational enhancements to ensure efficiency. read more

Securities Lending: Value or Volume?

Karl Loomes, SunGard

Sep 26, 2013
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It has been a widely discussed trend in the post-crisis securities lending industry hat beneficial owners have been shifting their focus significantly away from the traditional, high-volume lending of general collateral (GC) securities and moving toward high-value intrinsic lending, where the borrowing of high-cost specials takes priority. But if we take a step back,does this pattern actually manifest itself across all facets of the industry, across every asset class, every region? Exactly what does the makeup of intrinsic value lending look like today, and what are the potential consequences for market participants? One key point to note when considering this growing trend toward intrinsic value lending is that despite efforts by many participants to shift this focus, through methods such as requiring minimum lending spreads or limiting cash-collateral reinvestment guidelines, the data shows that in terms of the volume of securities on loan, the pattern has actually seen little change in five years: GC securities still by far represent the highest number of securities on loan. read more

Looking through the CFTC’s prism

Mark Brennan, Fidessa

Sep 25, 2013
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The CFTC’s recent Concept Release on Risk Controls and System Safeguards for Automated Trading Environments represents a watershed moment for US derivatives markets, setting the stage for a new regulatory approach to electronic trading. The CFTC’s role and powers have already been greatly enhanced, post-Dodd-Frank, through a combination of the new market abuse powers, the “command and control” approach to risk embodied in Regulation 1.73 and the Commission’s guidance on disruptive trading. read more

THE NEED FOR BETTER PRE-TRADE CONTROLS

David Morgan, SunGard

Sep 24, 2013
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Regulators and exchanges continue to scratch their heads over how to protect financial markets from the dangers that are inherent in automated trading. The potential exposure to market distortions and large trading losses is always present where an automated engine is in use—no software is guaranteed perfect, and errors can have alarming effects. The higher the performance level of the automated engine, the greater is the potential order sending rate, and with it, the risk. In theory, major trading loss incidents should be impossible in the U. read more

How much luck do you need to succeed in stress-tests?

Fleming Europe

Sep 24, 2013
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The history of European stress-testing is an interesting one. First were the stress exercises of 2010 and 2011 which were not perceived very well. In 2011, a major bank even passed and then ran into deep trouble, being unable to raise needed cash on financial markets, only three months after the results were published.    Only shortly before they were scheduled to take place, the planned 2013 stress-tests were postponed to 2014.To make things even more interesting, in August 2013 the International Monetary Fund published a working paper called Credibility and Crisis Stress Testing (download here), which noted, that luck could be also considered as one of the key elements relevant to the results of a stress exercise. read more