News

E.U. Could Go It Alone on Leverage Ratio, Says MEP

By Philip Alexander
June 8, 2016, Risk

An influential member of the European Parliament's economic and monetary affairs committee (ECON) insists the E.U. should be prepared to go it alone on the application of the leverage ratio, if the internationally agreed version can be shown to harm the provision of client clearing by banks. The industry has long warned that the inclusion of client margin in the calculation of leverage ratio exposures will make client clearing prohibitively expensive.

"It makes sense that the clearing mandate should not be harmed by banks' lack of ability to provide clearing for all clients. If it can be demonstrated that harm is being done to clearing, the E.U. could go its own way on the leverage ratio," said Kay Swinburne, who is ECON co-ordinator for the third-largest parliamentary group, the European Conservatives and Reformists.

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Top Regulator Sets Stage for Blockchain Debate

By Anna Irrera
June 2, 2016, Financial News

The use of distributed ledger technology in securities markets could raise competition issues and heighten cybersecurity and operational risks, according to Europe’s top financial watchdog.

In a discussion paper published on June 2, the European Securities Markets Authority recognized that the technology offered potential benefits to the region's securities markets, but noted that a number of key “shortcomings” must be addressed before those benefits can be reaped.

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Collateral Management: Clearing the Way to Greater Transparency

By Neil Dennis
May 17, 2016, FX-MM

In the banking sector alone, Standard Chartered, ING, UBS, and Santander are among the many European institutions that have recently reported the negative impact of regulatory costs on their full-year profits last year.

Banks have come under the most pressure, with attempts to ban proprietary trading, new capital ratio requirements, and stricter liquidity management and reporting mechanisms among the hurdles they have had to overcome in the years since the financial crisis.

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E.U.’s Hill Considers Reducing Reporting Obligations for Derivatives

By Francesco Guarascio
May 17, 2016, Reuters

The European Commission may reduce reporting requirements for derivatives trading in Europe, in an effort to cut costs for financial services, the financial services commissioner said on Tuesday.

After the collapse of Lehman Brothers in September 2008, which left regulators in the dark over who was on the other side of the bank’s derivatives trades, leaders of the Group of 20 economies agreed all derivatives trades must be reported.

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Swap Reporting Standards Due This Year

By Helen Bartholomew
May 14, 2016, IFR

The Financial Stability Board is preparing to publish best practice standards for a harmonized global swaps reporting regime before the end of this year, which should answer a long-running debate over who should report data and present guidelines for ensuring global regulators can access systemically important information.

A big divide exists between the CFTC’s single-sided reporting requirements, which apply to the majority of U.S. swaps, and dual-sided reporting under the European Markets Infrastructure Regulation.

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Experts Warn Over Looming European Clearing Deadline

By Alice Atwood
May 12, 2016, FOW

Experts have warned there is more to be done before European clearing mandates kick ­in over the coming months, with on­boarding clients the current focus.

"When thinking about readiness for the key May 21 requirement for category two firms to start front­loading under European Market Infrastructure Regulation (EMIR), it is a bit late for firms to be thinking about how to do this. They should now be ready for this crucial date," said one of the panelists.

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CCP Interoperability Drive Poses Margin Challenges

By Alexander Campbell
May 9, 2016, Risk

A European Union drive towards interoperability for derivatives central counterparties (CCPs) raises insurmountable problems for margin requirements, according to two researchers from the Federal Reserve Bank of Chicago.

In a paper that is forthcoming in the Journal of Financial Market Infrastructures, a Risk Journal, senior policy adviser John McPartland and researcher Rebecca Lewis argue there is no fair and equitable way to govern the posting of concentration margin between CCPs.

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ESMA Announces E.U.-Wide Stress Tests for CCPs

April 14, 2016, Automated Trader

ESMA is mandated to conduct stress tests of CCPs under the European Markets Infrastructure Regulation (EMIR). The stress test assesses the resilience and safety of the European CCP sector and aims to identify possible vulnerabilities.

Steven Maijoor, ESMA Chair, said: "CCPs offer significant benefits to the market and play a key role in making derivatives markets safer. CCPs are also highly interconnected - both with financial institutions and markets - and the increasing volumes cleared through CCPs make them even more important for the financial system. Therefore, it is essential to test the sufficiency of their resources, not only individually but also at an E.U.-wide level. These stress tests are a crucial supervisory tool to ensure the sector is safe and resilient to shocks."

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Best Execution: A Call to Action

By David Weisberger
April 5, 2016, 
The Trade

The continued push towards best execution across multiple asset classes has been gaining momentum and the role of best execution analysis has become quite clear.

The guidance provided by the European Securities and Markets Authority (ESMA), for example, introduces the concept of considering available liquidity in best execution, which is a major change from the previous regime of having a general policy.

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Questions Remain After Final E.U. Uncleared Margin Rules

By Samuel Wilkes
April 5, 2016, 
Risk

Final European rules on uncleared derivatives margin have accommodated some industry concerns, but outstanding questions will need to be resolved quickly if banks are to meet their first deadline in September. The treatment of jurisdictions with no legal opinion on the ability to net payments is top of that list of potential hurdles and banks are also fretting about the timeline for posting margin on cross-border trades.

"There are a number of positive elements in the rules compared with the previous proposals. We are happy with how they have developed; however, obviously the rules are very late," says Chris Dickens, head of regulatory analysis and design for global banking and markets at HSBC.

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Clearing Trade Body Proposes EMIR Changes

By Julie Aelbrecht
March 31, 2016, FOW

Europe's top clearing houses have proposed changes to the European regulation to enable firms to benefit from a new cost­cutting clearing service.

A trade body representing the main European clearing firms issued on Wednesday a paper which outlined some suggestions to improve the regulation for portfolio margining, a new service firms claim can dramatically cut the cost of clearing.

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Blockchain Tipped as Fix for Margin Segregation

By Steve Marlin
March 30, 2016, Risk

Blockchain technology could ease the operational complexities associated with individually segregated accounts (ISAs) for clearing and boost their popularity, a technologist at Barclays has claimed.

"We need to come up with an automated solution to help individual segregation, where you have a plethora of subaccounts, and potentially a shared ledger solution could help," said Lee Braine, a member of Barclays' chief technology office. "Currently, across the industry, there are a number of solutions, but there's no generic automated solution for that."

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Comment: Refining Reporting: Where Is ESMA Heading?

By Dheeraj Joshi and Ravi Jain
March 23, 2016, FOW

Since 2007, European Securities and Markets Association (ESMA) has implemented and/or proposed a host of regulations that will have a significant impact on firms’ reporting requirements. As evidenced by its growing list of regulations – from MiFID and EMIR through to MiFID II/MiFIR and the Securities Financing Transaction Regulation (SFTR) – ESMA plans to bring together all OTC derivatives, ETDs, and securities financing transactions into its purview as early as 2018.

The cost of achieving and maintaining compliance is increasing as firms invest in understanding the regulations, creating reporting mechanisms for trades and transactions, and implement systems and infrastructures to manage the process.

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Q&A: Regrouping for a Renewed MiFIR Compliance Effort

By Michael Shashoua
March 21, 2016, Waters Technology

Inside Reference Data gathers together leading data management professionals to discuss issues raised by the Markets in Financial Instruments Regulation.

Of the types of information necessary for MiFIR compliance—such as identifiers, instrument classification data and transaction reporting—what is proving most challenging to manage?

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ESMA to Work with South Korean Regulators on CCPs

March 22, 2016, Global Investor Magazine

E.U. securities watchdog ESMA has deepened ties with Korean officials on central counterparties (CCPs), the clearing houses standing between parties to a trade.

A statement on Tuesday said a memorandum of understanding had been signed with the South Korean Financial Services Commission (FSC) and the Financial Supervisory Service (FSS).

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Europe Will Open Gates to U.S. CCPs, Says Massad

By Peter Madigan
March 16, 2016, Risk

U.S. clearing houses should have "no problem" getting approval to operate in the European Union after the U.S. Commodity Futures Trading Commission (CFTC) unanimously approved a substituted compliance framework for European central counterparties (CCPs) that are dually registered with U.S. regulators, CFTC chairman Timothy Massad said today (March 16).

The substituted compliance determination satisfies the CFTC's obligations under its deal with the E.U., reached on February 10, regarding the cross-border supervision of CCPs. 

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Comment: The Past, Present, and Future of Asset Segregation

By Akber Datoo and Paul Watkins
March 10, 2016, 
Finance Magnates

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ESMA Publishes Final EMIR Draft RTS

By Julie Aelbrecht
March 9, 2016, FOW

The Joint Committee of the European Supervisory Authorities has published the final draft of the Regulatory Technical Standards, outlining the framework of the European Market Infrastructure Regulation.

The Regulatory Technical Standards (RTS) for the European Market Infrastructure Regulation (EMIR) aim to increase the safety of the over­the counter derivatives (OTC) markets in the European Union. The European Supervisory Authorities (ESAs) is made up of the European Banking Authority, the European Insurance and Occupational Pensions Authority and The European Securities and Markets Authority (ESMA)....

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ESMA Sounds Positive Note on Clearinghouse Safety

By James Rundle
March 3, 2016, Financial News

Europe's top markets regulator has said that rules governing how clearinghouses interact with each other are generally working well, but warned that the re-use of collateral may increase systemic risk if not managed correctly.

The European Securities and Markets Authority issued a final report on March 1 about systemic risk and cost implications related to how clearinghouses link with one another, a process known as interoperability.

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EC Approves Credit Derivatives Clearing

By James Rundle
March 2, 2016, Financial News

The European Commission has adopted long-awaited rules that will require certain kinds of index credit default swaps to be centrally cleared for the first time.

The changes will ensure that much of the over-the-counter market falls into line with a 2009 G20 mandate, which stipulated that all standardized OTC derivatives should be centrally cleared.

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