• 1271

    OPTIMIZING THE INVESTMENT PROCESS: leveraging IBOR for alpha generation

    The Investment Book of Record (IBOR) has traditionally focused on operations and accounting support to strengthen data utilization, optimize trade support analytics, increase regulatory reporting preparedness and tighten risk mitigation. But is this approach the most comprehensive and effective? In this article, Joshua Satten and David Depew examine the information that should form an IBOR to plug alpha leaks and improve the investment process at a time when profit margins are shrinking and regulatory reporting requirements are expanding. Investment is the key term that defines an IBOR. All data controlled and consumed is used with the intent of supporting the [...]
  • 1227

    SIMM: tackling the initial margin obligation in OTC derivatives

    Regulatory reforms following the financial crisis have tested banks’ ability to adapt and fundamentally changed business models. The Standard Initial Margin Model (SIMM) is another addition that could reshape many derivatives trading and risk management practices. In this article, Sapient Global Markets’ Thomas Schiebe and Sendi Cigura in partnership with Patrice Touraine and Matthieu Maurice of Global Market Solutions look at what it means for banks and how they must tackle a new wave of data and technology challenges. Following the introduction of mandatory clearing for standardized derivatives, regulators created measures to deal with non-centrally cleared and non-standardized derivatives. This [...]
  • 1139

    BENCHMARK REGULATION: are EU markets ready?

    Volatility has foiled financial markets since the subprime crisis exposed a variety of shortcomings, prompting regulators to intervene with more stringent requirements. The crisis revealed a significant issue when major banks in the United Kingdom were accused of manipulating the London Interbank Offered Rate (Libor), a key benchmark for financial deals worth $300 trillion.1 Following the Libor scandal, regulators have voiced their concern about the potential manipulation of Euro Interbank Offered Rate (Euribor), Hong Kong Interbank Offered Rate (Hibor) and other key interest rate benchmarks. The European Securities and Markets Authority (ESMA) has responded with a new Benchmark Regulation (BMR) [...]
  • 894

    MiFID II & MiFIR: reporting requirements and associated operational challenges

    While the key objectives of Markets in Financial Instruments Directive (MiFID) I were to bring greater standardization and improvements in collateralization and risk management, MiFID II seeks to enhance transparency and supervision to ensure methodical markets and harmonize reporting requirements across member states. In this article, Mahima Gupta and Shashin Mishra summarize the obligations MiFID II imposes upon investment firms and explore the associated impact and operational challenges, some of which can be effectively outsourced to a vendor system. Download the PDF MiFID I came into effect in 2007 to facilitate cross-border financial services within Europe, ensuring a competitive landscape [...]
  • 938

    BULK NOVATIONS: addressing the five key challenges

    With new, tighter regulations driving capital markets firms to fundamentally transform their business models, many have turned to bulk novations in response to the structural reorganization of their legal entities as their portfolios are repositioned. But several issues have emerged throughout the bulk novation lifecycle, leading to inefficient transfers and undesirable risk exposure. In this article, James Bakelmun, Nick Fry, Sarah McLellan and Nathan O’Reilly outline these challenges and explain what firms can do to migrate their portfolios more efficiently and mitigate their operational risk or potential reputational damage. Download the PDF In the financial markets, novations—the act of legally [...]
  • 924

    EMRR: a crucial component to successful risk management

    Exceptions, or processing failures due to erroneous data, are a daily occurrence for market participants as they fulfill their regulatory reporting obligations. However, as regulators seek more granular data for over-the-counter (OTC) derivatives trading activity, exceptions are becoming more frequent and more complex. That’s driving the need for exception management in regulatory reporting (EMRR), which is the process of identifying, investigating and resolving conflicts during data reporting transfers. In this article, Basu Bishal and Rohit Narula explain why EMRR should be a component of every trading firm’s risk management system and how effective implementation can minimize compliance costs while freeing [...]
  • 89

    HOUSING BUBBLE 2.0: ready for another housing market crash?

    A study of the current housing finance market reveals the multidimensional reaction to events from the last decade is still in play throughout the global financial system. New regulation and regulatory bodies, wholesale legislative changes, the formation and adoption of new risk-management frameworks, reduced securitizations by private-label banks and increased scrutiny by the press are just a few of the factors contrasting today’s mortgage market with the pre-crisis era. But are mortgage markets truly more stable now than they were before 2008? In this article, Hans Godfrey and Adi Ghosh discuss how the government and regulators, as well as the [...]
  • 218

    CALCULATING THE CLEARING THRESHOLD: challenges for non-financial counterparties in the european union

    While EMIR mandates clearing and reporting requirements on over-the-counter (OTC) derivatives for Financial Counterparties (FCs), it exempts Non-Financial Counterparties (NFCs) from parts of reporting and clearing requirements only until their positions in proprietary trades remain within a pre-defined clearing threshold (defined for each asset class by ESMA). In order to avoid the infrastructure and process costs for the increased EMIR reporting and risk management responsibilities, every NFC has to closely monitor its vulnerability to breach the mandated clearing threshold. For many, however, this is no small task. In this article, Mahima Gupta and Shashin Mishra review the challenges involved for [...]
  • 202

    THE HIGH PRICE OF NON-STANDARD COMMUNICATION: firms reduce costs, errors and risk for OTC cleared derivatives reporting and communications by adopting new clearing connectivity standard

    Now that some of the dust has settled following the implementation of several regulatory initiatives, such as Dodd-Frank, MiFID II/MiFIR, and European Market Infrastructure Regulation (EMIR), many financial institutions are grappling with how to deal with the impact these initiatives have had on their derivatives business. In this article, Phil Matricardi and Adam Kott discuss why firms are adopting the new ISDA Clearing Connectivity Standard (CCS), introduced two years ago, for derivatives reporting and communication and why an industry utility for data transformation is a necessary next step. OVERVIEW New regulatory requirements, combined with the increasing volume of cleared derivative [...]
  • 351

    REMIT: bringing physical commodity trading into the regulatory spotlight

    As far back as the 1986 Financial Services Act, regulators in the UK have had the authority to oversee activities related to commodity derivatives, but until recently, their presence was negligible. Despite the advent of the Financial Services and Markets Act in 2000 and a move from self to statutory legislation, the regulatory focus on commodities remained limited. The weight of rule-making was restricted to just two small handbooks—one for energy market participants (EMPs) and one for oil market participants (OMPs). With the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT), however, that is about to change. In this [...]