Regulations

  • 335

    MIFID II: harmonization mandates new business models in the OTC space

    Regulatory initiatives, such as the Dodd-Frank Act and EMIR, have had a seismic impact on derivatives markets. The Financial Stability Board’s seventh progress report on the implementation of OTC derivatives market reforms has highlighted crossborder consistency issues arising from different jurisdictions. The combined effect of these regulations through the mandated electronic trading and central clearing of standardized derivatives contracts has been the “balkanization of the capital markets,” causing pockets of liquidity and varying prices for the same contracts across jurisdictions. With the implementation of MiFID II/MiFIR on the horizon in Europe, the industry is anticipating a more level playing field [...]
  • 319

    CROSS-ASSET UNIVERSAL PRODUCT IDENTIFIER: is this the solution the industry is looking for?

    Covering the entire spectrum of asset classes and financial services, from loans and credit cards to derivatives and bond positions, a Universal Product Identifier (UPI) will enable a holistic approach to identifying all trades and positions, including capital calculations, reporting, clearing mandates and booking rules. While such an idea sounds great in theory, historical attempts at achieving global agreement have fallen short, even within a subsector of the industry. Peter Meechan, Jim Bennett and Pauline Tykochinsky examine the feasibility of universal product codes, ponder whether the industry is ready to come together to create them, and discuss what a potential [...]
  • 310

    THE NOVATION CHALLENGE: how to ensure a successful outcome

    Organizations within the financial markets are undergoing a period of incomparable change. The financial crisis has prompted a reevaluation of how risk is managed within firms, and as a result, many have been either forced to, or have elected to, fundamentally transform their business models. This has prompted an unprecedented amount of change in legal entity structures, often leading to large-scale migrations of trade portfolios. As firms migrate positions between legal entities, the need in the market for novation expertise is growing as never before to avoid reputational damage with counterparties, spiraling costs and increased operational risk. In this article, [...]
  • 727

    MARKIT METRICS: Q3 2013 trend analysis

    Since 2005, Sapient Global Markets and Markit have worked together to provide the G15 banks with global derivative transaction metrics for the over-the-counter (OTC) Derivatives Regulators’ Forum chaired by the Federal Reserve Bank of New York. The dealer group community utilizes this data to increase operational efficiency, along with verifying the ranking within the group and evaluating trading activity. The key metrics encompass OTC derivatives transaction volume and electronic processing of trade confirmations and measures the time delay in issuing trade confirmations. The industryís desire for self-regulation stated by the introduction of commitments to the OTC Derivatives Regulators Forum (ODRF) [...]
  • 649

    AUTOMATED RETAIL DERIVATIVES PLATFORMS: challenges and opportunities

    The retail derivatives industry faces the same challenges seen in many mature financial markets: slow growth, heightening competition, increasing regulatory requirements and demanding clients. In this article, Stefan Naumann, Patric Mayer and Roger Waldhausen discuss how the automation of product platforms can help banks proactively maintain and expand their market share and highlight the different options to get there. During the last several years, the market for retail derivatives in central Europe has been in turmoil. In the early days, structured products, also known as certificates, were highly successful, sold well and provided high margins to the issuing banks. Because [...]
  • 635

    THE INVESTMENT RESEARCH MARKET: how regulations are driving technology innovation

    The post-crisis regulatory environment has had far-reaching effects—impacting processes in the front, middle and back offices. With two regulatory initiatives in the UK, the investment research market is now bracing for change. In this article, Neil Scarth, Principal, Frost Consulting, discusses how regulations are affecting research and, in particular, how they are driving technological change that will ultimately make the process of searching for and using information more efficient and productive. The institutional equity market, which involves the management of pension/mutual funds, etc., is a unique business model funded by the “currency” of equity commissions. These small charges are added [...]
  • 628

    THE CLIENT CLEARING OFFERING: balancing cost, risk and client service

    Financial institutions are facing pressure to offer clearing services to their clients. This is a costly endeavor that offers little financial upside for firms: It is a low-margin service that requires a large capital commitment to clearing houses as well as a heavy investment in technology. Phil Matricardi and Adam Kott discuss the costs and risks of offering client clearing as well as how firms may begin collaborating in the future to meet their clients’ needs. High-cost, high-touch banking and advisory services, such as over-the-counter (OTC) derivative brokerage, mergers and acquisitions advisory and fixed income capital markets, have been either [...]
  • 586

    EUFTT: the tax that is dividing a union

    The European Union Financial Transaction Tax (EUFTT) is one of the most talked about regulations in the last couple of years. Despite the controversy, it will likely be imposed on almost all financial transactions by early next yearóif not in late 2014. In this article, Ajay Mathur and Thomas Zimmermann provide an overview of the current state of the discussion around the EUFTT and highlight some key concepts of the proposed legislation. They also address the challenges financial institutions may face during implementation and important next steps firms should take to prepare for the EUFTT. Some attention will also be [...]
  • 566

    SWAP EXECUTION FACILITIES: a catalyst for OTC market change?

    Could mandatory electronic execution of over-the-counter (OTC) derivatives, stemming from the 2009 G20 Pittsburgh Summit, act as the catalyst in spawning new business models? Jim Myers, Kimon Mikroulis and Paul Gibson discuss the impact of mandatory electronic execution for certain OTC products under the most advanced of these electronic mandates, Dodd-Frankís swap execution facilities (SEF). As the OTC markets are entering a phase of rapid evolution, concepts that were originally created in the exchange-traded world, such as sponsored access, agency execution and general price aggregation, are emerging as critical issues to be addressed by OTC market participants. Introduction The Dodd-Frank [...]
  • 1059

    REGULATION SCI: regulators take aim at exchanges’ electronic systems

    As issues with electronic systems continue to impact exchange operations, the US Securities and Exchange Commission (SEC) has proposed a new regulation designed to improve the stability, performance and security integrity of a variety of computerized systems in the listed securities markets. In this article, Jim Myers introduces Regulation Systems Compliance and Integrity (Reg SCI), discusses industry reaction and proposes steps exchanges can take now to prepare for this new legislation. Over the past six months, several major exchanges have fallen victim to systems-related issues, losing valuable time and money—and damaging their reputations in the process. On April 12, the [...]