2016 The Year of Big Change in Banking BY: AMBER BISSELL
Typically banks and financial institutions have, in times of mounting cost pressures, adopted a restructuring and redistribution of resources and processes globally to align with the business target operating model and strategic aims. Using a balanced combination of offshoring, nearshoring and outsourcing, referred to as “right-shoring”, businesses seek to achieve the optimum cost-effective, fully functional locational footprint.
ESMA Briefing on MIFID II Transaction Reporting Requirements
Despite being a relatively new standard, ISO 20022 is gaining increasing significance and traction within the world of European regulatory transaction reporting. ISO 20022 is the successor to ISO 15022 and at the risk of revealing my age I recall implementing ISO 15022 standards for SWIFT messaging when I worked at Blackrock many years ago.
An air of cautious optimism prevails in the capital markets as we head into 2017, which should have positive implications for both banks and technology.
Following the Brexit vote, in October 2016 Prime Minister May and the new Brexit secretary confirmed their intention to trigger Article 50 of the Treaty on European Union before the end of March 2017, starting the clock on a two-year process of leaving the European Union. This article comprehensively sets out the issues for CCPs around Europe.
Over the past 20 years the investment management industry, and specifically hedge funds, has achieved tremendous growth. As assets under management increased, so did diversification in strategies and investments. During that time investors have become very sophisticated in their selection of investments as well as the operational due diligence process. This growth and sophistication has reinforced the critical role of operational executives, and their teams’ responsibility to effectively manage the operational infrastructure. These are the people, functions and technology that are an integral part of keeping these firms thriving.
We propose a model for the credit and liquidity risks faced by clearing members of Central Counterparty Clearing houses (CCPs). This model aims to capture the features of: gap risk; feedback between clearing member default, market volatility and margining requirements; the different risks faced by various types of market participant and the changes in margining re- quirements a clearing member faces as the system evolves. By considering the entire network of CCPs and clearing members, we investigate the distribution of losses to default fund con- tributions and contingent liquidity requirements for each clearing member; further, we identify wrong-way risks between defaults of clearing members and market turbulence.
The second most important topic to PTF survey respondents was trade reporting and we are pleased to announce the next working group for the Post Trade Forum on this exact topic.
Firms use Validate.Trade to test reporting software to reduce the cost and risk of change to pre-validate trade reports before they fail at the ARM, TR or SDR resulting in better control and compliance!
Users have been voting with their clicks as to the most interesting articles, and we've developed a list to show you which 30 articles have been the most popular. This list is as-of January 1st, and shows our all time most viewed articles. We've also provided a list of our most popular articles in November & December 2016, and will continue to update these lists.
For many, today is the first working day of 2017, which is also the original start date of MiFID II, before it was delayed by a year. With an eventful year behind us, what can we expect in the coming months, both on paper and in reality?
Thank you to our readers, contributors and sponsors during 2016.
New into the chart in this edition is BME and Shanghai clearing. BME covers rate swaps, OIS and FRAs, Shanghai cover rate swaps. Leaving the chart is SwapClear LLC, reported as wound down in the last edition. Overall most CCPs have gained notional, with reductions in IRS at CME and SwapClear, assumed to be a result of compressing gross notional to reduce capital requirements. If you take out the figures in Rates from CME and SwapClear, the total increase in cleared interest rate products is $6.5trn, a big increase, showing that the market continues to turn over large amounts of rate risk globally.
Bank Underground is about to take a hard-earned festive break. But before the blog goes off on its Christmas holidays, it’s time for the now annual tradition of the Bank Underground Christmas Quiz. Test your knowledge on our ten festive themed q
Did you know that a group of senior buy- and sell-side people meet in private each year to freely debate the state of the OTC market, and hear from regulators on the future direction of regulations?
CCPs were recently introduced for standard derivatives to remove counter-party risk from trades. Should the buyer or seller default, then the CCP will take over his trade commitment. CCPs thus effectively insure counter-party risk. Traders are therefore expected to continue to trade at times of elevated counter-party risk. A liquidity dry-up is thus avoided and, with it, the potential for an all-out crisis.
Bill: The ClarusFT article covers the fine detail of intra-day topups to SwapClear and why timing changes were necessary. If you have never looked at the detail of intraday margin calls then this is the article to read.
by Alan McIntyre