Deutsche Bank's pricey error raises risk questions | ECB wants to expand authority over clearinghouses in US, UK | UK-US working group to focus on post-Brexit stability
April 20, 2018
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Deutsche Bank's pricey error raises risk questions
Deutsche Bank erroneously paid Eurex Clearing a daily collateral adjustment worth reportedly €28 billion about a week before Easter, but the mistake was caught before causing financial harm. The error raises questions about the bank's risk controls, but spokesman Charlie Olivier says officials "have rigorously reviewed the reasons why this error occurred and taken steps to prevent its recurrence."
Bloomberg (free registration) (4/20),  Financial Times (subscription required) (4/19) 
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ECB wants to expand authority over clearinghouses in US, UK
The European Central Bank says it needs additional authority to protect EU member states in case of "exceptional situations" involving clearinghouses in the US and UK after Brexit. Among the powers sought are the ability to increase requirements for US and UK clearinghouses' liquidity buffers and more collateral gathered from clients.
Bloomberg (free registration) (4/18) 
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Brexit
UK-US working group to focus on post-Brexit stability
The UK and the US plan to form the Financial Regulatory Working Group to ensure financial stability and market efficiency after Brexit. The group plans to meet at least semiannually.
Reuters (4/19) 
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Regulatory Roundup
Fed's Brainard: Not a good time to revisit big-bank rules
Fed's Brainard: Not a good time to revisit big-bank rules
Brainard (Alex Wong/Getty Images)
Federal Reserve Governor Lael Brainard explained her vote against a proposal to change capital or liquidity rules for big banks, saying the largest firms "have the right kind and amount of liquidity." Vulnerabilities in asset valuation and business leverage show signs of "financial imbalances," Brainard said.
Reuters (4/19),  Bloomberg (free registration) (4/19),  The Wall Street Journal (tiered subscription model) (4/19) 
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IMF wants jurisdictions to cooperate on cryptocurrency rules
The International Monetary Fund urges regulators and policymakers in different jurisdictions to use a "nimble, innovative and cooperative approach" to establish cryptocurrency rules. "National authorities and international standard setters are encouraged to intensify cooperation on the monitoring of crypto-assets and on the consistency of the regulatory approach," an IMF report states.
MLex (subscription required) (4/19) 
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Industry Developments
Cboe to offer bitcoin futures in smaller increments
The Cboe Futures Exchange plans to change the minimum increment for bitcoin futures to 5 points from 10 points to offer "a more robust price-discovery environment," says Matt McFarland, head of strategy and operations. As the market evolves, "there is a chance that we could move to even smaller than $5, but we will take things slowly," McFarland says.
Futures & Options World (subscription required) (4/19) 
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LCH seeks changes in FCM rules
LCH has filed a proposal with the Commodity Futures Trading Commission to let clearing members reduce risk from the default of a futures commission merchant. The proposal would give clearing members freedom to transfer positions from the defaulting FCM to their proprietary account or to the proprietary account of a third-party clearing member.
Futures & Options World (subscription required) (4/19) 
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Financial Technology
Report: Hedge fund leaders find innovation crucial
Hedge fund industry leaders expect to make greater use of artificial intelligence and other disruptive technology and to focus more on responsible investing to meet investor demand, according to a report by Aberdeen Standard Investments and an industry group. "This paper shows that the pace of change and innovation in the hedge fund industry is only going to increase," industry expert Jack Inglis says.
Verdict (UK) (4/17),  Financial News (UK) (tiered subscription model) (4/17),  International Investment (UK) (4/17),  City A.M. (London) (4/16) 
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Commodities and Managed Futures
Indian exchanges aim for commodity derivatives presence
The National Stock Exchange of India and BSE want to introduce commodity derivatives platforms. The exchanges have applied for licenses after the Securities and Exchange Board of India decided exchanges can provide universal trading platforms for stocks and commodities.
The Economic Times (India) (4/20) 
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Oil traders urge change in pricing benchmark
As US oil exports surge, traders are calling for a revamp of the pricing benchmark to move away from West Texas Intermediate crude delivered in Cushing, Okla., and toward oil sold in Texas Gulf Coast ports. "As the demand center shifts to the export markets, it would be more important to have prices on the water, shifting away from Cushing-based prices," says John Coleman of Wood Mackenzie.
Bloomberg (free registration) (4/20) 
FIA News
May 17 Webinar: "FIA Indirect Clearing Terms & 2018 Terms of Business"
Join FIA and Clifford Chance for a live webinar as they present the new FIA Indirect Clearing Terms. The FIA Indirect Clearing Terms are designed to supplement contractual terms based on either the 2011 Professional Client Agreement or the soon-to-be-launched 2018 Terms of Business. The terms complement and complete FIA's suite of indirect clearing documentation and form part of the wider FIA Documentation Library. This session will focus specifically on the FIA indirect clearing documentation published in 2017 and 2018, with a specific focus on the recently published FIA Indirect Clearing Terms, as well as the 2018 Terms of Business. Tune in at 9 a.m. BST on May 17. Register now!
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