UK Prime Minister Theresa May will call for a transitional arrangement lasting two years after Brexit to ensure the UK's departure from the EU is carried out smoothly, according to excerpts from her upcoming speech on the matter that were released by the government. She is expected to propose that the UK pay €20 billion over two years to settle its financial obligations to the EU.
Responding to deteriorating confidence in existing benchmarks for interest rates for the euro, the European Central Bank said it plans to develop its own overnight reference interest rate no later than 2020. The new reference rate is intended to serve as a backstop for existing private-sector benchmarks, the ECB said.
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The UK's loss of access to the EU single market poses a threat to financial stability as the continuity of contracts between EU and UK counterparties is disrupted, the three European Supervisory Authorities reported. The financial regulators also predict a loss of market confidence during what will be a lengthy transition to European-based financial services.
A proposed change to the Federal Reserve's FR Y-15 reporting rule requiring the eight US global systemically important banks to include cleared derivatives transactions would increase client-cleared notional by an estimated $46 trillion. Banks that have worked to reduce G-SIB scores but stand at the upper limit of surcharge categories, including Citigroup, JPMorgan Chase and Morgan Stanley, would be at risk of being pushed into the next bucket.
The UK Financial Conduct Authority plans to take a close look early next year at investment firms' compliance with the strengthened reporting requirements imposed by Europe's revised Markets in Financial Instruments Directive, which takes effect in January, said Stephen Hanks, a markets policy manager. He said the FCA plans to move swiftly on reporting requirements because it is easier for firms to correct deficiencies when a new requirement takes effect than later.
CME Group has partnered with Citigroup's foreign exchange prime-brokerage business to launch trading of an over-the-counter spot FX contract and an FX futures contract on electronic-trading platform CME Globex. "OTC FX market participants will benefit from the capital and regulatory advantages of listed futures, as well as optimizing credit lines through facing a central counterparty," said Paul Houston of CME Group.
Analysts warn that major investment banks' third-quarter earnings in the US and Europe look likely to be disappointing, with some predicting falls of as much as 25% in fixed-income trading. Several managers say conditions might be equally difficult through the rest of this year.
Commodity Futures Trading Commission Chairman J. Christopher Giancarlo told government technology executives that blockchain technologies "are going to challenge orthodoxies that are foundational to our financial infrastructure," and that regulations need to catch up with the digitization of the economy. "The one thing that has not yet been digitized is regulation," he said.
The European Central Bank is inviting views on how financial-technology firms can apply for banking licenses and register themselves as lenders, with the aim of establishing harmonized and appropriate standards. The ECB has issued a pair of draft guides and has requested comments by Nov. 2.
Morgan Stanley, Citigroup and Macquarie are the top three banks in the commodity sector. The Australian bank's rise is part of a trend in which the share of commodity revenue among US and European banks declined to 72% in 2016 from 81% in 2014, according to Coalition Development.
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