Euro overcomes politics, surpasses expectations | Executives: Moving euro-clearing will drive up costs | Extension of production cut drives oil prices down 5%
26 May 2017
GFMA SmartBrief
News on the global financial markets
Morning Bell
Euro overcomes politics, surpasses expectations
Despite political fears over the euro's future, the currency has emerged as one of the top-performing in the Group of 10 nations this year. Foreign investors are buying into eurozone funds and regional economic growth has exceeded expectations.
Bloomberg (25 May.) 
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Know Your 2017 FS Regulation for US, EU and APAC
Clutch Group's 2017 Regulatory Report consolidates key policy and enforcement trends from 26 regulatory agencies across the U.S., the E.U., and Asia with an introductory letter by Clutch Regulatory Head and former FCA Enforcement Investigator, Charles Hastie.
Industry News
Executives: Moving euro-clearing will drive up costs
Buy-side executives said that forcing clearing of euro-denominated contracts into the EU from London would drive up costs for trading euro-denominated interest-rate swaps.
The Trade (UK) (25 May.) 
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Extension of production cut drives oil prices down 5%
Investors were disappointed by the extension of oil production curbs from OPEC and other producing nations, causing prices to fall 5% Thursday. "Today the bottom evaporated from the market," said Robert Yawger of Mizuho Americas.
Reuters (25 May.),  Bloomberg (26 May.),  The Wall Street Journal (tiered subscription model) (25 May.),  Financial Times (tiered subscription model) (25 May.) 
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FRTB may cause problems for trading desks in Asia
A number of market risk experts at global banks say the Fundamental Review of the Trading Book's requirements could cause fragmentation, as separate trading desks may need to be opened in every country where they operate. Under the current structure, a network of offices can report to a central line manager, but national regulators may prohibit this, which would cause particular problems for banks with a significant presence across numerous Asian territories.
Risk (subscription required) (25 May.) 
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Regulatory Roundup
Basel to standardise bank capital output floor
The Basel Committee on Banking Supervision will set an aggregate floor on banks' internal regulatory capital models, instead of individual floors for certain risks, Secretary-General William Coen told a conference. This decision aims to allow banks more flexibility in modelling risks for each portfolio, although the final floor calibration has yet to be agreed upon and may be a source of contention.
Risk (subscription required) (25 May.),  Reuters (25 May.) 
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Market calls for more clarity on ETD reporting rule
A European Commission proposal to simplify reporting on exchange-traded derivatives under the European Markets Infrastructure Regulation has not been sufficiently explained, some market participants say. In its recent EMIR review, the commission said the current dual-sided reporting status will be changed so only central clearing counterparties need to report ETD trades, but this gives rise to a number of questions and grey areas, they contend.
Risk (subscription required) (25 May.) 
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BIS releases FX code of conduct
The Bank for International Settlements' Foreign Exchange Working Group has released a code of conduct with 55 principles that cover ethics, transparency, governance, information sharing, electronic trading, algorithmic trading and prime brokerage. "All of us recognise the need to restore the public's faith in the foreign exchange market," said Reserve Bank of Australia Deputy Governor Guy Debelle, chairman of the working group.
Bloomberg (25 May.),  Financial Times (tiered subscription model) (25 May.),  Politico Pro (subscription required) (25 May.) 
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Commentary: Italy, Germany pose dilemmas for ECB
The European Central Bank will soon be faced with a difficult balancing act, writes Ambrose Evans-Pritchard. Its current policy of covering Italy's budget deficit and rolling over its public debt is at odds with its need to dampen the German economy, which is showing signs of overheating.
The Telegraph (London) (tiered subscription model) (25 May.) 
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Spotlight on China
Outlook brightens for Chinese bond market
The addition of Chinese bonds to Bloomberg indices and the planned addition by Citigroup bode well for China's bond market. Foreign ownership of Chinese bonds fell last year.
Bloomberg Professional Services (24 May.) 
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Tech Trends
UK, Hong Kong form fintech innovation partnership
The UK's Financial Conduct Authority and Hong Kong's Securities and Futures Commission have launched a partnership to encourage financial-services innovations. The agreement will also foster information exchange, experience sharing and a regulatory referral system.
Finance Magnates (25 May.) 
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AFME's inaugural European Compliance and Legal Conference will take place on 19-20 September at De Vere Grand Connaught Rooms in London
Registration is now open for AFME's inaugural European Compliance and Legal Conference which will bring together a high-level audience to engage with leading industry experts and discuss key issues shaping the legal and compliance functions in the European financial sector. Individuals will hear from the regulators on the latest developments, network with senior legal and compliance officers and discover how their peers and clients are navigating the new market landscape.
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ASIFMA's 7th China Capital Markets Conference to be held on 14 June in Hong Kong
This signature conference of ASIFMA will bring together 400 industry-leading professionals and regulators on China's capital markets, with topics across China macro, fixed income, currencies, equities, asset management and regulatory aspects. Register now given seats are limited!
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Editor's Note
SmartBrief will not publish Monday
In observance of Memorial Day in the US, SmartBrief will not publish Monday. Publication will resume Tuesday.
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Sophia Loren,
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