US regulators would be wise to stress-test the liquidity of derivatives clearinghouses, similar to reviews underway in Europe, said Federal Reserve Governor Jerome Powell. The Commodity Futures Trading Commission has begun stress tests that look at credit risk but not liquidity risk.
Asian-Pacific market participants have embraced the decision to switch from the London Interbank Offered Rate to the US Treasurys-backed repurchase agreement market benchmark. However, some doubt the move will completely end the use of Libor.
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By 2020, some investment banks could lose as much as $240 million in business to smaller research firms because of restrictions on research purchasing under Europe's revised Markets in Financial Instruments Directive, according to Quinlan & Associates. "The most important priority for brokers now is to start making decisions around the structural makeup of their investment-research offering," said CEO Benjamin Quinlan.
The Bank for International Settlements is encouraging central banks to start raising interest rates and winding down quantitative-easing efforts. The bank also warned against protectionist efforts and a reversal of global economic cooperation.
The European Commission gave Italy permission to provide state aid to Banca Popolare di Vicenza and Veneto Banca as a part of its orderly liquidation of the lenders. The government aid is aimed at preventing disruption of the local economy.
The EU will try to come to an agreement with the US Commodity Futures Trading Commission for mutual recognition of each other's derivatives trading rules, Tilman Lueder, head of the European Commission's securities-markets policy unit, said at an industry conference. The commission intends to make a determination that US rules for trading venues are just as strict as EU rules, an action that would apply to at least 90% of Europe's foreign derivatives deals, he said.
The European Securities and Markets Authority's Post-Trading Standing Committee is creating a working group to gain industry input on its regulatory policies. The group will address collateral, clearing and reporting requirements, among other post-trade issues.
After some high-profile cases of manipulation (e.g., Libor), regulatory authorities will be implementing strong conduct rules on benchmark administrators and users that will significantly affect the conditions under which market participants will use the range of financial benchmarks that are published all over the world. This conference will provide an in-depth look at the timeline and scope of implementation, progress on strengthening existing benchmarks, the development of alternative risk-free rates and fallbacks for IBORs. REGISTER: Financial Benchmarks on July 12 in New York
This conference will focus on key issues that firms typically negotiate in an English law-governed ISDA 2002 Master Agreement, as well as Paragraph 11 to the ISDA 2016 Credit Support Annex for Variation Margin (Title Transfer -- English Law). The goal of this full-day conference is to help attendees better negotiate terms with different counterparties by going through the provisions of the documentation in a detailed way and working through key negotiated terms and issues. REGISTER: ISDA Master Agreement and Credit Support Annex: Negotiation Strategies on July 12 in London