London won't be able to maintain its financial-center status after Brexit, Bundesbank board member Joachim Wuermeling says, and Europe should prepare for New York, Singapore or Hong Kong to take over. "In the case of Europe, Brexit could have a negative impact for already fragmented funding channels," he says.
LCH in London clears the majority of euro interest-rate swaps because of economic and commercial forces, and the EU will counter market forces if it makes euro clearing relocate upon Brexit, according to a report by the Institute of Economic Affairs. Furthermore, restricting euro clearing to the EU would exclude North America and Asia, potentially prompting US retaliation, the report says.
ISDA, the Futures Industry Association and the Securities Industry and Financial Markets Association have lent support for a US House bill that would deduct initial margin provided by a client before the supplemental leverage ratio is calculated.
Billions of pounds of digital trade could be threatened if the UK leaves the EU without a data-transfer agreement, says Steve Wood, the UK's deputy information commissioner. British businesses are asking whether they need legal authority for UK-EU data exchanges after Brexit eliminates their automatic right to cross-border transfers, Wood says.
Data indicate cleared swaps volume is concentrated in a small group of systemically important clearinghouses. LCH leads in interest rate and foreign exchange, while Intercontinental Exchange dominates credit derivatives.
A Trump administration budget plan to partly fund the Commodity Futures Trading Commission through fees on the futures industry that would likely be passed on to end users is not sitting well with Senate Republicans. CFTC Chairman J. Christopher Giancarlo, who has sought additional funding, stayed neutral on the proposal when asked at a recent hearing.
The Commodity Futures Trading Commission is working to align reporting rules for swap-data repositories with those of other regulators but will not adopt Europe's favored method of dual-sided reporting, Chairman J. Christopher Giancarlo says. The CFTC requires one counterparty, usually the dealer, to report transaction details, which Giancarlo says is a better approach.
Use of request-for-quote platforms appears to have risen since the start of the year, with the Tradeweb platform reporting a 32.1% increase in average daily exchange-traded-fund deals and the two other leading platforms expected to post similar figures. A requirement of Europe's revised Markets in Financial Instruments Directive for buy-side firms to provide evidence of best execution, which they can do automatically by using RFQ platforms, is thought to be propelling the growth.
Dan Bucsa, an oversight official at the Commodity Futures Trading Commission, has given a chilly reception to an executive's suggestion that the CFTC prioritize blockchain work more. It is up to the industry to "decide to transition to a new way of doing things," Bucsa says.
Changes to the Basel Committee on Banking Supervision's Pillar 2 approach to operational-risk capital might create an uneven playing field that includes an increase in capital requirements for European banks while US banks see a decrease. Banks hope regulators make adjustments before the standardized approach takes effect in 2022.
ISDA's 3rd Annual Legal Forum will provide comprehensive updates on key legal issues around benchmarks, Brexit, margin, moratoria under the Bank Recovery and Resolution Directive (BRRD), clearing and trading. REGISTER: ISDA Annual Legal Forum on March 19 in London