The Basel III banking regulatory reforms are close to being completed and it is "fairly clear what the result will be," William Coen, secretary-general of the Basel Committee on Banking Supervision, said in a speech to the International Monetary Fund. After work on Basel III is finished, the committee plans to take a break before launching any new policy reforms, he said.
Saddled with new capital requirements, major global banks have struggled to create returns, opening the door for China's banks to gain prominence. Top investment banks have seen their revenues decline 34% since the financial crisis.
CME Clearing, ICE Clear US and LCH have passed a stress test to show they can generate enough liquidity to weather a major market disruption, according to the Commodity Futures Trading Commission. The test posed an extreme but plausible scenario in which two major clearinghouse members defaulted.
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The demand for data scientists in the US is greatly outpacing the supply, with an expected shortage of a quarter million people by 2024. Data analysis is quickly becoming an indispensable tool in finance and other fields.
The updated Markets in Financial Instruments Directive will require money mangers to inform clients should their holdings drop by 10%, a requirement critics say could shake confidence and lead investors to divest holdings. "Warning non-professional investors straight away that the market is falling would only do one thing -- it makes it fall further," said Jean-Marie Catala of Groupama Asset Management.
The role of data science in fixed income markets is likely to expand over time, especially as pension funds, mutual funds and insurance firms catch up. "If you can figure out how to use data more efficiently and automate your investing processes even just marginally, you can crush your competition," one trader said.
The EU's General Data Protection Regulation will affect financial-services firms when it takes effect in 2018. "GDPR cuts across industries, but because financial services has so much sensitive data on people's finances, it has particular applicability there," said Patrick Lastennet of Interxion.
A number of quantitative analysts say their efforts to model and predict liquidity risks in the futures market are hampered by the lack of available data from alternative risk premia strategies. The increasingly popular strategies were valued at more than $150 billion in 2016 with more than half the products futures-based, but analysts say that banks do not divulge the assets within them, which makes accurate forecasting difficult.
Bond markets took a cue from Federal Reserve chief Janet Yellen's speech at the Group of 30's annual International Banking Seminar, prompting a surge in global sovereign bonds and a decline in US Treasurys. Yellen reiterated the Fed's commitment to raising interest rates on pace with US economic growth, despite lagging inflation.
The Department of Defense is tapping executives from high-frequency-trading firms and quantitative hedge funds to help identify vulnerabilities in financial markets. High-speed traders and quant-fund managers tend to have a great deal of knowledge on the inner workings of financial markets and the automated systems that drive much of today's trading, making them ideally suited to see weaknesses that cybercriminals could exploit.
Nasdaq Clearing is aiming its direct-clearing model, which allows a direct relationship between clients and central counterparties, at the repurchase agreement market. The newly launched model improves client protection and cost efficiency, according to Nasdaq.
The Treasury Department has called for some asset-backed securities to be among acceptable high-quality liquid assets for the Basel Committee on Banking Supervision's liquidity coverage ratio and net stable funding ratio to make assets such as housing loans more attractive. Industry groups have called for inclusion of private-label residential mortgage-backed securities, rather than limiting the list to assets issued by government-backed housing lenders.
The European Banking Authority called on national regulators to take a flexible approach to banks' internal risk models after Brexit. Banks that relocate operations from the UK to the EU because of Brexit should be allowed to rely on UK approvals until there is time for EU regulators to review them, the EBA said.
Ivy League law professors Allen Ferrell and John Morley examine the regulatory challenges facing investment funds, broker-dealers and credit rating agencies. They conclude that the way capital structures are regulated for investment firms should be revamped.