EU lets traders use US markets under MiFID II | Fed stands by outlook for 2018 as it raises rates | ESMA rule on direct electronic access might hit US FCMs
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December 14, 2017
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EU lets traders use US markets under MiFID II
The European Commission has ruled EU traders can continue to do business on stock markets in the US, Australia and Hong Kong after the revised Markets in Financial Instruments Directive takes effect next month. The action includes equivalence recognition for more than 20 exchanges and more than 30 dark pools in the US.
Reuters (12/13),  Politico Pro (subscription required) (12/13) 
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Fed stands by outlook for 2018 as it raises rates
The Federal Reserve has voted 7-2 to increase its benchmark interest rate by one-quarter of a percentage point to a range of 1.25% to 1.5%. The central bank stood by a forecast of three rate increases in 2018 but omitted from its post-meeting statement previous language of expectation the labor market will strengthen.
Bloomberg (free registration) (12/13),  Reuters (12/13),  Los Angeles Times (tiered subscription model) (12/13),  Politico Pro (subscription required) (12/13) 
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ESMA rule on direct electronic access might hit US FCMs
The European Securities and Markets Authority says firms outside the EU cannot offer direct electronic access to trading venues once the revised Markets in Financial Instruments Directive takes effect. The move could lock out futures commission merchants in the US unless they are affiliated with an EU firm that is prepared to apply for a MiFID II license.
Risk (subscription required) (12/14) 
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"Flash crash" may occur as central banks curb liquidity, expert says
Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said in a research note that "a sobering flash crash" is likely to occur "as central banks, the major sedative of volatility, start to withdraw liquidity." Such an event could happen after assets reach an expected high point early in 2018, he said.
Financial News (UK) (tiered subscription model) (12/11) 
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Bloomberg Insights
Investors look past uncertainties to fuel emerging-market rally
Emerging markets this year have generated strong returns for investors who showed faith in spite of geopolitical uncertainty. It's unclear, however, whether the growth will continue into 2018.
Bloomberg Professional Services (12/13) 
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Analysts take on tricky job of 2018 market outlook
Bearish predictions from late 2016 are coming back to haunt analysts as they try to predict the market's direction. Geopolitical uncertainty and the expected pullback of stimulus programs have not dampened returns in 2017.
Bloomberg Professional Services (12/7) 
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IFRS 9 aims for clarity among risk, finance, treasury functions
International Financial Reporting Standard 9 takes a principle-based approach to providing a common accounting language across the finance, risk and treasury functions.
Bloomberg Professional Services (12/7) 
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Trading Trends
Questions remain about organized trading facilities
Questions about which brokerages and exchanges are authorized to run organized trading facilities and which contracts can be listed have yet to be answered, despite OTF establishment being a key requirement of Europe's revised Markets in Financial Instruments Directive.
Risk (subscription required) (12/11) 
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Cboe's Tilly says big exchange M&A not over
Cboe's Tilly says big exchange M&A not over
Tilly (Angela Weiss/AFP/Getty Images)
Cboe Global Markets Chairman and CEO Edward Tilly doesn't think major stock exchange mergers have ended. "The synergies that are inherent in a deal in the exchange space -- because at the end of the day these are huge technology companies -- still make sense," he said.
Financial News (UK) (tiered subscription model) (12/14) 
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Operational Efficiencies
Blockchain changes commodity business
More commodity firms and traders, including BP, ABN AMRO, Mercuria Energy Group, Natixis and Trafigura, are adopting blockchain technology to increase efficiency, changing the way they do business. "Once you've established blockchain and it's working, you will see faster changes, because then the transformation of the value chain becomes an option," said Rabobank analyst Harry Smit.
Bloomberg (free registration) (12/14) 
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Machine learning in trading faces uphill battle
Quantitative Investment Management and Teza Capital Management, up 68% and more than 50% this year, respectively, have leveraged machine learning to become top-performing hedge funds, but struggles faced by The Voleon Group, up about 4.5% this year through October, show the strategy's difficulty. Finding an approach to machine learning that works with complex data presented by financial markets is challenging, experts say.
The Wall Street Journal (tiered subscription model) (12/11) 
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Regulatory Review
Banks call for leniency on LEI rule
Banks are requesting relaxation of a forthcoming requirement that all traders have a legal-entity identifier because many clients have not yet applied for one.
Financial Times (tiered subscription model) (12/13) 
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Treasury: US has few tools to cope with CCP failure
Tools available to US regulators to deal with a failed derivatives central counterparty are far more limited than those available to unwind distressed banks, the Treasury Department's Office of Financial Research says in a report. Although clearinghouses are required to write wind-down plans, there aren't any sanctions if regulators deem those plans inadequate, the report says.
MLex (subscription required) (12/11) 
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Firms wrestle with MiFID II's implications
The revised Markets in Financial Instruments Directive will take effect in less than a month, and firms are scrambling to prepare and to determine what the regulatory changes mean for tasks such as market research, writes Howard Coates of KPMG Makinson Cowell. "[O]ne thing I am confident about is that companies can expect their investor relations teams to be much busier in 2018," Coates writes.
FT Adviser (12/13) 
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CFTC clarifies when CTA registration is needed
The Commodity Futures Trading Commission has said that firms, including futures commission merchants and swaps dealers, will not have to register as commodity trading advisers when they receive a separate payment for research. The CFTC said that registration as a CTA is required only if advice is not "solely incidental" to a firm's business.
Futures & Options World (subscription required) (12/12) 
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Research & Analysis
Commentary: "CoCos" key in battle against future bailouts
Basel III has provided incentives for the use of contingent convertible capital securities as a way to mitigate the risk of future bank bailouts. Banks had issued some $521 billion in "CoCos" by the end of 2015.
Harvard Law School (12/8) 
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