EU seeks trade alliance with China, sidestepping US | Report: Many counterparties won't meet Basel deadline | More central banks poised to raise interest rates
July 20, 2018
SIFMA SmartBrief
News on the capital markets
Morning Bell
Fed should consider publishing SOFR average, Quarles says
It would be appropriate for the Federal Reserve to consider publishing a compound average of the Secured Overnight Financing Rate to foster greater confidence in the benchmark, Vice Chairman for Supervision Randal Quarles told the Alternative Reference Rates Committee on Thursday. "It has been suggested that we could call it SAFR, for secured average financing rate, and this is something that we are encouraging our staff to explore," Quarles said, and the ARRC has selected SOFR as a Libor alternative, encouraging the industry to make a shift.
Reuters (7/19) 
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Industry News
EU seeks trade alliance with China, sidestepping US
The European Union is pushing China to open its economy to foreign investments and help restore the international trade order following US President Donald Trump's tariffs on US trade allies. The EU has signed a trade deal with Japan and started free-trade talks with Australia and New Zealand.
The Wall Street Journal (tiered subscription model) (7/18) 
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Report: Many counterparties won't meet Basel deadline
Many counterparties that fall under the Basel Committee on Banking Supervision's uncleared margin rules from next year will be unable to achieve compliance by their relevant phase-in dates, according to a joint report from ISDA and SIFMA. "If an immediate effective implementation program is not adopted by [newly in scope counterparties] and regulators and third-party service providers (inclusive of custodians) do not provide effective solutions for NISCs, market disruptions may ensue," notes the report.
Futures & Options World (subscription required) (7/19) 
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More central banks poised to raise interest rates
Some central banks, including the Bank of England, will likely follow the example of the US Federal Reserve and increase interest rates in the coming months; Norway's central bank is projected to raise rates in September. The People's Bank of China is the main exception, being expected to ease policy in response to the trade tariffs imposed by US President Donald Trump.
The Wall Street Journal (tiered subscription model) (7/19) 
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Washington Roundup
Experts call to amend US Federal Reserve stress tests
The US Federal Reserve should replace its "mono-model" approach to calculate average capital requirements for the Comprehensive Capital Analysis and Review with a multiple-scenario model to avoid unnecessary capital charges on banks, an expert told a House Financial Services Committee hearing. Separately, Morgan Stanley CEO James Gorman told analysts the Fed stress tests have become "increasingly more demanding" each year.
Risk (subscription required) (7/18),  Reuters (7/18) 
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US yield curve's flattening prompts questions for Fed's Powell
The flattening of the US yield curve makes some investors worried about an economic slowdown, although Federal Reserve Chairman Jerome Powell says the economy remains strong enough for rate increases.
Financial Times (subscription required) (7/18) 
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SEC looks into improved oversight of electronic bond trading
Securities and Exchange Commission Chairman Jay Clayton has instructed his staff to review whether there are opportunities to "enhance the framework for oversight" of electronic platforms that trade bonds. The action came after Democratic commissioners called for disclosure of potential conflicts of interest by those platforms.
MLex (subscription required) (7/19) 
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Criticism expressed of potential US tariff on cars
Criticism expressed of potential US tariff on cars
Ross (Win McNamee/Getty Images)
A bipartisan group of 150 lawmakers, officials of several foreign governments and a trade group representing major automakers criticized President Donald Trump's proposal to impose a levy of as much as 25% on imported cars and automotive parts. US Commerce Secretary Wilbur Ross said it is too early to say whether Trump's proposal will be put into effect.
Reuters (7/19),  The Toronto Star (7/19),  The Mainichi (Japan)/Kyodo News (7/20) 
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Registration Open: AICPA-SIFMA FMS Conference on the Securities Industry, Oct. 17-18
This fall, gain insight into the latest developments in securities regulation, auditing and accounting requirements. Program sessions at The National Conference on the Securities Industry include: Senior executive's view of the securities industry; analyst perspective; recent and pending accounting and auditing pronouncements from FASB and industry experts; PCAOB feedback on inspections of broker-dealer audits; open Q&A session with representatives from the SEC, FINRA and CFTC; and more. CPE credits will be available.
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Oh, What a Web We Weave: A Spider Web of Regulators and Regulations
While healthier, G-SIBs and other large institutions must navigate a spider web of regulations and regulators. In the latest note from SIFMA Insights, we analyze the redundant and overlapping rules and exams in the current regulatory regime, with multiple regulators adopting the same rule but with different interpretations of how to implement it.
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