The EU's proposed curbs on commodity speculation don't go far enough and risk rejection by the European Parliament, lawmakers say. Financial Services Commissioner Valdis Dombrovskis says a revised proposal is forthcoming.
The UK must ensure that Europe's revised Markets in Financial Instruments Directive is implemented as intended in January 2018 to avoid complicating negotiations on its withdrawal from the EU, says Jacob Rees-Mogg, a supporter of Brexit and a Conservative lawmaker in Parliament's Treasury Committee. He said the UK must convert the EU directive into law while it remains a member of the bloc, but "we can in all senses legally change any regulations that we want" once the UK leaves the EU.
A standardized derivatives collateral agreement for trading noncleared swaps might be forced on clients when margin rules come into force in March, dealers say. "Creating a new [standardized credit support annex] is a sure way of getting everyone on board on time because the amount of resources required will be much less than if everyone has to amend," said JPMorgan Chase's Paulo Peres.
Banks are striving to adjust risk models by eliminating immaterial factors to avoid capital charges under the Basel Committee on Banking Supervision's Fundamental Review of the Trading Book. The challenges of this strategy include regulatory oversight and the internal models test.
The Organization for Economic Cooperation and Development has updated its Brexit forecast, saying that a UK recession is not in the near future but that growth will slow in 2017. "Spillovers to the global economy, notably the euro area, have been modest so far, including through confidence and financial markets weighing on investment; more negative effects on the euro area are likely to become apparent in 2017," according to the OECD.
The European Securities and Markets Authority has proposed phasing in requirements under Europe's revised Markets in Financial Instruments Directive that some over-the-counter derivatives be traded on platforms or exchanges starting in January 2018. The proposed start date is much earlier than expected and could prompt cross-border issues.
Derivatives traders want EU margin rules for noncleared trades between large banks implemented by mid-January to avoid a conflict with the application of variation margin rules across covered financial entities March 1. The US, Canada and Japan introduced initial-margin rules for large banks Sept. 1, but rules in Europe and several Asian jurisdictions have been delayed.
The proposed Regulation Automated Trading is a "20th-century analog response to the 21st-century digital revolution in trading markets," says J. Christopher Giancarlo, a member of the Commodity Futures Trading Commission. He also questions giving access to trading source codes to the CFTC and the Justice Department without a subpoena.
The Bank of England says extending stress testing into the entire financial system would let regulators better analyze interconnection and address instability. "Extending the reach of stress testing beyond the core banking sector would help in guarding against any perverse incentives stress tests and broader bank regulation creates for institutions to move activities outside the core banking sector into the so-called 'shadow banking sector,' " according to a BoE paper.
This half-day conference is focused on the work surrounding the definition of product identifiers for OTC derivatives. Panel discussions will provide an overview of the work on product identification accomplished so far, with a focus on the regulatory and business requirements. In addition, the conference will discuss infrastructure and implementation of product ISINs and industry usages. Register for the New York conference Sept. 30.