Clearing rules, capital disputes under review by European Commission | CCPs delve deeper into portfolio margining | LSEG, DB shareholders to decide merger in July
May 19, 2016
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Clearing rules, capital disputes under review by European Commission
Hill
Hill (Eric Piermont/AFP/Getty Images)
Settling disputes around clearing rules and incoming capital requirements are at the top of the European Commission's list of post-crisis reforms. Ensuring that capital rules don't conflict with banks' clearing of over-the-counter derivatives is also key, says Jonathan Hill, commissioner for financial services. "We must make sure that the cumulative impact of bank capital rules such as the leverage ratio and [the European Market Infrastructure Regulation] are not overly burdensome," Hill says.
The Trade (U.K.) (5/18),  Financial News Online (U.K.) (tiered subscription model) (5/18) 
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CCPs delve deeper into portfolio margining
Central counterparties have started to look more seriously at portfolio margining as a way to ease banks' collateral challenges. "Portfolio margining has become the 'topic du jour,' predominately driven by [Europe's revised Markets in Financial Instruments Directive], which will mandate CCPs to be open access and allows for the possibility of risk offsets on a much bigger scale," said Dan Maguire, global head of rates and foreign exchange derivatives at LCH.
Financial News Online (U.K.) (tiered subscription model) (5/19) 
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Industry News and Trends
LSEG, DB shareholders to decide merger in July
London Stock Exchange Group and Deutsche Boerse say that revised shareholder documents on their merger will be published in June and that shareholders will be asked to decide on the move in July.
The Trade (U.K.) (5/18),  Reuters (5/18),  FOW (subscription required) (5/18) 
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CSDs could become blockchain casualty, experts say
Smart contracts utilizing blockchain technology might remove a need for central securities depositories if regulatory barriers are overcome, experts say. "Because I can maintain these contracts myself, I don't need to go to a CSD to authenticate the actual asset and get a report of what I own or am owed," said Markit's Jeffrey Billingham. "There is a big possibility to change the nature of how people interact with a CSD."
Risk.net (subscription required) (5/18) 
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Banks: Leverage ratio behind higher cost of unwinding swaps
Banks cite the Basel III leverage ratio as the reason costs for unwinding swaps have increased. Some buy-side firms say the cause is less clear.
Risk.net (subscription required) (5/19) 
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Regulatory Roundup
Sen. Wyden aims to eliminate derivatives tax loophole
Sylvia Burwell Testifies At Senate Confirmation Hearing For HHS Secretary
Wyden (Alex Wong/Getty Images)
A proposal by Sen. Ron Wyden, D-Ore., would require derivatives users to pay tax on gains, which would be treated as ordinary income. "This proposal will help end the 'Tale of Two Tax Codes' and create one fair system with simple and straightforward rules that apply to everyone," said Wyden, the top Democrat on the Senate Finance Committee.
The Hill (5/18),  The Wall Street Journal (tiered subscription model) (5/18) 
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Regulators likely to review eurozone banks' internal risk models
Eurozone banks may have to prove they can maintain and validate their internal models for credit risk management, sources say. The Single Supervisory Mechanism is likely to compare banks to see whether some have lower capital requirements than others for the same kind of activities, after efforts by the US Federal Reserve to issue guidance for more robust model risk management.
Risk.net (subscription required) (5/18) 
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GAO reviews structure of financial-regulatory system
The Government Accountability Office is looking into how regulators, including the Commodity Futures Trading Commission and the Securities and Exchange Commission, work together to prevent crises, the GAO's Orice Williams Brown says. The GAO is also considering whether merging regulators might be beneficial.
Reuters (5/18) 
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MiFID II delay approved by European Council
The European Council has approved a one-year delay of implementation of the revised Markets in Financial Instruments Directive to Jan. 3, 2018. "The one-year postponement of the transposition and application dates will affect the provision of services for investments in financial instruments and the operation of regulated financial markets," according to the council.
The Trade (U.K.) (5/18),  FOW (subscription required) (5/18) 
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SEC's White: Cyberrisk is top threat to financial system
White
White (Kena Betancur/Getty Images)
The biggest threat to the US financial system is cyberrisk, said Securities and Exchange Commission Chair Mary Jo White. The SEC has found shortcomings at major securities exchanges, clearinghouses and dark pools, she said. "What we found, as a general matter so far, is a lot of preparedness, a lot of awareness but also their policies and procedures are not tailored to their particular risks," she said.
Reuters (5/18) 
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ISDA News and Events
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This symposium will provide an in-depth explanation of the ISDA Resolution Stay Jurisdictional Modular Protocol, how it relates to the previous ISDA Resolution Stay Protocols and its implications for market participants. This protocol was developed to aid the market in complying with regulatory requirements that oblige certain regulated entities to obtain from their counterparties a contractual recognition of the application of stays on or overrides of certain termination rights under the home-country special resolution regime of such regulated entity (Stay Regulations).

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