Oversight of the UK's clearing business should remain with the European Central Bank after Brexit, President Mario Draghi says. "It will be important to find solutions that at least preserve, or ideally enhance, the current level of supervision and oversight," Draghi wrote in a letter to European Parliament member Pervenche Beres.
The UK will probably face tougher clearing-equivalence standards when it exits the EU, similar to what the US has faced in negotiations, Commodity Futures Trading Commission Chairman Timothy Massad says. "The London market is, of course, even more important to the EU, so it would not surprise me if the UK faced a similar situation," Massad said.
UK banks, asset managers and insurers have concluded they have no hope of retaining passporting rights that allow them unrestricted access to the European single market after Brexit. Instead, they are pressing for a narrowly defined trade deal that allows stock and bond trading and sales of some products.
Britain's plan to withdraw from the EU has ceased to be the most important risk to the UK economy, Bank of England Governor Mark Carney said. Any setbacks for the financial-services sector brought by Brexit will have a bigger effect on the EU than the UK, he said.
A number of banks are said to be discussing ways to standardize cross-currency settlement dates, moving away from a system that requires principal amounts at the start and end of the trade, which carries excessive risk in their view. Switching to swaps on a net basis, using the International Monetary Market dates that are often used for futures and options settlements, may be a solution.
Mario Draghi, head of the European Central Bank, called for vigilance over the proposed $28 billion merger of London Stock Exchange Group and Deutsche Boerse. He says Brexit might adversely affect the ECB's capacity for oversight and supervision, and solutions must be found to maintain it.
The merger of Deutsche Boerse and London Stock Exchange Group could "substantially increase the current quality of regulation" of the derivatives market, according to a study commissioned by the German exchange operator. "Without a merger, the European Central Bank is in danger due to Brexit of losing the ability to supervise interest rate and currency transactions," the study says.
The House could vote today on a bill that would require the Securities and Exchange Commission to estimate the cost of a rule before introduction. Financial industry groups welcome the bill, which would also require the SEC to periodically review regulations and their efficacy.
EU regulators should make it easy for financial firms to experiment with blockchain as a tool that could make regulatory reporting less expensive, said Cora van Nieuwenhuizen, a member of the European Parliament and a vocal supporter of financial technology innovation. A good start would be to allow the use of distributed-ledger technology to report the settlement of securities transactions, she said.
Variation Margin "Big Bang": Are You Ready for March 2017?
In-scope market participants with uncleared swaps must begin exchanging margin March 1. In preparation for this regulatory deadline, ISDA will have conferences in each region focused on helping participants understand what changes are coming, determine which rules apply to their counterparty relationships, specific requirements in different jurisdictions and provide an in-depth look at the ISDA 2016 Variation Margin Protocol, designed to help market participants establish regulatory compliant documents with their counterparties. Registration open: Hong Kong: Jan. 18 AgendaRegister Tokyo: Jan. 20 AgendaRegister Paris: Jan. 24 AgendaRegister New York: Feb. 2 AgendaRegister Boston: Feb. 8 AgendaRegister London: Feb. 8 AgendaRegister Seoul, South Korea: Feb. 10 AgendaRegister Miami: Feb. 10 AgendaRegister