Cyprus reaches €10B rescue deal with troika | Bond investors expect Cypriot problems to be isolated | EU aims to boost market for securitised debt, covered bonds
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25 March 2013
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News on the global financial markets

Morning Bell
Split starts to emerge over European transaction tax
Officials involved in negotiations for a proposed tax on financial transactions in 11 EU nations are struggling to agree on the implementation timeline, possible exemptions and the scope of the levy. "The member states are divided; there is no unity about what the FTT will cover," said James Hughes, an account manager at Cicero. Many public-affairs experts are predicting that European leaders will rein in the tax. Financial News Online (U.K.) (subscription required) (25 Mar.)
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Industry News
Cyprus reaches €10B rescue deal with troika
Cyprus has struck a deal with the International Monetary Fund, the EU and the European Central Bank to help the banking and finance sector. Euro-zone finance ministers will vote on the plan, which includes establishing a "good bank" and a "bad bank". The proposal would force large losses on bank deposits of more than €100,000 at the two largest banks. "It's been a particularly difficult road to get here," Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem said. "We've put an end to the uncertainty that has affected Cyprus and the euro in recent days." Reuters (24 Mar.), Bloomberg (25 Mar.), Financial Times (tiered subscription model) (25 Mar.), The Wall Street Journal (24 Mar.)
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Bond investors expect Cypriot problems to be isolated
Major bond investors are hanging onto Italian and Spanish bonds, indicating that they think Cyprus' issues won't spread. "We're looking at this and saying, 'This is a Cypriot problem'," said Michael Lee of the Wells Fargo Advantage International Bond Fund. The Wall Street Journal (24 Mar.)
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EU aims to boost market for securitised debt, covered bonds
EU Internal Market Commissioner Michel Barnier is poised to publish draft plans on stimulating the market for securitised debt and covered bonds. The move is intended to bolster investment in businesses. "Europe is confronted by a range of constraints that affect its long-term financing capacity," according to the European Commission. The plans would cover "prudential rules, corporate governance, and financial markets". Bloomberg (24 Mar.)
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Regulatory Roundup
Basel Committee takes aim at regulatory arbitrage
The Basel Committee on Banking Supervision has proposed levying charges on financial institutions that use credit default swaps to reduce capital requirements. The committee acknowledges that CDS can effectively manage risk but says banks should appropriately recognise the cost in their capital buffers. Reuters (22 Mar.), Financial Times (tiered subscription model) (24 Mar.)
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ESMA supports choice in OTC derivatives reporting
The European Securities and Markets Authority has released guidance that says reporting of over-the-counter derivatives doesn't have to be performed by the same entity that cleared the transaction. The US Commodity Futures Trading Commission is in a dispute with market participants regarding the same issue. The Trade News (U.K.) (22 Mar.)
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European Commission assesses effects of financial reforms
The European Commission is reviewing how financial reforms have affected the economy, amid ongoing criticism. London Stock Exchange CEO Xavier Rolet, International Organisation of Securities Commissions Secretary General David Wright and other high-profile people have criticised the European Commission for failing to adequately analyse the economic cost of its regulatory overhaul. Financial News Online (U.K.) (subscription required) (25 Mar.)
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German crackdown on HFT passes upper house of parliament
The upper house of the German parliament has voted to rein in high-frequency trading. Draft law was passed by the lower house in February and awaits the president's signature. The measure, expected to take effect this year, would put high-frequency traders under the supervision of financial regulator BaFin. Reuters (22 Mar.)
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European bankers urge US official to ease restrictions
European bankers and representatives of lenders have been meeting with Dan Tarullo of the Federal Reserve to persuade him to adjust plans to bolster oversight of foreign banks in the US. Tarullo's plans would force large banks to hold liquidity buffers and would require foreign banks to put subsidiaries into a holding company, which would face capital standards on par with those of US holding companies. Reuters (22 Mar.)
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Spotlight on China
Trading rules in Hong Kong could force exits, expert says
Hong Kong's Securities and Futures Commission has released rules governing electronic trading. Clifford Chance partner James Wadham says the regulations, which make intermediaries responsible for orders made on their electronic trading venues, might prompt some companies to quit the business. "The proposals may cause some providers to reconsider whether this is a viable service," Wadham said. "There will need to be a significant cost increase around compliance, and if you're not prepared to incur that, you may have to get out of this business." Bloomberg (22 Mar.)
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Early-bird registration is open: AFME 6th Annual European Post-Trade Conference
Registration is open for AFME's 6th Annual European Post-Trade Conference, scheduled on 23 May at the Lancaster London hotel. This event brings together eminent speakers from across the industry, including senior operations executives and key regulators, and offers insights into crucial developments in the post-trade space and their impact on the industry.

Register to secure your place.
  • Early-bird member rate (available until 11 April): £299
  • Early-bird nonmember rate: (available until 11 April): £609
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I love those who can smile in trouble, who can gather strength from distress, and grow brave by reflection. 'Tis the business of little minds to shrink."
-- Leonardo da Vinci,
Italian artist, scientist and writer
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