April 20, 2021
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Top Stories
A review by the European Central Bank shows the largest eurozone banks have underestimated capital requirements by using models that understate the riskiness of assets.
Full Story: Financial Times (subscription required) (4/19),  Reuters (4/19),  Risk (subscription required) (4/19),  GlobalCapital (subscription required) (4/19) 
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The UK Treasury and the Bank of England are studying a central bank digital currency. The institutions say they are forming a task force to coordinate preparations for a digital currency that would "exist alongside cash and bank deposits, rather than replacing them."
Full Story: Bloomberg (4/19),  The Block (4/19),  BBC (free registration) (4/19) 
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Industry News and Trends
The International Swaps and Derivatives Association's Ibor Fallbacks Protocol that reduces the systemic risk associated with the cessation of certain interbank offered rates has gained wide support. Almost 14,000 entities have adhered to the protocol, according to ISDA. "The ISDA protocol has been a resounding success in de-risking the derivatives market," said Tom Wipf, chair of the US Alternative Reference Rates Committee.
Full Story: Bloomberg (4/19),  International Swaps and Derivatives Association (4/20) 
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Regulatory Roundup
The European Commission is raising pressure on EU financial firms to move their euro swaps clearing activity out of London. Banks say that a forced swaps clearing migration would have consequences for them and their clients by giving US competitors an advantage in derivatives execution and clearing.
Full Story: Risk (subscription required) (4/20) 
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UK Chancellor Rishi Sunak has proposed reforms that would scrap several requirements under Europe's revised Markets in Financial Instruments Directive, including the share trading obligation. Removing the STO would make it highly unlikely that the UK and EU reach an equivalence agreement.
Full Story: The Trade (UK) (4/19) 
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The UK Financial Conduct Authority has named Sacha Sadan as its director of environment, social and governance, tasked with developing the regulator's approach to sustainable finance. In the new post, Sadan will help develop policy to "ensure the long-term safety and soundness of firms, the proper function of markets and the protection of consumers," the FCA said.
Full Story: Financial News (UK) (tiered subscription model) (4/19) 
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US Commodity Futures Trading Commission member Dawn DeBerry Stump says the US and other jurisdictions should remove limitations that keep market participants from using derivatives clearing infrastructures outside their home countries. "Without deference to comparable regulatory regimes, we subject the very infrastructure we depend upon to deliver the reforms, such as [central counterparties], to a confusing web of compliance issues, or worse a market that is fragmented and less systemically sound," DeBerry Stump said.
Full Story: Futures & Options World (subscription required) (4/19) 
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Chinese markets are being monitored for big inflows and outflows of foreign money, says Fang Xinghai, chair of the China Securities Regulatory Commission. The commission is confident it can keep capital markets steady while widening access, Fang says.
Full Story: Reuters (4/19) 
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ISDA News and Events
*Complimentary Registration* Derivatives Trading Forum, April 28 — Sponsored by Quantile Technologies & Tradeweb
This virtual event will explore what's driving the regulatory change, and how trading venues and market participants are adapting their product set and trading strategies in response. Secure your complimentary registration here!
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Don't Miss ISDA's 35th Virtual AGM: The Premier Event in the Derivatives Industry! May 10-12, 2021
Featuring live sessions, on demand content, networking, exhibitions and more! To register, view the agenda, and find more information on what you won't want to miss visit: https://agm.isda.org/
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The ISDA Research Note examines several major developments in 2021 that have been announced and/or are expected to occur related to the adoption of replacement benchmarks such as risk-free rates (RFRs). It also reviews the significant progress made on the transition from LIBOR and other IBORs to RFRs in 2020. The full paper is available here.
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