July 29, 2021
SmartBrief on Risk and Compliance
Managing Risk in Today's MarketsSIGN UP ⋅   SHARE
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The Group of 30, a consortium of former financiers, central bankers, academics and government officials, has published a report that calls for urgent changes to the Treasury market and that makes recommendations to help the market avoid shocks that could disrupt worldwide financial stability. "No financial system could have withstood the shock of the pandemic without exceptional actions by the [Federal Reserve]," former Treasury Secretary Timothy Geithner says. "But making the Treasury market more resilient would reduce the damage to the financial system caused by future shocks, whatever the source, and reduce the need for exceptional action by the Fed in crisis."
Full Story: The Wall Street Journal (7/28),  Bloomberg (7/28),  Financial Times (subscription required) (7/28) 
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Billionaire-backed crypto project Bullish Global has rolled out the first private pilot tests of its trading network. The company will offer the seven-week trial to both professional and retail investors, allowing them to trade simulations of digital assets and paper money.
Full Story: Financial Times (subscription required) (7/27) 
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US investment banks secured an unprecedented 58% of fees for mergers and acquisitions and equity advisory activity in the first half of the year, accumulating $60 billion, according to Dealogic. Performing well above European counterparts, JPMorgan Chase, Goldman Sachs, Bank of America and UBS have reported second-quarter revenue that surpasses or nears individual records.
Full Story: Financial News (UK) (tiered subscription model) (7/28) 
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Katherine Venice, founder of The Ethical Capitalism Group, writes that financial institutions must use their leverage to help combat an erosion of democratic principles in the US. "Capitalism without democracy is oligarchy, with winners and losers determined by autocrats," writes Venice.
Full Story: Financial Times (subscription required) (7/28) 
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Bloomberg Insights
The China Securities Regulatory Commission set up a call with major investment banks Wednesday to ease concerns about the government's crackdown on private-tutoring companies and the stock market downturn it had triggered, sources said. The government's core message was that actions against private-tutoring firms were not intended to harm businesses in other industries.
Full Story: Bloomberg (7/28) 
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Disruptions to global supply chains causes by storms and the coronavirus pandemic are straining multinationals' ability to meet consumer demand generated by the Tokyo Olympics. Vietnam shut down factories due to a spike in coronavirus deaths, affecting companies such as Nike and Eclat Textile.
Full Story: Bloomberg Professional Services (7/28) 
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Shares of Spinnaker Acquisitions, the first special-purpose acquisition company to come to the market in the UK, have surged 25% after the company's listing on the London Stock Exchange raised nearly $2.8 million. UK regulators are working on rule changes to encourage more SPACs to go public in the country.
Full Story: Bloomberg (7/28) 
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Trading Trends
During the first quarter of 2021, the Options Clearing Corporation experienced a $2 billion initial margin breach after frenetic trading on retail platform Robinhood drove up the price of GameStop shares, a Risk Quantum analysis finds.
Full Story: Risk (subscription required) (7/27) 
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The S&P 500 is going through relative tranquility, rising 35% since October, but analysts say investors should expect an increase in volatility, which might help because it could curb investor exuberance. "There are periodic pullbacks, and they are healthy because they remove the frothiness associated with the market and excessive optimism," says Leo Grohowski, chief investment officer at BNY Mellon Wealth Management.
Full Story: The Wall Street Journal (7/27) 
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The share of US dollar swap market trading in the secured overnight financing rate has reverted to prior norms after an initial uptick during the July 26 launch of the "SOFR first" drive. The risk-free rate accounted for 9% of US dollar swap notional activity on July 26, falling to 4% on July 27.
Full Story: Risk (subscription required) (7/29),  Regulation Asia (tiered subscription model) (7/29) 
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Operational Efficiencies
Some New York-based financial firms considered relocating their offices to the suburbs during the coronavirus pandemic lockdowns, but the city's reopening has led them to ramp up return-to-office plans at their original hubs.
Full Story: Bloomberg (7/27) 
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According to a Northern Trust survey of 300 global asset-management firms, 98% of firms are using data science or are planning to optimize investment processes in the next two years through use of data science. "This survey shows asset managers are aware of the need to implement a digital operating model that enables efficient and safe growth but at the same time are rightly focused on the imperative to spend scarce capital wisely," says Paul Fahey, Northern Trust head of investment data science.
Full Story: The Trade (UK) (7/28) 
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The shift to a T+1 settlement cycle will bring a host of changes to financial firms' operations and, despite some challenges, will provide significant benefits, writes Uday Singh, head of professional services at Broadridge Financial Solutions. Singh recommends firms examine their organizational preparedness for the shift, and assess how it will affect their technology infrastructure and operational processing, as well as revenue streams.
Full Story: Traders (7/22) 
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Regulatory Review
The Securities and Exchange Commission is preparing a proposal that would require public companies to disclose climate change risk when reporting to investors. Chair Gary Gensler says he expects the proposal to be presented before year-end. "Investors today are asking for that ability to compare companies with each other," Gensler says. "Generally, I believe it's with mandatory disclosures that investors can benefit from that consistency and comparability."
Full Story: The Wall Street Journal (7/28),  Bloomberg (7/28),  CNBC (7/28) 
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The UK Treasury is proposing to drop pre-trade quote publication rules for over-the-counter derivatives traded outside of electronic order book venues. Market participants say the rules failed to increase competition as planned because the data was of limited use.
Full Story: Risk (subscription required) (7/28) 
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Securities regulators from across the world have started sharing information about special purpose acquisition companies as concerns over the regulatory consequences of the vehicles have risen. "While SPACs may offer alternative sources of funding and provide opportunities for investors, they may also raise regulatory concerns," the International Organization of Securities Commissions said in a statement.
Full Story: Reuters (7/27) 
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Research & Analysis
A blog post from the International Monetary Fund notes that less stable economies could be tempted to accept cryptocurrencies as legal tender, and acknowledges that they could bring cheaper and faster payments, give financial access to unbanked people and improve cross-border transactions. However, the IMF says these advantages are outweighed by the disadvantages, including possible legal issues, price instability, the currencies' ability to be used for illegal activities and environmental concerns.
Full Story: Fortune (tiered subscription model)/Bloomberg (7/28) 
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