US fund closures create financing challenge | Goldman: Options market signals post-election volatility through Dec. | London hedge funds hit hard by coronavirus, Brexit
September 22, 2020
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Industry News
The highly-anticipated stock market exchange, Members Exchange, launched on Monday trading seven symbols, with plans to start trading all U.S. stocks on Sep. 29. MEMX is expected to challenge incumbent exchanges, three of whom control 60% of U.S. equity trading volume, with aggressive pricing strategies and is backed by more than 40 member banks, electronic-trading firms and asset managers including BlackRock, Charles Schwab, Citadel Securities, Fidelity, Goldman Sachs, Jane Street Capital, JPMorgan Chase, Morgan Stanley and Virtu Financial.
Full Story: The Wall Street Journal (tiered subscription model) (9/21),  Reuters (9/21) 
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The decision by a number of leading asset managers to shutter several US money market funds has adversely affected US corporations' access to short-term funding.
Full Story: Financial Times (subscription required) (9/15) 
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Options market pricing indicates traders are hedging against market volatility remaining high for a full month and possibly longer after the November election, according to Goldman Sachs strategists. The volatility pricing reflects the possibility that there will be delays in counting the ballots and that the result may be disputed, the strategists said.
Full Story: Bloomberg (tiered subscription model) (9/19) 
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The coronavirus and Brexit have created serious obstacles for London's hedge funds which were already losing ground to rivals in New York, Connecticut and other North American financial centers. Brexit may force UK hedge funds to relocate managers to the EU, draining talent from London.
Full Story: Financial Times (subscription required) (9/16) 
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Asset managers face new challenges to incorporate environmental, social, and governance considerations in their investment decision-making. A recent industry panel heard in-house methodologies are more effective than external ratings as a way to secure optimal returns from ESG investment.
Full Story: Expert Investor (UK) (9/17),  WatersTechnology (subscription required) (9/17) 
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Recent increases in volatility and bond issuances by troubled companies in the travel sector have prompted a revival in the fortunes of hedge funds running a convertible arbitrage strategy.
Full Story: Financial Times (subscription required) (9/17) 
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Regulatory Roundup
The European Commission has formally approved equivalence for UK derivatives central counterparties for 18 months beginning in January 2021. "This time-limited decision has a very practical rationale, because it gives EU market participants the time they need to reduce their excessive exposures to UK-based CCPs, and EU CCPs the time to build up their clearing capability," said EU financial services chief Valdis Dombrovskis.
Full Story: Reuters (9/21),  The Trade (UK) (9/21) 
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New Jersey leaders reached a budget deal to increase taxes on the state's top earners as well as reinstate a corporate surtax, and announced that a proposed financial transaction tax would proceed separately from the budget. SIFMA President and CEO Kenneth E. Bentsen Jr. said the financial transaction tax is really "a sales tax on investors and frankly, wherever this has been tried before, it's failed."
Full Story: Politico (9/17),  Fox Business (9/17) 
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Concerns are growing among London-based asset managers that calls from the European Securities and Markets Authority to restrict delegation rights are a bid to shift business to other hubs.
Full Story: Financial Times (subscription required) (9/20) 
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Green bonds are growing rapidly in popularity, but a study from the Bank for International Settlements raises questions on their effectiveness beyond virtue signaling. The study finds green bonds have not yet made significant progress in curbing carbon emissions or lowering the cost of borrowing.
Full Story: The Economist (tiered subscription model) (9/17),  Bank for International Settlements (9/14) 
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SIFMA News
SIFMA's Annual Meeting gathers a cross-section of speakers from public policy and finance to tackle our toughest challenges and look to opportunities ahead. Nowhere else will you find this unique combination of the highest-caliber speakers on the issues that matter most for the capital markets. Join us on Oct. 19-20 to hear about issues including: Industry Leadership, Business Strategy and Crisis Management, Shifting Market Fundamentals, Policy and Financial Regulation, Technology and Innovation, Benefits of a Diverse & Inclusive Economy, and The Economic Outlook.
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SIFMA's membership is diverse, ranging from the largest global financial players to the smallest independent firms providing access to the global capital markets. Full membership is open to broker-dealers, investment banks and asset managers. Associate membership is available to key industry partners, including law, technology and consulting firms, rating agencies, trading and analytic platforms and clearing and settlement providers. Now more than ever, your firm needs to be informed on all of the regulatory, operational and industry environmental changes occurring today. Contact the Office of Member Engagement to learn about the benefits of membership
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