September 21, 2021
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Top Stories
Use of the Secured Overnight Financing Rate in the interdealer market increased after the Commodity Future Trading Commission's SOFR First initiative, and the regulator today begins its next phase in the transition away from Libor, RFR First. However, some market participants are concerned that transitioning the dealer-to-client market from Libor will be more difficult.
Full Story: Practice Insight (9/20) 
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CME Group is set to launch a service on Sept. 27 to allow clearing firms to track positions in sustainable derivatives such as carbon offsets. CME said the service will make it easier for clearing firms to measure the impact of their support for sustainable activities.
Full Story: Hedgeweek (London) (9/20),  Global Investor (subscription required) (9/20) 
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Webinar: New markets and the changing derivatives game
Regulations and cross-asset platform support of new products including Bitnomial trading are new derivatives challenges. Have you found a way yet to support them with your middle and back office? Join us on 14 October to discuss your reconciliation challenges, register here
Industry Developments
The crisis at China's Evergrande Group has paid off for some traders that used put options to hedge the risk of a market downturn. Demand for puts relative to calls is the steepest since 2018.
Full Story: BNN Bloomberg (Canada) (9/20) 
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Japan's Osaka Exchange and the Tokyo Commodity Exchange have partnered on the launch of J-GATE 3.0, a derivatives trading system they say will improve reliability and convenience for participants while expanding market liquidity. OSE and TOCOM are also extending night session trading and adding a static circuit breaker during regular trading hours.
Full Story: Regulation Asia (tiered subscription model) (9/21) 
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Natural gas: a volatile winter ahead?
August 2021 was the most active August of all time for Natural Gas options. Traders are expecting the US natural gas market to potentially have one of its most challenging winters in many years. Read more
Regulation and Enforcement
Bloomberg's credit-sensitive short-term bank yield index may not meet the International Organization of Securities Commissions' standards, US Securities and Exchange Commission Chairman Gary Gensler told an Alternative Reference Rates Committee webinar. "BSBY has the same inverted-pyramid problem as Libor," Gensler told the ARRC's SOFR Symposium.
Full Story: Risk (subscription required) (9/20) 
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Bank of England senior regulator Sam Woods says the central bank will have to add more staff if the government follows a plan to onshore EU financial services rules into domestic regulation. Woods says that the bank is "determined to maintain a strong focus on the efficiency of our operations, but taking on this larger role will inevitably require more staff -- albeit we anticipate that this increase will be a relatively small portion of current total staffing levels."
Full Story: Financial News (UK) (tiered subscription model) (9/20) 
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Cryptocurrency exchange Coinbase says it has cancelled the launch of an interest-yielding USD Coin lending program days after the US Securities and Exchange Commission said it would sue the firm if it proceeded with the proposal. "As we continue our work to seek regulatory clarity for the crypto industry as a whole, we've made the difficult decision not to launch," said Coinbase in a blog post.
Full Story: Reuters (9/20),  BNN Bloomberg (Canada) (9/20),  Financial Times (subscription required) (9/20),  The Wall Street Journal (9/20) 
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A potential ban on payment for order flow arrangements for retail stock trading being considered by the Securities and Exchange Commission would raise trading costs for millions of investors, writes Hal Scott, director of the Committee on Capital Markets Regulation and emeritus professor at Harvard Law School. The SEC's claim that such arrangements could result in conflicts of interest is unfounded, Scott writes.
Full Story: Financial Times (subscription required) (9/20) 
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Financial investigators combing through the details of the collapse of Archegos Capital Management have highlighted gaps in international regulations that allowed Credit Suisse to book trades in London which fell outside of Federal Reserve stress tests. The gap in oversight meant regulators were unaware of the scale of risks facing the bank, which ultimately suffered losses totaling around $5.5 billion.
Full Story: The Wall Street Journal (9/21) 
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The use of cloud computing infrastructure in financial services is set to accelerate over the next 12 months, according to research from Google and Coalition Greenwich. However, there is a distinct gap in usage rates between different firms, with 90% on the buy side using some form of cloud data, compared to 67% of sell-side companies.
Full Story: WatersTechnology (subscription required) (9/20) 
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FIA News
With the finalization of both the SEC's regulatory framework for derivatives use by RICs and BDCs and the SEC's capital, margin and segregation rules regarding security-based swaps, the OTC derivatives regulatory landscape is expected to shift yet again. Join us on September 23 as we explore how these developments are likely to affect firms' trading programs and learn how to prepare for the changing landscape. Register now!
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