"In turning to Regulation Automated Trading (“Regulation AT”), I acknowledge that my staff and I had dozens of issues and concerns that we brought to the attention of the Division of Market Oversight. While they were responsive to a few small topics, many other issues require much further attention and consideration that I will summarize in this statement."
"The intersection of finance and technology is a place alive with innovation. Over 2015, the focus on this area has sharpened with politicians and business leaders alike championing the fintech revolution set to transform the financial services industry and bring it into the digital age. But what’s driving this revolution? I see four interlocking themes that are inspiring the changes we see in our industry and which will only continue to grow in importance and influence during 2016."
"This consultative document provides principles-based guidance for FMIs to enhance their cyber resilience, cognisant of the dynamic nature of cyber threats and the importance of interconnected entities for the resilience of individual FMIs. This guidance also recognises some of the unique challenges that cyber risk presents to FMIs' traditional operational risk management frameworks, such as the need for a fast and safe resumption of core services following a cyber attack. In doing so, it does not aim at introducing new standards but rather at elaborating on the principles which are already established in the Principles for financial market infrastructures (PFMI)."
"The tone at SEFCON VI gave the sense that very little has changed since this time last year – many of the same issues are unresolved and business is shrinking. But three areas – regulatory environment, business environment, and access and market structure – stood out."
"As the use of ILS capacity has grown within the overall insurance and reinsurance market, the industry has voiced concerns about how investors will react after a significant loss event, but industry leaders actually predict more ILS capital to enter than exit post-event."
"If you’re like me, you’ve read the news on negative swap spreads and tried to sift through the reasons behind it. On the surface, it seems such a basic premise that swap spreads need to be positive – surely there is an arbitrage out there. So I set out to understand it better by seeing how I would arb this apparent misbalance, in much the same way that I had attempted to understand the CME/LCH basis by trying to arb that market."
"A study conducted by the United Nation’s (UN) highlights the significant cost that weather-related disasters cause across the globe, and with the expectation of more frequent and more severe events in the future, an urgent need to improve disaster resilience and mitigation is again brought to light."
"Why does the lack of liquidity in bond markets have many of the world's top economic opinion-makers worried? Ben Wright writing in the Telegraph reports on the voices in "the chorus of doom" and explains why the evaporation of this liquidity in the global fixed income market signals "a warning shot across the bow"."
"The two said their convictions should be tossed because the government failed to prove their Libor submissions were false or fraudulent. They also said there’s no evidence they had any communications with counterparties to the Libor transactions or that those counterparties were “duped” by the rate submissions."
"Blockchain technology could reduce the role of intermediaries such as banks and settlement houses, the Bank for International Settlements - or "the central bankers' central bank" - said in a report on Monday."
"Digital currencies, and especially those which have an embedded decentralised transfer mechanism based on the use of a distributed ledger, are an innovation that could have a range of impacts on various aspects of financial markets and the wider economy. These could include potential disruption to business models and systems, as well as facilitating new economic interactions and linkages."
"Over the past two weeks, the US banking regulators released their much anticipated final margin requirements for the uncleared portion of the derivatives market.  This portion amounts to over $250 trillion of the global $630 trillion outstanding and has up to now been operating in “business as usual” mode,  while other derivatives have been pushed into clearing. The final rule’s release completes a long process since it was proposed in 2011 and re-proposed in 2014. "
"We take a look at Swap Spreads, this time by way of Cross Currency Basis swaps. We find that Cross Currency swaps are also moving sharply lower and have seen impressive volumes….. …..with increases in volumes around key price levels that have acted as support in the past. More negative Cross Currency levels would normally be associated with higher swap spreads as both may be considered proxies for credit spreads… but both will tend to move lower when there is consistent bond issuance and an appetite to swap these issues into floating USD Libor exposures."
"With the importance of collateral management ever growing, I thought it best to outline the basics of collateral management in a complete 10-step guide, covered in a series of 5 parts that will be posted every Tuesday. This ‘Collateral Management for Dummies’ series will cover all fundamental aspects concerning the management of collateral, the associated risks and opportunities, as well as the key topics involved in establishing and running a collateral management function."
"At the end of my article on Final US Rules for Non-Cleared Swaps, I noted that I would look at ISDA’s Standard Initial Margin Model (SIMM). On doing so, I was surprised to see the direction that ISDA is now taking, one that I did not expect."
"Countries attempting to introduce digital money in a more measured manner have since learned the hard way that competitive digital money systems are inordinately harder to roll out — not least because they lack the harmonising efficiencies of monopolistic systems making them only marginally less costly than existing frameworks. This has impeded the roll-out of digital mobile money systems further afield."
"In a Nov. 6 article for American Banker, John Heltman provided a comprehensive overview of the challenges banks will face when the Federal Open Market Committee finally raises short-term interest rates. Margin pressure, deposit runoff and increased loan defaults from struggling floating-rate borrowers are all valid concerns that we see our bank clients wrestling with as they prepare for the long-awaited policy shift. But the article's mention of rising rates causing potential loan defaults by commercial borrowers, and the potentially costly unwind of related interest-rate swaps, tells only part of the story."
In the right setting, central clearing can produce significant benefits, including reduced credit and liquidity risks; improved default management and reduced risk of fire sales; greater transparency; and improved risk management. Of course, this does not mean that every product should be cleared, or that every type of repo trading would benefit from clearing. In my view, clearing should be limited to those assets that are highly liquid and expected to remain so even in severely stressed market conditions. While any model for expanded repo clearing will have to satisfy stringent regulatory requirements, regulators should be open to emerging clearing solutions where they provide substantial benefits and can meet these standards. This may be particularly true for repo trading in government and agency securities, since new regulations require financial institutions to hold such high-quality collateral under the assumption that it can be quickly converted to cash. It is therefore important to consider ways to support their continued liquidity where possible.
"For an investment manager with more than $16 billion assets under management (AUM), the costs of an outsourced collateral management exceed those of an in-house solution (see figure 1), according to consultancy and services provider Sapient. In its white paper ‘Collateral management: when does it make sense to outsource?’ issued in July, it modelled the expenses that the choice of buying has against that of building. However, cost is not the only factor involved in the decision to outsource; the technical challenge of moving, tracking and exchanging collateral is such that outsourcing providers are seeing a boom in interest."