A CLE presentation gave me an excuse to read many of the comment letters regarding the SEC’s proposed Rule 18f-4, which would regulate the amount of “senior security transactions” in which an investment company could engage. I filed a personal comment letter responding to the SEC’s initial concept release in 2011. The proposed rule and most of the comments have moved well beyond the “conceptual” stage and my understanding of quantitative risk management. But several comments reveal some conceptual confusion that a thoughtful review of the law might dispel.
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Policy and Research
Attention FinTech and Blockchain Firms: Financial Innovation Was the Talk of the Week in Regulatory Circles
In a span of 48 hours this week, two noteworthy developments occurred on the U.S. regulatory front:
- A major bank regulatory agency, the Office of Comptroller of Currency (the “OCC”), published Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective; and
- A commissioner from the Commodity Futures Trading Commission (the “CFTC”), J. Christopher Giancarlo, addressed the Depository Trust & Clearing Corporation 2016 Blockchain Symposium, delivering his personal observations on the development of financial technologies in a speech entitled Regulators and the Blockchain: First, Do No Harm.
This posting will summarize the OCC’s publication and provide excerpts from CFTC Commissioner Giancarlo’s speech. As we explained in a February 2016 posting (Doing Business with Regulated Market Participants: Why Regulations Are So Important Even (Especially?) To the Unregulated), we believe that these regulatory developments are as important to regulated market participants (like banks) as they are to the unregulated innovators looking to sell services to those regulated market participants and, in many cases, compete with those participants for market share.
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A Compendium of 2015 Regulatory Activity by the SEC In Respect of Security-Based Swaps
Links to Text of Rules
Final Rules: http://www.sec.gov/rules/final.shtml
Proposed Rules: http://www.sec.gov/rules/proposed.shtml
2015 Timeline Final Rules (F) and Proposed Rules (P)
(F) February 2015 Finalized Registration and Governance Rules that Apply to SBS Data Repositories
(F) February 2015 Finalized SBS Data Reporting Rules
(P) February 2015 Proposed Rules to Implement the Finalized Reporting Rules, Establish Certain …
European Commission Adopts Clearing Mandate
Last week, the European Commission (EC) adopted Regulatory Technical Standards (RTS) that provide a clearing mandate for certain interest rate OTC derivatives. The RTS have been subject to significant discussion and come in the wake of Dodd-Frank’s fifth anniversary and nearly three years after the Commodity Futures Trading Commission (CFTC) adopted similar requirements in the United States. This post discusses the mandate and specific areas of concern for buy-side market participants.
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Tri-Party Repo Data: January
The Federal Reserve Bank of New York released their monthly statistics of the U.S. tri-party repo market for January 2015.
As of January 12, 2015, the total collateral in the U.S. tri-repo market decreased $59.05 billion to $1.579 trillion. Most of the decrease was in U.S. Treasury collateral which decreased $58.78 billion to $582 billion.…
Federal Reserve Adds Term Trades to Repo Program
On January 28, 2015, the Federal Reserve Bank of New York announced that its Open Market Trading Desk (the Desk) will conduct a series of term reverse repurchase agreements (RRP) operations in February and March.
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CFTC Staff Guidance on Option to Segregate Initial Margin
The CFTC’s staff recently provided guidance on a swap dealers duty, under Reg. 23.701 and 23.704, to provide counterparty’s with a notification informing them of their option to have their initial margin segregated at a custodian.
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Highlights from CFTC’s Global Markets Advisory Committee Discussion on Bitcoin
On October 9, 2014 the CFTC’s Global Markets Advisory Committee held a meeting focused on the clearing of Non-Deliverable FX Forwards and also with respect to bitcoin. This post will focus exclusively on the discussion related to bitcoin.
A few highlights from the discussion on bitcoin include the following:
Thomas Leahy from the CFTC staff summarized the process for self-certifying bitcoin derivatives and provided background on TeraExchange’s self-certification of a non-deliverable forward on bitcoin.
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Issues and Trends of Interest to Buy-Side Derivatives End-Users: ISDA Publishes Survey
ISDA recently published the results of a survey that it conducted to identify key issues and trends for the buy-side, derivatives end-user community. The results are fascinating and, we blelieve, accurately reflect the experiences of many market participants and professionals that are involved in the over-the-counter (OTC) derivatives markets. The following is a brief summary…
Quarter-End Bids Exceed Fed Reserve Repo Cap; Zero Rate Posted
On September 30, 2014, the Federal Reserve Bank of NY received $407.167 billion in bids for its reverse repo operation. $300 billion of the bids were accepted and received a rate of 0.00%. The high bid was 0.05% and the low bid was -0.20%. On October 1, 2014 there were $212.481 billion in bids and,…