I have always been a fan of the concept of a shared platform across banks. Looking at some of the big examples such as SWIFT and CLS, and the shared ownership/consortium concept such as EBS and FXall, you can see how the utility aspect can be put to good use. As the increased automation of FX trading evolves, customers now have a wide range of choices when it comes to execution of trades. Central Limit Order Books (CLOBs) such as Reuters Matching and EBS have spawned single dealer platforms (SDP) and multi-bank platforms (MBPs) alongside anonymous ECN’s, so a wide choice of platforms have become available, suiting all types of market participant’s preferred execution choices. Technology has allowed for aggregation in what remains a fragmented market place and algorithmic techniques are a growing component across a wide spectrum of the market.
The Women’s World Cup (WWC) has been in full swing and finally we entered the knock out phases after 36 games, 106 goals and plenty of technological controversy, 24 teams became 16 after many dramatic twists and turns. With the climax approaching this weekend, the semi-finals have so far followed suit. Like football, with a team’s coaches, goalkeeper, defence, midfield and strikers with a communicated strategy, a treasury has similar requirements of its technology. As the knockout stages progress we have again seen technology (VAR) continuing to make a difference in key games!
In November last year we held a Breakfast Briefing entitled “New Horizons for Treasury Regulation”, two of the topics we covered were IBOR reforms especially from the legal aspects and the Fundamental Review of the Trading Book and predicted these would come centre stage in 2019.
Delving beyond the world of algo’s/AI, the drive for ever faster speeds and platform consolidation is potentially the return of the utility platform were a shared platform offers efficiencies to a group of participants. For example, the concept of a Regulatory Reporting utility for an association of banks could well lead to better transparency in reporting, higher quality/more accurate data, and lower costs. The benefit of a shared platform would bring efficiencies to the changing reporting requirements and probably lead to a faster deployment.
Following two high profile fines for regulatory reporting failures, totalling nearly £62 million by the UK’s FCA, the fines prompted an interesting observation by the Director of Enforcement and Market Oversight at the FCA.
Here we are … always following new market developments to inform our product development teams … and one item caught my eye in the last week:– Digital Regulatory Reporting (DRR) starring the FCA and a host of collaborative partners! As Ronald Reagan noted having seen the film Back to the Future “Never has there been a more exciting time to be alive, a time of rousing wonder and heroic achievement.”
This week I have been dusting off the Q&A release from ESMA in September 2018 regarding the reporting of FX Swaps to ensure we have successfully planned for the impending changes. The aforementioned Q&A included reference data and transaction reporting scenarios where an FX Swap is reported as a single stand-alone financial instrument. This Q&A implementation period was six months and to ensure a consistent approach across reporting requirements, ESMA also published a Q&A on FX Swaps reporting under EMIR, which should be implemented 12 months after its publication, as it is more difficult to implement, but the two are harmonised to ensure consistency.
Last week we looked at the recent GFXC note on Disclosures and today we take a deep dive into the accompanying report. As will be seen, it continues the theme of the importance of disclosures.
Not if - it’s the clarity of content that counts for FX Disclosures!
The Global FX Committee released the minutes of their last meeting, papers on Cover & Deal, Disclosures and a survey on Valentine’s Day. It makes for interesting reading for the FX market and luckily, on the 90th anniversary of the Valentine’s Day Massacre no bullets were fired!
LIBOR, which stands for ‘London Interbank Offered Rate’ is a benchmark interest rate that is currently used across a wide range of financial contracts both on and off balance sheet. Currently contracts in excess $370 trillion are reliant on LIBOR benchmark rates. As things currently stand, the LIBOR rate that appears on pages of a Reuters (or other) screen could go blank on 1st January 2022.
LIBOR is going nowhere fast. With $370 trillion of outstanding notional swaps tied to it, the desire to wean markets off this popular fix is going to be a long hard slog. The reasons for removing LIBOR are well rehearsed and the underlying intellectual rigour behind the arguments were compelling before the deluge of rate rigging allegations appeared.
The UK’s Cryptoassets Taskforce is comprised of HM Treasury, the FCA and the Bank of England. Not to be likened to the three witches from Macbeth who are often thought about at this time of year!! Just in time for Halloween, they have published a Final Report that sets the scene for the Cryptoassets, Blockchain and Distributed Ledger Technology (DLT) sector in the UK from a policy and regulatory perspective.