The regulation for Uncleared Margin Rules (UMR) was set in motion at the 2009 G20 meeting following the global financial crisis.
A triumvirate of the Working Group on Risk-Free Reference Rates (RFRWG), the FCA and the Bank of England published joint statements in March and April (see my previous blog LIBOR Wars) reiterating that firms must move away from referencing LIBOR and reduce the stock of legacy LIBOR contracts.
The effect of the pandemic has been a mixed bag for many involved in our markets. The increase in volatility has seen a boost to trading activities and RegTech has been busy innovating to help overcome the compliance issues of remote working. With banks splitting personnel between the office, disaster recovery sites and working from home, issues have arisen that will spur technological development and system renewals.
Regulations are having a profound effect on the trading landscape alongside a proliferation of Codes of Conduct. In the UK, there are three codes replacing the former NIPS code covering FX, Money Markets and Precious Metals.
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.