This blog post originally appeared on TabbFORUM. In the 1975 summer smash Jaws, a rogue shark terrorizes a summer town. In addition to being responsible for more aquaphobia and galeophobia (the fear of sharks) than any other film in history, it does highlight different responses to a problem. Much of the film is set on [...]
Posts Tagged: capital markets
As global regulators move to implement new rules designed to control the swaps markets, the world’s futures exchanges are responding with bold and innovative structural changes intended to reduce or eliminate certain regulatory burdens faced by their customers, including increased trading costs and additional expenditures associated with alternative risk management processing methods.
New regulations, such as Dodd-Frank in the U.S. and and MiFID II Europe, are focused on systemic risk and transparency. However, in the Middle East, systemic risks are typically well-contained and transparency almost entirely refers to OTC instruments which are not prevalent in the region. Consequently, the new regulations in other regions will have minimal impact in the Middle East.
Trading in the region will eventually become more attractive and accessible to overseas investors, but the panelists in Dubai implied that regulators were understandably quite cautious at present. Of more concern was the diversity of regulatory regimes throughout the region.
The ASEAN trading link announced its launch in September 2012. The link will firmly establish the ASEAN nations as an investment and trading bloc, and is also expected to attract new foreign investment to the region, as well as provide better opportunities for local capital.
Local Asian brokerage firms will probably benefit most from the link. They are now in a better position to compete with major international brokerage houses to manage the inflow business coming from neighboring countries, and they will also now have outbound access to local exchanges. While international brokerages have already established their own networks and unilateral relationships at the individual exchanges, the ASEAN trading link will bring the local brokers up to speed.
While the $270 billion of annual revenue that over-the-counter (OTC) securities and derivatives dealers collect from trading will likely fall by at least 20 percent once mandatory clearing becomes effective, new revenues driven by collateral optimization services for non-cleared swaps are likely to backfill that lost revenue.
Collateral optimization will allow dealers supervised by U.S. banking regulators – which we’ll call “bank dealers” – to operate under specific margin collection rules to collateralize non-cleared swaps, including segregation, calculation, and netting.
This blog post originally appeared on TabbFORUM.
The ASEAN link went live this week, linking Singapore Exchange and Bursa Malaysia members and traders, completing a project started five years ago. Perhaps it was only natural that Asia should pick up on one of the latest developments in capital markets: interconnectedness.
A certain excitement spread through the securities lending market during August 2012. A new set of guidelines from ESMA (European Securities and Markets Authority) that govern securities lending for UCITS (Undertakings for Collective Investments in Transferable Securities) and ETFs (Exchange-Traded Funds) were published. These guidelines, due to come into force in February 2013, had the laudable objective of strengthening and harmonizing regulatory practices, but one particular aspect was jumped on and, unfortunately, misinterpreted.
Right now, there is a noticeable change occurring in the approach to risk management on the buy side, particularly within the pension fund area.
Traditionally, pension funds have been measured against a few core metrics… but market changes are challenging the traditional approach.
…Now perhaps you’re thinking, “Thanks for the summary, Russ. Gotta go.” But I’m not finished yet; my interest isn’t in equities. Equities are so 2008. In my world, equities are nothing more than a hedging instrument and an input to a pricing model. Options will be the playground for the trading community in 2013 and beyond.