Tuesday, February 15, 2022

T+1: The Future is Now (or at least as early as 2024)

The SEC Boldly Sets Course for T+1 and T+0

Author: David Schwartz J.D. CPA

While real-time settlement is still something that may happen far in the future, perhaps on the Starship Enterprise, T+1 is now imminent. On February 9, 2022, the Securities and Exchange Commission proposed to make T+1 a reality. The proposal aimed at reducing risks in clearance and settlement seeks comment on shortening the current T+2 standard settlement cycle for most broker-dealer transactions by one day to T+1. Notably, the proposal also makes clear that T+0 is the ultimate and eventual goal and explicitly solicits comments on associated challenges and potential paths to achieving a same-day settlement cycle.

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Sunday, May 21, 2017

CFTC Chair Highlights Effect of Regulation on Liquidity

Urges Regulatory Recalibration and More Comity

Author: David Schwartz J.D. CPA

In a May 10, 2017 address, acting Chairman of the Commodity Futures Trading Commission (CFTC)  J. Christopher Giancarlo highlighted some unintended consequences regulation is having on the swaps markets. In his speech before the International Swaps and Derivatives Association 32nd Annual Meeting in Lisbon, Portugal Giancarlo talked about the changes to swaps trading liquidity, market fragmentation and regulatory comity in the post-reform global swaps markets. After providing an overview of how some aspects of the misapplication and miscalibration of regulatory reforms were harming global liquidity, he provided some astute observations on how to alleviate some of the harm being done to swaps markets in particular. 

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Thursday, January 28, 2016

OFR Report Highlights Unintended Consequences of Swaps CCPs

Author: David Schwartz J.D. CPA

On January 27, 2016, the Office of Financial Research (OFR), an arm of the Treasury Department created under the Dodd-Frank Act, issued its fourth annual report to Congress. The report highlights the results of OFR research, risks to financial markets, and OFR priorities for the coming year. Notable among its findings, the report suggests that reforms mandating central counterparties in the formerly OTC swaps market could unintentionally increase systemic risk in the long run rather than reducing it.   

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Tuesday, December 1, 2015

Swap Dealers Sued as Monopolists

Author: David Schwartz J.D. CPA

On November 25, 2015, the Chicago Public School Teachers’ Pension and Retirement Fund and other institutional investors filed a class action lawsuit in federal court alleging that ten of the world’s largest investment banks conspired to rig the lucrative interest rate swaps market.  The suit filed in the U.S. District Court in Manhattan accuses the investment banks of violating federal antitrust laws by colluding to create an anti-competitive stranglehold over the market for interest rate swaps for their own profit.  Plaintiffs say the ten defendant banks, Goldman Sachs Group, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse Group, Barclays Plc, BNP Paribas SA, UBS, Deutsche Bank AG, and the Royal Bank of Scotland worked together to prevent the trading of interest rate swaps on electronic exchanges, creating a monopoly, and extracting millions of dollars in overpayments from trading clients.

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Friday, July 12, 2013

Board Approval Required to Take Advantage of Swaps End-User Exception

Author: David Schwartz J.D. CPA
In their latest client memo, the Blank Rome law firm alerts directors and trustees of financial firms about their role in new swaps regulations.  In particular, the firm puts public companies on notice that their boards must take action in order to take advantage of the CFTC's end-user exception.   The end-user exception for swaps frees certain swaps transactions from the new requirement that all swaps be centrally cleared.
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