All - Center for the Study of Financial Market Evolution (CSFME)

SEC Puts the Brakes on Money Market Reforms

by David Schwartz J.D. CPA | Thursday, August 23, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

In an August 22, 2012 statement SEC Chair Mary Schapiro announced that the much anticipated money market reforms she has championed have hit a wall. It had been expected that the Commission would consider next week options for further reform like a free floating NAV, rather than a firm $1 NAV, perhaps a capital buffer, and a redemption restrictions. Schapiro announced that “because three Commissioners have now stated that they will not support the proposal and that it therefore cannot be published for public comment, there is no longer a need to formally call the matter to a vote at a public Commission meeting.”

Does LIBOR Have a Future?

by David Schwartz J.D. CPA | Tuesday, August 21, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

A discussion paper published on August 10, 2012 by a team commissioned by the UK Treasury’s Chancellor of the Exchequer takes a look at the structure and governance of LIBOR and the corresponding criminal sanctions regime.

Money Market Reforms: Have We Done Enough Already?

by David Schwartz J.D. CPA | Sunday, August 19, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

Ever since the Reserve Primary Fund “broke the buck” in 2008, regulatory reform of money market funds (MMFs) has been an area of intense debate. Following the financial crisis and given the important and pervasive role played by MMFs in the US and global economies, regulators embarked on a two-step process of reforming the regulation of MMFs. In 2010, the SEC approved new regulations intended to address credit quality, liquidity, maturity, and transparency concerns. Since that time, the SEC, legislators, the Fed, and market participants have vigorously debated “step two,” further regulatory measures aimed at reducing the risk of a run on MMFs and providing a cushion against losses. Are these further reforms necessary? Or have we done enough already?

IOSCO Wants Feedback on Money Market Reforms

by David Schwartz J.D. CPA | Sunday, August 19, 2012 | All, Formal Regulatory Remedies

At the request of the Financial Stability Board, IOSCO has published a consultation paper on the potential regulatory reforms of money market funds. The purpose of the consultation paper is to share with market participants IOSCO’s preliminary analysis regarding the possible risks money market funds may pose to systemic stability, as well as possible policy options to address these risks. IOSCO is actively seeking feedback on this preliminary work, and commenters have the opportunity to shape IOSCO’s ultimate recommendations to the FSB.

ISDA’s Killer Dodd-Frank Compliance App

by David Schwartz J.D. CPA | Saturday, August 18, 2012 | All

As part of its ongoing protocol project, the International Swaps and Derivatives Association (ISDA) has announced the launch of the August 2012 Dodd-Frank Protocol. The Dodd-Frank Protocol is designed to allow swap market participants to simultaneously amend multiple ISDA Master Agreements for the purpose of facilitating compliance with Dodd-Frank regulatory requirements, such as External Business Conduct Rules and others as they are finalized.

EU OTC Derivatives Reforms Have Major Pension Players Worried

by David Schwartz J.D. CPA | Wednesday, August 15, 2012 | All, Formal Regulatory Remedies

In their joint response to the European Securities and Markets Authority (ESMA) draft technical standards for the regulation on OTC derivatives, the Dutch Pension Federation, APG, MN, PGGM, Shell and Syntrus Achmea Asset Management, major players in the Dutch pension industry, were highly critical of the proposals, and said they could do more harm than good. They note that the proposals have a high probability of increasing costs for pension funds and their administrators, costs that will ultimately be borne by pension beneficiaries. While ESMA has said that the proposals aim to reduce risks via the use of central clearing and risk mitigation techniques and increase confidence with respect to margins, the joint response from the Pension Federation says that they are not convinced that the increase of the confidence level with regard to the margin will automatically lead to more safety.

Have Bailouts Made Banks Less Risky?

by David Schwartz J.D. CPA | Monday, August 13, 2012 | All

During the financial crisis, central banks, finance ministries, and legislatures across the globe put in place bank rescue packages for the most part financed by public funds. Have these unprecedented recapitalisations at public expense resulted in a reduction of risk in banks’ loan books?

Momentum Builds But No Consensus on Money Fund Reforms

by David Schwartz J.D. CPA | Sunday, July 29, 2012 | All, Formal Regulatory Remedies

The need for further regulations governing money market funds was once again hotly debated at Senate Banking Committee hearings last week. At the hearings, Treasury Secretary Timothy Geithner reiterated his concerns that the 2010 money market reforms enacted by the SEC just do not go far enough, and doubled down on his commitment to see the SEC enact further measures, saying: “My own judgment is that the SEC needs to go further. They can go further. And we should get on with the business of letting them expose to the world, to the markets, a set of options that the world can comment on.” Senator Corker added that he believed that the Financial Stability Oversight Council (FSOC) could act if the SEC fails to move forward with further money market fund reforms.

Basel and IOSCO Float Margin Requirements for Non-centrally-cleared Derivatives

by David Schwartz J.D. CPA | Tuesday, July 24, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) jointly have published a consultative paper on margin requirements for non-centrally-cleared derivatives. The paper presents the initial policy proposals emerging from the Basel Committee and IOSCO joint Working Group on Margining Requirements.

Is Money Market Fund Reform Just Regulatory Overkill?

by David Schwartz J.D. CPA | Sunday, July 22, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies

Already subject to a comprehensive regulatory regime, amendments in 2010 to the rules governing money market funds tightened regulation even further to make money funds more resilient to certain short-term market risks, and to provide greater protections for investors in a money market fund threatening to “break the buck.” More recently, however, Federal Reserve officials and some members of the Financial Stability Oversight Council have said money market funds are subject to runs, a source of systemic risk, and part of a shadow banking system that sorely needs even more regulation. In response, Melanie L. Fein, former senior legal counsel to the Board of Governors of the Federal Reserve System has published a paper describing why further changes to the money market regulatory regime are unwarranted overkill.

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