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

Lack of Haircut Data Hampers E.U. SFT Risk Assessment

by David Schwartz J.D. CPA | Thursday, March 30, 2017 | All, Disclosure Regimes, Formal Regulatory Remedies

The European Securities and Markets Authority (ESMA)’s report on Trends, Risks, and Vulnerabilities No. 1, 2017 (TRV) is the body’s latest effort to highlight areas of risk facing European financial markets. Noting that financial markets remained relatively calm since its last quarterly assessment, ESMA said that risks in the markets “remained at high levels, reflecting very high risk in securities markets, and elevated risk for investors, infrastructures, and services.” ESMA’s overall risk assessment remained unchanged with market and credit risks remaining at “the highest level,” while liquidity and contagion risk remained merely “high.” The report also identified political and policy uncertainties following Brexit and the U.S. elections as well as potential repercussions from the upcoming elections in some E.U. member states as the main risk drivers for 2017. ESMA also expressed concerns about haircut levels in securities financing transaction (SFT) markets but said that lack of haircut data was a significant impediment to assessing risks in SFT markets.

OFR Launches Initiative to Reduce Regulatory Reporting Burden

by David Schwartz J.D. CPA | Wednesday, March 29, 2017 | All, Disclosure Regimes, Formal Regulatory Remedies

In a March 16, 2017 address before the Financial Data Summit in Washington, DC, Richard Berner, Director of the Office of Financial Research (OFR), announced an initiative to identify areas of “duplication, overlap, and inefficiency in regulatory reporting.” The initiative is being undertaken in partnership with the Financial Stability Oversight Council (and its member agencies). The goal of the project is to “improve data quality and reduce the reporting burden” faced by regulated financial firms.

ISDA Says it’s Time to Revamp the Derivatives Markets

by David Schwartz J.D. CPA | Sunday, October 23, 2016 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies

The fast pace and broad scope of new regulation are driving participants in the complex derivatives markets to adapt quickly. Layers of old infrastructure and practices built up over time need to be overhauled to keep up with new regulation, technological change, and overall structural changes in derivatives markets. In a September 15, 2016 white paper, the International Swaps and Derivatives Association, Inc. (ISDA) has called for greater standardization and automation of derivatives trade processes in order to improve efficiency, reduce complexity, and lower costs for market participants. According to ISDA’s chief executive Scott O’Malia, “More recently, the sheer pace of regulatory change has meant firms have been under pressure to tackle the next pressing deadline. The result is a derivatives infrastructure that is duplicative and based on incompatible operating standards, and this isn’t sustainable.”

FSOC Wants Better Securities Lending and Repo Data

by David Schwartz J.D. CPA | Wednesday, October 19, 2016 | All, Disclosure Regimes

In its 2016 annual report published in July, the Financial Stability Oversight Council (FSOC) said that more and better data was needed to assess the potential systemic risks associated with securities lending and repo. The super-regulator called for more transparency and better data collection from both lenders and borrowers in securities lending and repo markets.

FINRA and SEC to Focus on Advisor Fees

by David Schwartz J.D. CPA | Tuesday, January 19, 2016 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies

Both FINRA and the Securities and Exchange Commission have indicated a renewed interest in the fees charged by investment advisors. In a May 2016 notice, FINRA announced a mutual fund fee waiver sweep intended to gather information regarding whether advisors had mechanisms in place to ensure that mutual fund investors are receiving promised fee waivers and reimbursements. The SEC’s investor advocate Rick A. Fleming announced in his annual report to Congress published on June 30 that improved disclosure of fees and expenses charged by financial advisers is a top priority for his office in the new fiscal year.

CSMFE Submits Comments on FSB Data Collection Proposals

by David Schwartz J.D. CPA | Saturday, December 19, 2015 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies, ROSE

On February 12, 2015, the Center for the Study of Financial Market Evolution (“CSFME” or the “Center”) filed its response to the Financial Stability Board’s (FSB) consultation, Standards and Processes for Global Securities Financing Data Collection and Aggregation (“Consultation Paper”). The Consultation Paper proposes a system of data collection intended to help market supervisors infer changes in systemic risk that are said to be created by securities lenders, repo traders and margin lenders. Previously, as part of their larger workstream on shadow banking, the FSB recommended that national/regional authorities collect appropriate data on securities financing markets to help the FSB better assess ongoing financial stability. The Consultation Paper is a proposal regarding what kinds of data on repo, securities lending, and margin lending should be collected, how they should be collected, and in what format.

FSB Finalizes Standards and Processes for Global Securities Financing Data Collection and Aggregation

by David Schwartz J.D. CPA | Thursday, November 19, 2015 | All, Disclosure Regimes, Procedural Changes, ROSE

On November 18, 2015, the Financial Stability Board (FSB) published its final Standards and Processes for Global Securities Financing Data Collection and Aggregation. The final standards are based on the FSB’s previous November 2014 consultation paper and define the data elements for securities lending, repo, and margin lending that national and regional authorities will be asked to report in aggregate to the FSB.

The standards build on the November 2014 consultation paper, including public comments, as well the policy recommendations from the FSB’s August 2013 report Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos, in particular its recommendations to improve transparency of securities financing markets. T

SEC Adopts New Rules Governing Security-Based Swaps Transactions

by David Schwartz J.D. CPA | Tuesday, January 20, 2015 | All, Disclosure Regimes, Formal Regulatory Remedies

The SEC has issued final rules governing security-based swap data repositories (SDRs) prescribing reporting to regulators and setting public disclosure requirements for security-based swap transaction data. These new rules implement mandates under Title VII of the Dodd-Frank Act requiring the SEC and CFTC to regulate swaps markets. The final rules approved by the Commission on January 14, 2015 “provide a powerful framework for trade reporting and the public dissemination of information that addresses blind spots exposed by the financial crisis.”

Jumping into Dark Pools and Heading off Disruptive Trading

by David Schwartz J.D. CPA | Monday, January 19, 2015 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies

Wednesday, November 18, 2015, was a busy day for the Securities and Exchange Commission. That morning the Commission convened to propose new rules to enhance the transparency of alternative trading systems, including “dark pools.” Later that day, Chairman Mary Jo White testified before Congress about the Commission’s plans to combat disruptive trading, to require registration “of certain active proprietary traders and improvements of firms’ risk management of trading algorithms,” as well as plans for rules addressing pre-trade pricing transparency in fixed income markets. The very next Wednesday, in what appears to be a coordinated approach to the SEC’s, the CFTC proposed its own set of rules designed to take on automated trading and disruptions that can be caused by rapid algorithmic trading.

Benchmarking data called into question

by Ed Blount | Friday, December 19, 2014 | All, Disclosure Regimes

Convenience and low cost have always been the prime motives for customers to use bank-provided benchmarks in their portfolio analytics. That user model, shaken by the Libor scandal, now seems upside down after US, UK and Swiss regulators fined 5 major banks more than US$3 billion for rigging FX rates in London.

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