News
UK Appeals Court Green Lights Two Important LIBOR-Related Cases
On November 8, 2013, a three-judge panel of the UK Court of Appeals handed down a much awaited ruling in two LIBOR-related cases. The ruling allows plaintiffs in two cases involving interest rate swap transactions referencing LIBOR to amend their claims to allege that the defendant banks made implied representations that their participation in setting the LIBOR rate was honest.
A Resilient UK Financial Sector Requires a Global Focus
R]eforms of domestic banking are far from sufficient for a global hub like London. Now is the time for a greater focus on what’s needed for resilient international banking and robust global markets.
Finadium: Collateralized Commercial Paper an “Elegant” Alternative to Repo
Is collateralized commercial paper (CCP) the the new “killer app” for liquidity? Finadium, a leading specialist research and advisory firm in the securities and investments industry, has published a a research report, “Collateralized Commercial Paper: Regulatory Arbitrage or Elegant Solution?” exploring whether innovative forms of CCP may at least in the short term take the place of repo.
In With the New: Federal Reserve and OCC Issue Final Risk-Based and Leverage Capital Rules
The Office of the Comptroller of the Currency (OCC) and Board of Governors of the Federal Reserve System (Fed) published final rules in the Federal Register on October 11, 2013 revising risk-based and leverage capital requirements for banking organizations and replacing existing interim rules.
BIS Issues Final Margin Requirements for Non-centrally Cleared Derivatives
The Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO) have published their final framework for margin requirements for non-centrally cleared derivatives. The document sets forth globally agreed standards for all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives.
Collateral Analysis:
Nineteenth century commercial banks earned their profits to a large extent by financing the inventories of shopkeepers and their supply chains. The expansion of manufacturing during the Industrial Revolution resulted in lower prices, broader distribution channels and an explosion in mercantile trade. As the first department stores were developed in the early 1850s, merchants increasingly asked for greater lines of credit to support their growing businesses. The standards used by bankers to evaluate their customers were described by J.S. Gibbons in The Banks of New York, Their Dealers, The Clearing House, and the Panic of 1857, which was published in 1858 by D. Appleton & Co. in New York.
Do Credit Derivatives Make the Concept of Insider Trading Meaningless?
In his paper published August 28, 2013, Yesha Yadav of Vanderbilt Law School posits that the rise of derivatives like credit default swaps (CDS) has made the concept of insider trading inoperable in markets where these derivatives trade. Yadav’s paper, “Insider Trading in the Derivatives Market (and What it Means for Everyone Else),” asserts that the credit derivatives markets actually may be more efficient by factoring in insider knowledge and transmitting this information more freely.
According to Yadav, the operation of the CDS market changes the assumption that shareholders lose when insiders trade using non-public information.
Prior to Dodd-Frank, the CDS market lived outside the insider trading rules, and the credit derivative market has operated using insider knowledge almost freely. New rules, however, expand the reach of the insider trading prohibition explicitly including the credit derivatives market.
Fed Begins Testing of Full-Allotment Overnight Reverse Repo Facility
“The purpose of the [full-allotment overnight reverse repo] facility is to establish a floor on money market rates and to improve the implementation of monetary policy even when the balance sheet is large. Even if our balance sheet increases significantly further and stays very large for many years, it will be useful to have this facility available to improve monetary policy control.”
CFTC Kicks Cross-Border Swaps Guidance Further Down the Road
On December 21, 2012, the CFTC issued a final exemptive order providing temporary relief from compliance with certain swap regulations and further proposed guidance relating to the application of certain swap-related provisions of the U.S. Commodity Exchange Act to swap activities outside the United States. The December 21 exemptive order adopts a number of provisions proposed by the CFTC in a July 2012 release, and addresses many of the topics covered in the CFTC’s proposed cross-border guidance (“Proposed Cross-Border Guidance”) also issued in July 2012.
25 Fordham Students Get the Chance to Peer Behind the Regulatory Curtain
On Wednesday, March 27, 2013, twenty-five lucky college students had the opportunity to travel to Washington, DC to visit some of the nation’s most important government agencies, and meet policy makers to discuss the nation’s economic governance.