News
Building the Better Mousetrap: Two Views on Regulation and Innovation
“[M]ore than anywhere else in the world, the United States remains a place where a visionary can risk everything on a dream or an idea and have a fair chance of fighting for it. And he or she can do so in an environment where the investors who underwrite that dream are protected.” -SEC Chairman, Elisse Walter
CFTC Finalizes Important Exemption for Inter-Affiliate Swaps
The Commodities Futures Trading Commission may have chosen April Fools’ Day to approve an important exemption for inter-affiliate swaps transactions, but exemption is no joke. It provides some much needed relief from a perceived flaw in the new swaps regime under Dodd-Frank. The Dodd-Frank legislation amended the Commodity Exchange Act to require clearing of any and all swaps the CFTC determined should be subject to mandatory clearing, but provided no exemption for transactions between affiliates.
FSOC Punts on Money Market Funds, While SEC Hints at Floating NAV.
The Financial Stability Oversight Council’s recently released 2013 Annual Report revealed that the FSOC will defer to the Securities and Exchange Commission on further reforms for money market mutual funds (MMFs), so long as the SEC moves forward with “meaningful structural reforms.”
Valentines Day Was No Bed of Roses for SEC and CFTC Heads
The Senate Banking Committee spent the best part of its Valentine’s Day grilling Fed officials and agency heads about the regulatory implementation of Dodd-Frank. Despite holding the hearings on a day dedicated to romance and love, the Senators certainly did not woo their witnesses with bonbons and soft questioning.
When it Comes to Swaps, Futurization Means Innovation
As new regulations under Dodd-Frank move swaps from the OTC swaps marketplace into the futures marketplace, exchanges and swap participants have come up with new products that trade as futures, but provide the benefits of swaps transactions. They have also begun to devise swap products that are custom designed, and therefore ill-suited to exchange trading and clearing, and thus are exempt from the new regulations.
High Frequency Trading Once Again Has Congress’s Attention
High frequency trading is once again in the sights of Congress. The use of sophisticated computer algorithms to trade securities on a rapid basis at speeds far beyond the capabilities of human beings garnered much attention in the wake of the 2010 Flash Crash, as well as the more recent BATS IPO and Knight Capital fiascos.
UK Floats Legislation to Tame LIBOR
“The government has acted swiftly and is implementing Martin Wheatley’s recommendations as quickly as possible, introducing legislation that brings Libor within the scope of regulation and creating new criminal sanctions for attempted manipulation of Libor. Recent events have illustrated that Libor might not be the only benchmark subject to attempted manipulation. We are consulting on whether further benchmarks should be brought with the scope of regulation.” — Financial Secretary to the Treasury Greg Clark
Repo is Far from “Unregulated”
Repo is very much in the news lately, even coming up on the radar screen of the New York Times’ Gretchen Morgenson. Morgenson penned an article in the Times’ September 14, 2013 issue, After a Financial Flood, Pipes Are Still Broken, in which she worries that despite new rules on derivatives, the repo market remains largely unregulated.
A Top Down Approach to Resolutions of Globally Active SIFIs
The Bank of England and the US FDIC have issued a joint white paper, “Resolving Globally Active, Systemically Important, Financial Institutions,” focusing on “top-down” resolution strategies that involve a single resolution authority applying its powers to the top of a globally active and systematically important financial group, that is, at the parent company level. The December 10, 2012 paper discusses how such a top-down strategy could be implemented for a U.S. or a U.K. financial group in a cross-border context.
EC Crosses the Rubicon into Regulation of OTC Derivatives and Investment Advisers
On December 19, 2012, the European Commission adopted technical standards on the European Markets Infrastructure Regulation (EMIR) as well as a Delegated Regulation supplementing the Directive on Alternative Investment Fund Managers (AIFMD) (called “Level 2 measures”). These two measures have been under formulation and consideration since 2010, and the technical standards adopted on December 19 meet important preconditions to implementing EMIR and AIFMD throughout all EU member countries.