News
SEC Gives the Green Light to Active ETFs Using Derivatives
In an address before the ALI Conference on Investment Adviser Regulation in New York City on December 6, 2012, Norm Champ, the new Director of the SEC’s Division of Investment, announced that the “Division staff will no longer defer consideration of exemptive requests under the Investment Company Act relating to actively managed ETFs that make use of derivatives.”
Should We Be Alarmed About Empty Voting?
Should we be alarmed about empty voting? According to a recent article, “A Call to Arms on Empty Voting!” by Andrew MacDougall, Robert M. Yalden and Jeremy Fraiberg, yes, we should indeed. Using a proxy battle over a proposal by Canadian company, TELUS to eliminate its dual class share structure earlier this year as an example, MacGougall, Yalden, and Fraiberg assert that as “the number of public M&A transactions increases, and if U.S. hedge funds continue to look for opportunities in Canada to engage in strategic gamesmanship, concerns about empty voting will also increase.”
Is the CFTC Fatally Fragmenting the Global Swaps Market?
On July 6, House Financial Services Committee Chairman Spencer Bachus (R-AL) initiated a series of hearings reviewing the two-year experience of the Dodd-Frank Act, and in particular the effects of its derivatives provisions. Prompted by the June 28 release by the CFTC of proposed interpretive guidance regarding the application of the Dodd-Frank Act to non-US persons engaging in swaps activities with a connection to the US, Bachus also urged the Senate to pass legislation, HR 2682, codifying and clarifying the end-user exemption from Dodd-Frank derivatives regulation.
FSB Renews its Focus on Shadow Banking
“Appropriate monitoring and regulatory frameworks for the shadow banking system needs to be in place to mitigate the build-up of risks.”
Forex Swaps and Forwards Win Vital Exemption from Dodd-Frank
“Unlike other derivatives, FX swaps and forwards already trade in a highly-transparent, liquid and efficient market. This final determination is narrowly tailored.
FOMC Mulls Change of Tactics to Fed Funds Rate Changes
The latest Federal Reserve Open Market Committee (“FMOC”) minutes reveal serious consideration of an approach to monetary policy whereby the Fed uses quantitative triggers based on unemployment rates and inflation, as opposed to date-based thresholds, to guide its changes in the federal funds rate.
FSOC Pulls Rank and Issues Its Own Money Fund Reform Proposals
Pursuant to powers granted to it by Section 120 of the Dodd-Frank Act, on November 13, 2012, the Financial Stability Oversight Council (“FSOC”) approved proposed recommendations for the structural reform of money market mutual funds (“MMFs”).
EU Members Tinker With Short-Selling Bans, But to What Effect?
On October 19, 2012, Spain’s financial regulator the CNMV announced that it would extend its ban on short selling until October 31 and has also submitted a proposal to the European Securities and Markets Authority (ESMA) to impose a further three month ban, effective November 1, 2012.
Stricter Capital Requirements Forcing as Many as 25% to Exit the Market
Increased capital requirements are squeezing as many as 25% of financial firms out of certain business lines, according to the fourth annual survey by the Professional Risk Managers’ Association (PRMIA), which was co-sponsored by SunGard. The survey finds, among other things, that the introduction of central clearing is expected to result in lower margins, increased collateral requirements, and generally increase the cost of doing business in OTC derivatives.
SEC Proposes OTC Derivatives Reforms. Defers Cross-border Worries.
On October 17, 2012, the SEC published its long awaited proposals for new rules governing “security-based swaps.” Recognizing the considerable concern over the cross-border effect of this proposed new regime for OTC derivatives, the Commission chose to set those worries aside to be addressed more fully in a forthcoming separate release. They explain that this approach will allow market participants, foreign regulators, and others an opportunity to weigh in on the issues raised by the proposed OTC Derivatives framework as a whole.