• 1544

    MIFID II RECONCILIATION: Six scenarios participants cannot ignore

    With MiFID II transaction reporting set to disrupt legacy systems and existing processes, Manu Garg highlights six scenarios that will affect reconciliation.

  • 1227

    SIMM: tackling the initial margin obligation in OTC derivatives

    Regulatory reforms following the financial crisis have tested banks’ ability to adapt and fundamentally changed business models. The Standard Initial Margin Model (SIMM) is another addition that could reshape many derivatives trading and risk management practices. In this article, Sapient Global Markets’ Thomas Schiebe and Sendi Cigura in partnership with Patrice Touraine and Matthieu Maurice of Global Market Solutions look at what it means for banks and how they must tackle a new wave of data and technology challenges. Following the introduction of mandatory clearing for standardized derivatives, regulators created measures to deal with non-centrally cleared and non-standardized derivatives. This [...]
  • 1139

    BENCHMARK REGULATION: are EU markets ready?

    Volatility has foiled financial markets since the subprime crisis exposed a variety of shortcomings, prompting regulators to intervene with more stringent requirements. The crisis revealed a significant issue when major banks in the United Kingdom were accused of manipulating the London Interbank Offered Rate (Libor), a key benchmark for financial deals worth $300 trillion.1 Following the Libor scandal, regulators have voiced their concern about the potential manipulation of Euro Interbank Offered Rate (Euribor), Hong Kong Interbank Offered Rate (Hibor) and other key interest rate benchmarks. The European Securities and Markets Authority (ESMA) has responded with a new Benchmark Regulation (BMR) [...]
  • 894

    MiFID II & MiFIR: reporting requirements and associated operational challenges

    While the key objectives of Markets in Financial Instruments Directive (MiFID) I were to bring greater standardization and improvements in collateralization and risk management, MiFID II seeks to enhance transparency and supervision to ensure methodical markets and harmonize reporting requirements across member states. In this article, Mahima Gupta and Shashin Mishra summarize the obligations MiFID II imposes upon investment firms and explore the associated impact and operational challenges, some of which can be effectively outsourced to a vendor system. Download the PDF MiFID I came into effect in 2007 to facilitate cross-border financial services within Europe, ensuring a competitive landscape [...]
  • 938

    BULK NOVATIONS: addressing the five key challenges

    With new, tighter regulations driving capital markets firms to fundamentally transform their business models, many have turned to bulk novations in response to the structural reorganization of their legal entities as their portfolios are repositioned. But several issues have emerged throughout the bulk novation lifecycle, leading to inefficient transfers and undesirable risk exposure. In this article, James Bakelmun, Nick Fry, Sarah McLellan and Nathan O’Reilly outline these challenges and explain what firms can do to migrate their portfolios more efficiently and mitigate their operational risk or potential reputational damage. Download the PDF In the financial markets, novations—the act of legally [...]
  • 924

    EMRR: a crucial component to successful risk management

    Exceptions, or processing failures due to erroneous data, are a daily occurrence for market participants as they fulfill their regulatory reporting obligations. However, as regulators seek more granular data for over-the-counter (OTC) derivatives trading activity, exceptions are becoming more frequent and more complex. That’s driving the need for exception management in regulatory reporting (EMRR), which is the process of identifying, investigating and resolving conflicts during data reporting transfers. In this article, Basu Bishal and Rohit Narula explain why EMRR should be a component of every trading firm’s risk management system and how effective implementation can minimize compliance costs while freeing [...]
  • 89

    HOUSING BUBBLE 2.0: ready for another housing market crash?

    A study of the current housing finance market reveals the multidimensional reaction to events from the last decade is still in play throughout the global financial system. New regulation and regulatory bodies, wholesale legislative changes, the formation and adoption of new risk-management frameworks, reduced securitizations by private-label banks and increased scrutiny by the press are just a few of the factors contrasting today’s mortgage market with the pre-crisis era. But are mortgage markets truly more stable now than they were before 2008? In this article, Hans Godfrey and Adi Ghosh discuss how the government and regulators, as well as the [...]
  • 44

    DYNAMICS OF DISRUPTION: an ‘Uber’ approach to compliance reporting

    With MiFID II requirements looming, firms face the need to build the new capabilities necessary to meet complex mandates for trade and transaction reporting. Or do they? As Uber and Airbnb continue reshaping the transportation and hospitality industries, a growing number of firms are adopting a similarly disruptive approach to trade and transaction reporting— positioning themselves for greater cost efficiency, reduced risk and more time to invest in meeting customers’ expectations. In this article, Cian Ó Braonáin and Randall Orbon explore why it is no longer a matter of if—but rather when and how—firms will exit the “business” of trade [...]
  • 680

    BCBS-IOSCO: increasing the margin period of risk

    As the CCP market continues to expand, with clearing houses offering an increasing number of clearable securities and netting efficiencies, there is an increased focus on the fate of over-the-counter (OTC) derivatives that are as yet unclearable. These bilateral trades will be subject to the BCBS-IOSCO Initial Margin (IM) requirements, scheduled to phase-in from September 2016. This will result in higher IM costs, primarily as a result of the increased Margin Period of Risk (MPOR). The baseline MPOR for a netting set (i.e., a portfolio with a counterparty under a legal netting agreement) is 10 days, but under certain conditions [...]
  • 218

    CALCULATING THE CLEARING THRESHOLD: challenges for non-financial counterparties in the european union

    While EMIR mandates clearing and reporting requirements on over-the-counter (OTC) derivatives for Financial Counterparties (FCs), it exempts Non-Financial Counterparties (NFCs) from parts of reporting and clearing requirements only until their positions in proprietary trades remain within a pre-defined clearing threshold (defined for each asset class by ESMA). In order to avoid the infrastructure and process costs for the increased EMIR reporting and risk management responsibilities, every NFC has to closely monitor its vulnerability to breach the mandated clearing threshold. For many, however, this is no small task. In this article, Mahima Gupta and Shashin Mishra review the challenges involved for [...]