Is the last bastion of the “traditional” FX market about to be overrun? Talking to market participants and technology providers, Colin Lambert is starting to think that market structure change in FX swaps is, finally, upon us In terms of false starts, the restructuring of the FX swaps market has, over the past decade and […]
There is plenty on the run sheet for this week’s podcast as Galen Stops quizzes Colin Lambert over a report that links FX swaps liquidity and spreads to spot. Lambert confesses to being a little puzzled over some of the statements in the report and willingly confesses to Stops’ accusation of him being an FX […]
Baton Systems, a provider of distributed ledger technology (DLT)–based post-trade solutions for capital markets, and JP Morgan have developed a solution that enables near real-time cash and collateral transfers to multiple clearing houses. The new service addresses the challenge of having to tie-up excess funds across the clearing workflow by integrating settlement instructions for custodians […]
New regulations will increase the cost of FX prime brokerage (FXPBs) services and all market participants – including executing brokers (EBs) – will have to share these costs, says a new report from Citi.The report, Collateral Damage? How Uncleared Margin Rules Will Revolutionise the FXPB Business Model, argues that FXPB is entering a “new market paradigm” driven by upcoming regulatory requirements that will increase both the value proposition and the cost of the services that they provide.The Uncleared Margin Rules (UMR) alluded to in the title of the report require market participants to post and segregate initial margin (IM) for derivatives transactions, including FX forwards, swaps and options, that are traded bilaterally.
The Futures Industry Association (FIA) has filed a response to the Basel Committee on Banking Supervision urging the adoption of FIA’s suggested modification to the leverage ratio and to recognise the exposure-reducing nature of client collateral in order to align regulatory incentives.
Central clearing of derivatives was a key pillar of the G20 countries response to the post-2008 financial crisis reforms to reduce systemic risk in the financial system, however FIA argues that to date, the leverage ratio’s failure to recognise collateral has had a direct negative impact on the ability of banks to provide clearing services to customers.
NEX Group (Nex) has launched a new cash and collateral movement workflow tool that enables clients to make cash movements and money market sweeps.
Created through the partnership between Nex Optimisation and Nex Markets, the new product, called Pivot, connects the Enso Core platform with Nex Treasury, a cash and FX liquidity management centre for the corporate and bank community. The new service aims to help buy side institutions act on cash insights identified within EnsoCore, a treasury, counterparty risk and portfolio financing workflow platform, to help clients make timely decisions to optimise their overall counterparty relationships, the firm says.
By using Pivot, Nex says that hedge funds will be able to execute cash payments directly through the portal for margin management, manage third party relationships, and invest excess cash in money market funds.
CloudMargin and DTCC-Euroclear’s GlobalCollateral unit have entered into an agreement to connect CloudMargin with the latter’s Margin Transit Utility.
LCH has introduced a new type of client account within its SwapClear service.
The account allows buy side clients to deliver collateral directly to the clearing house and to retain beneficial title to it. Segregation at an International Central Securities Depository (ICSD) ensures that such securities collateral remains client-specific.
This aims to increase operational efficiency and also eliminates the transit risk arising where a client delivers collateral to the clearing house via its clearing member.
JP Morgan is the first clearing member, and Aviva Investors is the first buy side client, to use this new account type. BNP Paribas and HSBC have also confirmed their readiness to support the new account structure.
Market and regulatory reforms are forcing buy side firms to look for new ways of accessing collateral, funding and liquidity, according to a new report from BNY Mellon and PWC.
Based on a survey that 120 buy side respondents with a combined $12 trillion in AUM participated in, the report claims that “access to high-quality collateral, funding and liquidity is not only a pressing concern, but has emerged as the essential new performance driver for the buy side”.
The current challenge with accessing these is twofold.
DTCC-Euroclear GlobalCollateral, a joint venture of Euroclear and The Depository Trust & Clearing Corporation (DTCC), says that State Street has agreed to participate in a pilot program to test their Margin Settlement Messaging Service. The service, powered by Margin Transit Utility (MTU) technology, has been developed to provide straight-through-processing for the settlement of margin obligations. […]