Fairness in Fixed-Income Markets
What are the essential building blocks of market integrity? Information, and fair access to that information. Transparency, but not onerous transparency. “There was a lack of fixed-income data, and large investors had better access to data,” said Ruxandra Smith, Senior Accountant at the Ontario Securities Commission (OSC), the first of three speakers at a luncheon sponsored by the CFA Society Toronto on changes in the fixed income markets in Canada. The event was held at the Toronto Board of Trade on September 18, 2015. Smith was referring to hot-button issues identified in the April 2015 report on the Canadian fixed […]
OTC Market 2. A New Paradigm
“How will errors be handled? That’s the biggest area of discussion with SEFs,” said Bis Chatterjee, Global Head of E-Trading and New Business Development, Credit Markets, at Citigroup Global. SEF refers to a Swap Execution Facility. He was the second of two speakers at a GARP-sponsored webinar, about changes to the over-the-counter (OTC) credit default swaps (CDS) market, held on April 15, 2014. “The market had less time than it would have liked to review various rules of the new guideline,” Chatterjee said, referring to the flurry of market response to the new regulations brought in by the US Commodities Futures […]
OTC Market 1. “It was a busy 15 months…”
Over the past fifteen months, “the biggest paradigm shift that we’ve seen in the last twenty years” has occurred, said Nathan Jenner, Chief Operating Officer at Bloomberg Electronic Trading. He was the first of two speakers at a GARP-sponsored webinar, held on April 15, 2014, about changes to the over-the-counter (OTC) market. Jenner put the changes in context: the new legislation driving the changes arose from the 2009 G20 summit in Pittsburgh that occurred on the heels of the 2008 financial crisis. There were three areas the signatory nations wanted to focus on, he said: “reducing systemic risk, improving transparency, […]
Volcker Rule Implementation 2. Proprietary Trading
The provisions of the Volcker Rule mean that banks are “turning their attention to difficult decisions that must be made,” said Anna Pinedo, Partner at Morrison & Foerster and the second of two speakers during a GARP webinar on April 1, 2014. The Volcker Rule defines proprietary trading as a bank “engaging as principal for” its own “trading account” in a “purchase or sale of one or more financial instruments,” including derivatives, noted Pinedo. Pinedo reviewed the financial instruments that must be assessed for compliance with the new rule. “A lot of our clients itemized and inventoried products to determine […]
Volcker Rule Implementation 1. Assess Yourself
“The Volcker Rule is a negative rule, namely, you are guilty until you prove yourself innocent,” said Robert Lendino, Associate General Counsel at BB&T, and the first of two speakers during a webinar hosted by GARP on April 1, 2014. “And the proof must be furnished by the bank’s compliance group.” The Volcker Rule, drafted in the aftermath of the 2008 financial crisis and approved December 10, 2013, prohibits banking entities from engaging in proprietary trading, and from having ownership in, or acting as sponsors to, certain commodity pools, hedge funds, and private equity funds. [Note: for readability the remainder […]
Fixing Broken Windows 4. Reducing Exposure To Investigations
“Staff training on policies and procedures is critical,” said Luke Cadigan, “to reduce exposure to insider trading investigations.” Cadigan, a partner in the Government Enforcement Group at law firm K&L Gates, was the final speaker in a four-part webinar on “Fixing Broken Windows” organized by GARP on March 11, 2014. Cadigan emphasized the message of the past three speakers, namely, that the Securities and Exchange Commission has become much more focussed on catching financial wrongdoing—from the lowest levels up. Investigations take time and effort and can be costly, thus, firms “want to convince the SEC staff there’s nothing there they […]
Fixing Broken Windows 3. Operation Perfect Hedge
The past seven years of Operation Perfect Hedge have been a “whirlwind,” said David Chaves, Securities Program Coordinator of the Federal Bureau of Investigation. He was the third speaker in the four-part webinar panel on March 11, 2014, “Fixing the Financial Industry’s Broken Windows,” sponsored by GARP. The undercover operation was born in 2007, amid the confluence of several factors that produced the financial crisis. At the time, there were a couple of “pump and dump” schemes but the FBI “couldn’t put anyone in,” Chaves said. Two individuals were identified by the Securities and Exchange Commission through market analysis. “Those […]
Fixing Broken Windows 2: How to be there when you’re not really there
“With only 4200 employees, the SEC must rely on force multipliers”, said Valerie Szczepanik, Assistant Director of the Asset Management Unit, Division of Enforcement, Securities and Exchange Commission. She was the second of four panellists at the GARP webinar “Fixing the Financial Industry’s Broken Windows” held on March 11, 2014. SEC Chair Mary Jo White has emphasized the SEC must be everywhere and appear to be everywhere, said Szczepanik, who outlined six factors helping the SEC carry out its mission in the face of increasing complexity in the financial world. The SEC is increasing its collaboration with other regulators and […]
Trading Book Capital: Repercussions of a Revised Framework
“Currently, there’s a large gap between models and the standardized approach. [The members of the Basel Committee] are trying to bring these back into line,” said Patricia Jackson, Head of Financial Regulatory Advice at EY (formerly known as Ernst & Young). She was the second of two speakers at a GARP-sponsored webinar on recently proposed changes to the trading book capital requirements. Strengthening the boundary between the banking book and the trading book “could have a significant impact,” Jackson said, because it will be harder to move positions. The change was made “to reduce arbitrage opportunities for placement with respect […]
Trading Book Capital: A Revised Framework
The proposed changes to trading book capital requirements are “a regulatory trade-off among the objectives of simplicity, risk sensitivity, and comparability,” said Mark Levonian, Managing Director and Global Head at Promontory Financial Group, and the first of two speakers at a webinar sponsored by the Global Association of Risk Professionals held February 11, 2014. Levonian acted as “tour guide” for the Basel Committee’s recently proposed changes to the trading book capital requirements. Highlights of the changes are: the revised standardized approach, more rigorous testing, and replacement of the value at risk (VaR) measurement with expected shortfall. “The perception from the […]