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The Depository Trust & Clearing Corporation (DTCC) today released a two-year industry roadmap for shortening the settlement cyclefor U.S. equities to one business day after the trade is executed (T+1). In its latest paper, “Advancing Together: Leading the Industry to Accelerated Settlement,” DTCC highlights the immediate benefits of moving to a T+1 settlement cycle, including cost savings, reduced market risk and lower margin requirements as well as the firm’s plans for galvanizing the necessary support for the project across a wide range of market participants.The Move to T+1In order to move to T+1, industry participants must align and agree to shorten the settlement cycle by implementing the necessary operational and business changes, and regulators must be engaged. DTCC says it does not have the regulatory or legal authority to unilaterally change the settlement cycle, but despite this, the organization said it continues to take a leadership position to shorten the settlement cycle to T+1, similar to the role it played in 2017 to move to T+2.
Vladimir Tenev, CEO of Robinhood, an American financial services company known for offering commission-free trades of stocks and exchange-traded funds via a mobile app, is pushing for the settlement infrastructure to be modernised.This follows the course of events from January when Robinhood had to restrict trading in stocks including GameStop because of the volatility caused by retail traders.The surge in buying of GameStop and other 'meme stocks' was partly aimed at creating a short squeeze on several hedge funds with known positions against the high-street games retailer.
The International Securities Lending Association (ISLA), has confirmed the publication of ‘Legal Clause Library & Legal Data Standards‘, a white paper produced in association with D2 Legal Technology (D2LT).Documentation plays a crucial part in the securities lending industry, creating a set of obligations between the contracting parties and recording the terms of their transactions and relationship, says ISLA. Accordingly, any successful digital transformation requires a focus on documentation. The trade group has therefore mobilized a clause library and taxonomy project in respect of the GMSLA documentation suite.The ‘Legal Clause Library & Legal Data Standards‘ white paper focuses on digital data standards created by the clause library and taxonomy project through a look at the key aspects of the securities lending industry:how the industry is positioned today;a vision for what the strategic state looks like;the steps required to achieve this strategic state;how best to achieve adoption across the industry; and immediate next steps. It concludes that in an increasingly data-driven world, firms are moving to operationalise their business through automating data-driven processes, allowing greater efficiency, scalability, and resilience through the medium of data. Key to this, according to the paper, is the representation of contractual terms and the expression of business outcomes...
Speaking at the International Swaps and Derivatives Association’s (ISDA’s) Collateral Management Virtual Showcase, Duncan Scott, Product Management Consultant for DTCC’s Margin Transit Utility (MTU), positioned MTU as an automation tool or ‘plug-in’ application, and described how MTU can extend its automation advantages to more products and use cases over time. The event allowed several providers of automation solutions for collateral management to highlight the features and benefits of their offerings and discuss the importance of automating the end-to-end collateral lifecycle.
DTCC has long advocated for shortening the settlement cycle to enhance market resilience, reduce margin requirements and lower costs for investors. In 2017, we led the industry-wide initiative to shorten the U.S. settlement cycle to T+2 – the most significant change to the market’s settlement cycle in over 20 years.Although DTCC’s equities clearing and settlement subsidiaries, NSCC and DTC, can support some T+1 and even same-day settlement using existing technology, many market participants don’t leverage this option because of market structure complexities, legacy business and operational processes.While the industry continues to align itself around shortening the settlement cycle further, as announced in January 2018, DTCC has begun steadily implementing a series of operational improvements that optimize current processes to further accelerate settlement times, and to lay the foundation for what we see as an eventual move to T+1.
The European Commission has granted Euroclear UK & Ireland (EUI) the ability to continue to offer issuer central security depository (CSD) services after the Brexit transition period ends on 31 December 2020.EUI will be able to continue settling Irish-domiclied funds and securities up until the end of the new extension period of 30 June 2021.This comes as the EC has decided to adopt an implementing act determining the legal and supervisory requirements for UK CSDs as equivalent to those in the EU.
A market survey by Acuiti has found that almost all tier one and tier two banks queried plan to invest more in derivatives post-trade operations over the next three years than in the last three, as a result of the COVID-19 fuelled market volatility seen in the first months of 2020.Almost half of tier one and two banks that responded to the survey are expecting to invest more than $5 million over the next three years in “long-awaited upgrades to post-trade processing capacity”.
Foreign exchange settlement specialist CLS will provide its netting calculation platform to clients of global FinTech provider Finastra under a new partnership. Finastra’s clients, including over 800 corporate and buy-side firms, will gain access to the CLSNet platform following an integration between CLS and the Finastra Fusion confirmation matching service.
Major investment banks will increase investment in post-trade infrastructure after reporting failures with back-office processes during the market volatility earlier this year.According to a recent survey by Acuti, 95% of tier one and tier two banks are planning to invest more than $1 million in post-trade infrastructure over the next three years, with 45% hoping to invest more than $5 million.
The Central Bank of Iceland (CBI) and SIA, a European hi-tech company in payment services and infrastructures, have gone live with the new real-time gross settlement system (RTGS) and the new instant payment platform.The new payments system is a more strategic and modern infrastructure and enables closer cooperation with other central banks.CBI manages all interbank payments in the country: it currently processes up to one million payments with peaks of 160,000 per hour despite the small population of just over 365,000.
At a time when the costs of doing business are skyrocketing, is it sustainable for banks to persevere with the current approach to trade settlement failure?While there will always be trades that fail, the tolerance levels of banking boardroom execs must be at breaking point right now if the latest Esma Trends Risks and Vulnerabilities (TVR) report is anything to go by. The study shows a dramatic surge in the level of settlement fails during the second half of March, with fails climbing to around 14 percent for equities and close to six percent for government and corporate bonds.
The Governing Council of the ECB has decided to reschedule the launch of the Eurosystem Collateral Management System (ECMS) from November 2022 to November 2023.This development follows the Governing Council’s earlier decision to extend the timeline of the T2-T2S consolidation project by one year. It addresses the concerns of market participants that the current adverse environment would hamper their preparations.
Regulators for the UK and US derivatives markets have signed a new cross-border supervisory agreement for clearing houses operating in both countries. The Bank of England (BoE) and the US Commodity Futures Trading Commission (CFTC) announced the signing of a new memorandum of understanding (MOU) where they have established a cooperation framework for overseeing international clearing houses.
New layers of risk and complexity call for holistic, collaborative and cross-border responses.As a vast majority of the financial industry's workforce continues working remotely, organizations are operating in entirely new ways. No one could have predicted at the end of last year that a global pandemic would impact the world's workers in 2020 and force millions of financial services staff, and staff across other industries, into a remote work environment.
The International Securities Lending Association (ISLA) has formed three new steering groups to address the regulatory, digital and associated market practice changes the industry is experiencing through the recent pandemic.ISLA runs a variety of working groups for its members, covering all aspects of advocacy, tax, legal, regulation and best practice in order to allow members to discuss challenges, debate issues, conceive ideas and seek solutions.
The Monetary Authority of Singapore and nine international banks have leant their weight to the establishment of a research institute dedicated to green finance research and talent development.The Singapore Green Finance Centre, run by Imperial College Business School and the Lee Kong Chian School of Business at Singapore Management University (SMU), will pursue research to help develop strategies for policy makers and financial institutions to support Asia’s transition to a low carbon future.
The Bank of Japan will begin central bank digital currency (CBDC) experiments early next year but says it still does not yet have any plans to issue its own digital yen.Central banks around the world have been grappling for years with the pros and cons of creating their own digital currencies.
HSBC has been appointed as the as the full securities service provider by Haitong International Asset Management (HK) Limited for Haitong MSCI China A ESG ETF, the first broad-based environmental, social and governance exchange-traded fund listed on Hong Kong Stock Exchange.
Buy-side members must begin reporting under the EU's Securities Financing Transactions Regulation (SFTR) from today as part of the third phase of implementation.SFTR reporting obligations now apply to investment funds, pension funds and (re-)insurance undertakings, which join sell-side firms, central counterparties and central securities depositories that began reporting in July.
This Finadium report investigates current dynamics in the Total Return Swaps market with a focus on bank resource optimization. We deliver market sizing through H2 2020 and analyze the dynamics that lead to a continued preference for TRS over physical financing transactions.
Central clearing counterparty (CCP) LCH SA will support the clearing of bonds issued as part of the European Union’s temporary support to mitigate unemployment risks in an emergency (SURE) programme.The bonds issued as part of the scheme will be eligible for clearing at LCH SA’s RepoClear service. LCH SA offers clearing of euro-denominated bonds and repos across 13 government bond markets. It will also support and clear the upcoming Next Generation EU Bonds.
As much as 30 percent (500,000) of legal entity identifiers globally are out of date and in need of renewal, according to LEI Worldwide, a GLEIF-registration agent and LEI provider.LEIs are a 20-character alphanumeric code that, as the name suggests, allows regulators to identify individual counterparties in a transaction.They are currently required under several rules frameworks including the Securities Financing Transactions Regulation and the European Market Infrastructure Regulation, among others.
TORA, the provider of industry leading trading technology, has today announced that it has expanded its multi-asset Order & Execution Management System (OEMS) trading platform to support fixed income.TORA’s OEMS now offers a range of proprietary tools to help traders access bond liquidity and to efficiently execute and manage bond orders across a broad range of sectors. With coverage across government, sovereign, supranationals, agency, investment grade corporate bonds, high yield, emerging markets, covered bonds and municipal bonds the new offering will appeal to global fixed income managers. This adds to existing coverage of fixed income futures, options and ETFs.
In collaboration with Tier 1 banks, SmartStream has launched Affinity, a new artificial intelligence (AI) ‘observational learning’ solution.SmartStream’s new solution is set to meet the technical demands and business agility for operational data management and data quality processes.
Due to the continued economic uncertainty from the coronavirus response, the Federal Reserve Board on Wednesday announced it will extend for an additional quarter several measures to ensure that large banks maintain a high level of capital resilience.