MarketVoice News
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What the Market Is Getting Wrong About Market Data
Q: Why is market data so critical in today’s equity markets? A: The U.S. equity markets are the envy of the world. To put this in context, more capital has been raised by U.S. listed companies so far this year than the GDP of some members of the European Union. Advances in technology and adoption of regulatory policies that increased competition among execution venues have enabled retail investors to buy and sell stock more cheaply than ever. Unlike the futures markets, U.S. equity markets are now incredibly fragmented as a by-product of this competition. Policy decisions — specifically, Regulation National Market System (Reg NMS) and Regulation Alternative Trading System (Reg ATS) — have contributed to the fragmentation of the U.S. equity markets, where there are now 13 licensed exchanges and more than 50 alternate trading systems and dark pools where listed securities can trade.
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Viewpoint - Derivatives markets demand a global approach
As I write this in early November, I am preparing for a trip to Beijing and Singapore, and I only just returned from a trip to Chicago. I can’t help but think about the connections that link our global markets together. I start with Scandinavia. As I am sure many of you know, a large default took place in September in the power derivatives market operated by Nasdaq. Nasdaq has published several FAQs regarding the default and is conducting an in-depth analysis of that incident, so it would be premature to jump to conclusions. However, this incident has caused ripples far beyond that marketplace.
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Special Alert: U.S. banking regulators propose SA-CCR methodology for calculating derivatives exposures
On Oct. 30, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued a rulemaking proposal seeking comment on an alternative approach to calculating capital requirements for derivatives. The proposal, if adopted, would permit banks to use the "standardized approach for measuring counterparty credit risk", also known as SA-CCR, as an alternative to the current CEM methodology for calculating derivatives exposure under U.S. regulatory capital rules.
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People News - October 2018
Securities lawyer and market regulator Gary Goldsholle has joined law firm Steptoe & Johnson as a partner after nearly four years as deputy director of the Securities and Exchange Commission’s Division of Trading and Markets. Goldsholle will work out of Steptoe's Washington office on financial services, public policy, blockchain and cryptocurrency matters. At the SEC, he was involved with nearly all aspects of the securities markets, including broker-dealer registration and sales practices, order routing and execution, and clearance and settlement. He also was a member of the SEC’s fintech working group and participated in the SEC’s orders pertaining to cryptocurrency trading platforms and bitcoin ETFs.
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U.S. trade policies cause pain for farmers but renew interest in agricultural derivatives
For the agricultural futures and options markets, the uncertainty caused by current U.S. trade policies is creating both the best of times and the worst of times, according to a panel of experts speaking at the FIA's annual trade show. Blu Putnam, chief economist at CME Group, noted that the overall level of trading in agricultural derivatives is generally up compared with last year. In particular, "short-dated options have just exploded," he said. These products are crucial for managing the risk of an immediate price break, he explained, when "some news comes out and prices move here to there very quickly."
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Industry experts expect digital asset derivatives will focus on bitcoin for now
The marketplace for derivatives backed by digital assets is changing rapidly. But depending on who you ask, that pace of change could either be too fast—or not fast enough.
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CFTC's Berkovitz expresses optimism over agency's agenda
Recently confirmed Commissioner Dan Berkovitz expressed optimism that the Commodity Futures Trading Commission will forge ahead on a "timely" agenda of issues in a bipartisan way.
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BaFin's Hufeld calls for expanded oversight to address risks of big data and AI
Financial regulators will face new challenges arising from the "digitalization" of finance and may need to extend their oversight powers to include certain services provided by technology companies, according to Felix Hufeld, the president of Germany's Federal Financial Supervisory Authority, known as BaFin. Speaking on Oct. 4 at a fintech conference in Washington, D.C. organized by the Commodity Futures Trading Commission, Hufeld cautioned that traditional models for supervision and regulation need to be adjusted to address the impact of technology on financial services. Hufeld spoke primarily about the implications of big data and artificial intelligence, although he also pointed to distributed ledger technology as having the potential to transform the financial services sector.
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SEC focuses on swap regulation, pledges cooperation with CFTC
The U.S. Securities and Exchange Commission has scheduled an open meeting Oct. 11 to discuss one of several outstanding rulemakings necessary to complete the Dodd-Frank requirements for credit default swaps and other security-based derivatives. At that meeting, the five SEC commissioners will discuss whether to reopen the comment period on proposals related to capital, margin and segregation requirements for security-based swap dealers and major swap market participants. The meeting comes amid a recent focus on coordination with the Commodity Futures Trading Commission on swap regulations mandated by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC has jurisdiction over credit default swaps based on individual companies, while the CFTC has jurisdiction over CDS based on indices.
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Another deal shows asset managers are targeting derivatives-based strategies
Victory Capital, a "multi-boutique" investment firm with more than $63 billion in assets under management, has moved to acquire derivative asset manager Harvest Volatility Management, a fund manager specializing in options-based investment strategies. The $300 million deal, which was announced on Sept. 24, is the latest example of investment managers targeting derivatives markets as an alternative source of returns. Harvest was founded in 2008, and has grown to about $12 billion in assets under management. The New York firm specializes in using equity index options for yield enhancement overlay, risk reduction, alternative beta and absolute return investment strategies.
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