FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

Derivatives: Struggling Into the New Era – Outlook 2013/14

The past few years have been challenging for the global economy but it seems as though the derivatives industry sustained more than its share of insults and injuries over the past year or so. Still reeling from the trauma of MF Global in October of 2011, exchange-traded volume went into its first nosedive in decades.

Urgent regulatory requirements added intense cost and time pressures to company staffs that were already stretched. A non-clearing FCM, Peregrine Financial, collapsed in scandal. OTC derivatives struggled with complex regulatory mandates and weak volume.

Perhaps the only positive for the year was that mergers and acquisitions at both the macro and micro level imply that innovation and creativity are still powerful industry drivers. That in turn suggests that the creative dynamism that has characterized the derivatives industry for so many years still has some innings to go.

Read the detailed report about Derivatives market outlook, challenges and issue of big deals, exchange mergers and new start ups, customer protection, Regulatory,Extraterritorial and Tax problems  and more. 

Source: WEF 25.04.2013 by Nicolas Ronalds

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Filed under: Asia, Brazil, Exchanges, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

News and updates on LEI standard progress and development

As a follow up on G20 acceptance in Los Cabos in July 2012 and the Financial Stability Board guidelines and recommendations of the Legal Entity Identifier  LEI, we will regularly update this post with news and article to provide an overview of  LEI standard progress and development.

 
First Published  13.07.2012 , Last Update 27.09.2012

Filed under: Data Management, Data Vendor, Reference Data, Standards, , , , , , , , , , , , , , , , , , , ,

Reference Data: LEI system Real and Ready for Use…or maybe not?

The morning after the G-20 leaders endorsed the Financial Stability Board’s recommendations for a global system of precisely identifying legal entities, the co-chairwoman of the LEI Trade Association Group said, “I think we have something that is real and ready for use.’’

Robin Doyle, a senior vice president at JPMorgan Chase, noted that 20,000 ready-to-use “legal entity identifiers” have already been generated by a prototype jointly developed by the Depository Trust and Clearing Corporation and the Society for Worldwide Interbank Financial Telecommunication. A copy of that file can be downloaded here.

The online portal that would allow financial market participants to register and receive 20-character ID codes and to search for the codes of counterparties or other entities was demonstrated Wednesday morning at the 2012 Technology Leaders Forum of the Securities Industry and Financial Markets Association.

That portal can be turned live “within 24 hours” of its need, said Mark Davies, 
Vice President, Business Development
 at The Depository Trust & Clearing Corporation, during the demonstration.

The LEI Trade Association Group represents a group of firms and financial industry trade associations trying to develop a global and uniform legal entity identifier. The group is supported by the Global Financial Markets Association, which includes SIFMA.

SIFMA and a variety of other trade groups have recommended that DTCC and SWIFT operate a central authority for registering and issuing the codes that the leaders of the G-20 industrial nations Tuesday endorsed.

The G-20 endorsed the 35 recommendations of an international coordinator known as the Financial Stability Board.

The board’s recommendations differed in one significant aspect from the SIFMA and trade association recommendation. Where the trade groups recommended a centralized system for registering and issuing ID codes – a point reinforced Tuesdya in opening remarks at SIFMA Tech by SIFMA president T. Timothy Ryan Jr. – the FSB recommended a “federated” registration model. Under that approach, local authorities, aka nations, could and theoretically would act as the agencies for registration, issuing and storing the codes.

The central authority would maintain a database that would be logically managed, but whose contents might be spread around the world, as on servers spread across the Internet.

“We think it can work,” but it has to be set up and maintained properly, Doyle said.

The federated model will only be as good as it adheres to the global standards set by the FSB and the International Organization for Standardization, which defined the 20-character code.

Doyle said a central authority under the FSB approach likely will need to conduct audits of local operating units, to ensure compliance with the overall standards. The challenge will be to make sure the codes are kept correctly and not, in some fashion, duplicated.

The local authorities will need to take on the expense of maintaining high standards. “It is an expensive, difficult process to validate data,” Doyle said.

“A public-facing system like this needs a huge amount of control,” Davies said.

The next shoe to drop on the development of the system will come within the next couple weeks. That’s when Commodity Futures Trading Commission member Scott O’Malia said a decision will be announced on what organization or organizations will handle the registration and issuance of ID codes for the swaps markets it will oversee. O’Malia said at SIFMA Tech Tuesday that the decision among what industry executives say are four competing proposals will come “very soon.”

Srinivas Bangarbale, the CFTC’s Chief Data Officer, said Wednesday that the regulator’s “interim compliant identifier” will support the ISO 17442 standard set out by the FSB and ISO. r

It’s decision to move ahead “presupposed the standard” and that the chosen implementing group would “adopt the standards as published.” The CFTC will not directly or indirectly create another set of reference data for the industry to keep track of

“It’s important to use the standard as soon as possible,” he said, however.

O’Malia said the CFTC is likely to begin issuing IDs as early as September. That is so the commission can fulfill its mandate to oversee interest-rate and credit-default swap markets, as mandated by the 2010 Dodd-Frank Wall Street Reform Act.

The FSB’s implementation schedule calls for a functional system to be ready to use by March 2013.

Source: Securities Technology Monitor, 20.06.2012 by Tom Steinert-Threlkeld

Filed under: Data Management, Reference Data, Standards, , , , , , , , , ,