Sunday 25th January 2015
FRIDAY, JANUARY 23RD 2015: European markets regulator ESMA has added Athens Exchange Clearing House to its list of authorised CCPs under the European Market Infrastructure Regulation (EMIR). EMIR requires EU-based CCPs to be authorised and non-EU CCPs to be recognised in the European Union (EU). The updated list of authorised CCPs is available on ESMA's website - Driven by strengthening private domestic demand, economic growth in the US is expected to accelerate modestly this year and drag last year’s unspectacular housing activity upward, according to Fannie Mae’s Economic & Strategic Research (ESR) Group. Amid continued low gasoline prices, a firming labour market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds, the economy is expected to climb to 3.1% in 2015, up from the Group’s estimate of 2.7% in the prior forecast. The stronger economic backdrop should lead to improving income prospects, underpinning a higher rate of household formation in 2015. "Our theme for the year, Economy Drags Housing Upward, implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace," says Fannie Mae chief economist Doug Duncan. "We have revised upward our full-year economic growth forecast to 3.1% for 2015, which is not yet robust but still an improvement over last year’s growth. Consumer spending should continue to strengthen due in large part to lower gas prices, giving further support to auto sales and manufacturing. We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017, likely keeping interest rates relatively low for some time." - The Russian Central bank said yesterday that its gold reserves grew by a 600,000 ounces (18.7 tonnes) in December – the ninth successive month of gold reserve increases. Russia has now more than tripled its gold reserves in the past ten years. The ruble has fallen in value by almost 50% in the past 12 months which makes the nation’s gold reserves ever more important to its global economic status – According to LuxCSD the Taiwan Depository and Clearing Corporation (TDCC) has announced, effective Sunday (January 25th) the firm’s BIC will change from TDCCTWT1 to TDCCTWTP. Customers should quote the TDCC's new BIC in field 95P::PSET//TDCCTWTP of their settlement instructions – Moody's today upgraded the Corporate Family Rating (CFR) of Stabilus S.A. to B1 from B2 and the Probability of Default Rating (PDR) to B1-PD from B2-PD. At the same time the rating agency upgraded the instrument ratings assigned to the Senior Secured Notes issued by Servus Luxembourg Holding S.C.A. to B1 from B2. The outlook on all ratings remains positive – The US Federal Reserve Bank of New York says its daily Fed Funds effective rate is now 0.12% (Low 0.30%, High 0.3125%) with four basis points of standard deviation - Vanguard Group, already the biggest mutual fund company in the world, has risen to second place as a provider of exchange-traded funds, says ETF.com—based on the success of its low-cost index funds, including ETFs. Boston-based State Street Global Advisors, has dropped from second to third. Even so, SSGA still has the largest ETF in the world, the SPDR S&P 500 ETF (SPY | A-98) - The Straits Times Index (STI) ended +41.21 points higher or +1.22% to 3411.5, taking the year-to-date performance to +1.38%. The FTSE ST Mid Cap Index gained +0.97% while the FTSE ST Small Cap Index gained +0.23%. The top active stocks were CapitaLand (+4.09%), DBS (+0.80%), SingTel (+0.76%), UOB (+0.72%) and Noble (-0.47%). The outperforming sectors today were represented by the FTSE ST Real Estate Holding and Development Index (+2.31%). The two biggest stocks of the FTSE ST Real Estate Holding and Development Index are Hongkong Land Holdings (+1.18%) and Global Logistic Properties (+1.57%). The underperforming sector was the FTSE ST Oil & Gas Index, which gained +0.16% with Keppel Corp’s share price unchanged and Sembcorp Industries’s share price declining +0.93%. The three most active Exchange Traded Funds (ETFs) by value today were the SPDR Gold Shares (+0.77%), IS MSCI India (+1.89%), DBXT MSCI Asia Ex Japan ETF (+1.57%) –

Volcker Rule likely delayed until after US presidential elections

Monday, 16 April 2012
Volcker Rule likely delayed until after US presidential elections As mandated by the Dodd-Frank Act, the Volcker Rule—named for its author, former Federal Reserve Chairman Paul Volcker—prohibits commercial banks from using their own capital to invest in hedge funds and private equity funds, unless such activity is deemed “systemically important” (that is, is related to market making, securitisation, hedging, and/or risk management) and is limited to a three-percent ownership stake. With nary a fan on either side of the pond, the much-maligned Volcker Rule could be ripe for modification—though any change is more likely to happen later than sooner. David Simons reports. http://www.ftseglobalmarkets.com/

As mandated by the Dodd-Frank Act, the Volcker Rule—named for its author, former Federal Reserve Chairman Paul Volcker—prohibits commercial banks from using their own capital to invest in hedge funds and private equity funds, unless such activity is deemed “systemically important” (that is, is related to market making, securitisation, hedging, and/or risk management) and is limited to a three-percent ownership stake. With nary a fan on either side of the pond, the much-maligned Volcker Rule could be ripe for modification—though any change is more likely to happen later than sooner. David Simons reports.

Regulators had hoped to have the Volcker Rule finalised by mid-July. However, ironing out the increasingly complex proposal—which includes newly added exemptions needed to placate the bill’s many opponents—will likely take much longer.

Retiring Massachusetts congressman Barney Frank, head of the House Financial Services Committee and co-author of the 2010 Dodd-Frank Act, has suggested something of a compromise; that regulators work towards completing a simplified version of the law by early September. "The agencies [have] tried to accommodate a variety of views on the implementation,” says Frank, “but the results reflected in the proposed rule are far too complex, and the final rules should be simplified significantly.”



Financial institutions may be struggling to regain public trust in the wake of the 2008 credit meltdown; however that has not stopped officials from taking aim at the proposed Volcker legislation during the SEC’s comment period which closed on February 13th. Speaking on behalf of the Securities Industry and Financial Markets Association (SIFMA), Tim Ryan, SIFMA’s president and chief executive officer called the proposed regulations “unworkable” and “not faithful to Congressional intent”. Moreover, Ryan says they will have negative consequences for US financial markets and the economy.

Echoing a common theme among Volcker critics, Ryan contends that the new law could result in drastically reduced market liquidity for investors, and make it more difficult for companies to raise capital. SIFMA’s five-part comment letter includes proposed modifications to proprietary trading restrictions and hedge fund/private-equity fund investment activity under Volcker, and expresses concern over Volcker’s impact on municipal securities and global securitisation.

Like almost everything else drafted by the Obama White House, the Volcker Rule has virtually no support in the GOP, and includes among its detractors Daniel Gallagher and Troy Paredes, the two Republican members of the Securities and Exchange Commission (SEC). Speaking at an Institute of International Bankers conference held in Washington last month, Gallagher suggested that regulators re-examine their initial efforts and, if necessary, “go back to the drawing board to make sure we regulate wisely, rather than just quickly.”

Not that all of the criticisms have had political overtones. An exception to the rule allowing US banks to continue trading treasuries and municipal bonds has drawn fire from state and local government agencies, which have demanded that they receive the same exemption. The Municipal Securities Rulemaking Board (MSRB), the US-based firm charged with protecting investor interest in the municipal-securities space, has urged regulators to expand the rule’s proprietary trading exemptions to include municipal-bond brokers. It’s an effort to avoid “bifurcation” within the municipal securities market, says MSRB, warning current exemptions “are not useful in the municipal securities market,” and unless modified will “prevent a free and open market from prevailing.”

Nor has Volcker venting been limited to the US. In a comment letter issued in February, the European Fund and Asset Management Association (EFAMA), the representative association for Europe’s investment-management community, argued that exemptions favouring US institutions pose a serious threat to European funds due to the potential shift in the balance of power. Accordingly, regulators should take the necessary steps to prevent any negative impact on liquidity and operational efficiency abroad, said the group.

Meanwhile, Oregon’s Democratic Senator Jeff Merkley, who along with Senator Carl Levin of Michigan helped draft some of the Volcker provisions, bristled at suggestions that substantial modifications would be required. If anything, said Merkley, the rule needs to be tougher, though not “as vague or complex as regulators are making it.” Also in favour of a stronger Volcker is former Citigroup chief executive officer John S Reed, who has argued that in its present form the rule “does not offer bright enough lines or provide strong enough penalties for violation."

Having made regulatory reform one of its chief priorities, the Obama administration is unlikely to cede any ground in the months leading up to the US presidential elections in November. Hence, even the most vocal of Volcker opponents admit that change is unlikely to happen until after the new Congress convenes in January of next year.

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