Tuesday 1st September 2015
NEWS: Friday, August 28TH: The Hong Kong Monetary Authority says it has granted a restricted banking licence to Goldman Sachs Asia Pacific Company Limited (GSAPCL) under the Banking Ordinance. GSAPCL, incorporated in Hong Kong, is a wholly-owned banking subsidiary of the Goldman Sachs Group, Inc. The number of restricted licence banks in Hong Kong is now 24 - Apple launched its first Australian dollar corporate bond issue, raising $1.2bn within two hours this morning. Strong demand for the US tech giant’s fixed and floating, four and seven year Kangaroo bonds saw the firm outstrip predictions it would raise between $500m and $1bn. Apple bonds are popular because the AA+ rated company is considered an ultra-safe investment, although yields are correspondingly low — about 3% on four-year bonds and about 3.8% on seven-year bonds - The European Securities and Markets Authority (ESMA) has published the responses received to the Joint Committee Discussion Paper on Key Information Document for PRIIPS. The responses can be downloaded from the regulator's website - Romania’s MV Petrom reportedly is planning a secondary listing on the London Stock Exchange. According to Romanian press reports, the local investment fund Fondul Proprietatea may sell a significant stake in the company via public offering on the Bucharest Stock Exchange and London Stock Exchange. OMV Petrom, with a current market capitalisation of €4.85bn has announced that it will ask its shareholders’ approval for a secondary listing in London. The general shareholders meeting is scheduled for September 22nd. Austrian group OMV, holds 51% of the company’s shares; other shareholders include the Romanian state, via the Energy Ministry, with a 20.6% stake, and investment fund Fondul Proprietatea, which holds 19%. The remaining 9.4% is free-float - Morgan Stanley (NYSE/MS) today announced the launch of a new fund, the IPM Systematic Macro UCITS Fund, under its FundLogic Alternatives plc umbrella. The fund provides exposure to IPM’s Systematic Macro strategy, which is based on IPM’s proprietary investment models that provide unique insights into how fundamental drivers interact with the dynamics of asset price returns. The FundLogic Alternatives Platform currently has more than $2.6bn in assets under management (as of 31 July 2015) and this latest addition expands Morgan Stanley’s offering of global macro strategies - Equities sold off hard this morning as continued pressure on Chinese stocks rippled throughout world markets. Chinese government intervention brought the Shanghai Composite back a positive close; but the question is now, has confidence eroded so much that the market will continue to depend on the government to prop it up? The other key element to consider today is the outcome of the debate in the German parliament on the Greek bailout. Last month, a record 65 lawmakers from the conservative camp broke ranks and refused to back negotiations on the bailout. The daily Bild estimated that up to 120 CDU and CSU members out of 311 might refuse to back the now-agreed deal. However, Chancellor Merkel is looking to secure support from the Social Democrats (SPD), Merkel's junior coalition partner, and the opposition Greens which will likely swing the final decision Greece’s way. However, a rebellion by a large number of her allies would be a blow to the highly popular Chancellor.

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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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