Tuesday 7th July 2015
NEWS TICKER: MONDAY, JULY 6TH: Moody's Interfax Rating Agency (MIRA), which specialises in credit risk analysis in Russia, has withdrawn the Baa1.ru national scale rating of Petrocommerce Bank (OJSC) based in Russia (Ba1 negative). This action follows Petrocommerce Bank's reorganisation and merger with Bank Otkritie Financial Corporation PJSC (deposits/senior unsecured Ba3 negative, BCA b1). Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks, report Moody’s. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".ru" for Russia. - PEGAS, the pan-European gas trading platform operated by Powernext, today announced that a total volume of 68.9 TWh were traded in June 2015. This represents a year on year increase of 41% (June 2014: 48.8 TWhPEGAS, the pan-European gas trading platform operated by Powernext, today announced that a total volume of 68.9 TWh were traded in June 2015. This represents a year on year increase of 41% (June 2014: 48.8 TWh).Overall spot trading volumes amounted to 28.4 TWh which represents a year on year increase of 31%. PEGAS recorded volume increases in particular in the German, French and Dutch market areas. The June volume in the German GASPOOL and NCG areas increased to 12.0 TWh (+33%), including 3.6 TWh traded in quality-specific gas products. The volume in the French PEG Nord and TRS market area rose to 8.0 TWh (+40%). The Dutch TTF spot volume reached 8.1 TWh (+17%) while the Belgian ZTP spot market registered a volume of 222,715 MWh. The total volume of spread transactions amounted to 2.3 TWh. - Clearstream has issued an update to the Statement of Holdings report (MT535), covering both HTML and CSV formats: effective immediately the newly added column, “Pledged for Collateral” for non-available positions (introduced as part of the June release) will be renamed "Pledged for Collateral NAVL". This change applies to the Statement of Holdings report (MT535) in HTML format and when downloaded as a CSV file. Other reporting formats are not impacted, says Clearstream. In addition, when downloaded as an MT535 CSV file, the newly named column "Pledged for Collateral NAVL" will now appear as the final column. This allows a better reconciliation of positions, says Clearstream Banking - Christine Lagarde, managing director of the International Monetary Fund (IMF), made the following statement today: "The IMF has taken note of yesterday’s referendum held in Greece. We are monitoring the situation closely and stand ready to assist Greece if requested to do so.” - Morgan Lewis is enhancing its United Kingdom and global employment law capabilities with the addition of employment investigations and data privacy partner Pulina Whitaker, who joins the firm today from another global law firm. Her arrival, says the firm, strengthens the full suite of global client services offered from the Morgan Lewis London office, including those connected to finance, corporate, energy, funds, and litigation - Leading shares in European bourses will continue to struggle today as investors look for direction from European leaders over their response to the Greek referendum decision yesterday. In Asia, Japan’s Nikkei retreated -2.08% while Hong Kong’s Hang Seng went down by 4% and the Shenzhen Composite down by 4.69%. The Shanghai Composite stabilised around 3,709, up 0.61%, as China Security Finance Corp, the institution which managed short selling and margin trading, will receive a capital boost to 76bn “to maintain financial market stability and expand its business".; it is actually something of a turnaround, as Chinese equities have been under pressure for over a month now. In Australia, equity markets are trading into negative territory with the S&P/ASX down -1.14% while AUD/USD broke to the downside the strong support lying at 0.7533 (low from April 2) and is heading toward the following one at 0.7414 (low from October 2010). Tomorrow, the Reserve Bank of Australia will release its interest rate decision. The US dollar is broadly higher against G10 as only the Japanese yen is adding gains versus USD. German Chancellor Angela Merkel will meet French president François Hollande later today. Greece’s main creditors have more pressures on their shoulders; analysts suggest that they will be more willing to provide significant debt relief measures. The next payment is due to the ECB on July 20th.

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Rules could curb collateral movement, ICMA warns

Thursday, 03 April 2014
Rules could curb collateral movement, ICMA warns Regulators need to consider the impact of financial regulation on the movement of collateral according to a new study by ICMA’s European Repo Council. http://www.ftseglobalmarkets.com/

Regulators need to consider the impact of financial regulation on the movement of collateral according to a new study by ICMA’s European Repo Council.

The trade body has highlighted potential systemic risks of inhibiting collateral fluidity and the negative impact this could have on the stability and efficiency of capital markets.

A number of regulatory and market driven initiatives are in place to meet the challenges that currently constrain the efficient movement of collateral, including Target2-Securities, EU Central Securities Depository Regulation (CSDR) and tri-party settlement interoperability between ICSDs/CSDs.



However, according to ICMA’s study entitled 'Collateral is the new cash: the systemic risks of inhibiting collateral fluidity’, regulations such as the Basel III Leverage Ratio and the proposed EU Financial Transaction Tax (FTT) could prohibit the effective functioning of collateral markets.

For the markets, these regulations could mean less liquid secondary markets for securities, greater asset price volatility. Hedging, and the pricing and management of risk, could become more difficult. There may also be greater execution risks for investors.

Meanwhile the economy could suffer from reduced investment in capital and businesses, higher borrowing costs for governments, increased costs for corporate capital raisers and place more onus on central banks to support markets.

“If banks find it economically inefficient, or are restricted by regulation from supporting the critical functions of sourcing, pricing, managing, and mobilising collateral, and the infrastructure is not in place for the efficient mobilisation of collateral, then the basic intermediation roles of banks and financial markets - that of maturity, risk, and credit transformation - would be undermined,” says the study.

The proposed EU 11 Financial Transaction Tax (FTT), were it to be applied to securities finance trades, would severely impair the effective functioning of collateral markets. Another ICMA study suggests that the size of the European repo market could be reduced by as much as 66%, with the market effectively closed for transactions under six months’ maturity.

In addition, new Basel III capital adequacy requirements are making the balance sheets of banks more expensive. As a result, banks are having to rethink their business models and priorities. Low-margin, capital-intensive businesses, such as repo, are becoming less attractive.

“Sound regulation is essential for the efficient and stable functioning of the global funding and capital markets that support our economies,” says the IMCA’s report. “So is collateral. In this respect, regulation should not only avoid inhibiting collateral fluidity, but, where possible, it should aim to enhance it.

Godfried De Vidts, chair of ICMA’s European Repo Council, adds: “As we build the framework of new financial regulation for safer markets we should steer clear of embedding systemic risks which could contribute to future financial crises.”

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