Thursday 2nd July 2015
NEWS TICKER: THURSDAY, JULY 2nd 2015: The Straits Times Index (STI) ended 3.3 points or 0.1% lower to 3327.84, taking the year-to-date performance to -1.11%. The top active stocks today were UOB, which gained 0.82%, DBS, which closed unchanged, Singtel, which declined 0.24%, CapitaLand, which declined 1.13% and Global Logistic, with a 0.78% fall. The FTSE ST Mid Cap Index declined 0.06%, while the FTSE ST Small Cap Index rose 0.02%. The outperforming sectors today were represented by the FTSE ST Basic Materials Index, which rose 0.82%. The two biggest stocks of the Index - Midas Holdings and NSL- ended 1.59% higher and 0.67% lower respectively. The underperforming sector was the FTSE ST Real Estate Investment Trusts Index, which slipped 0.67%. CapitaLand Mall Trust shares declined 2.30% and Ascendas REIT declined 2.41% - According to Flightglobal, China’s state aviation supplier has tentatively signed for up to 75 Airbus A330s in an agreement which will help bridge a production gap to the re-engined A330neo. General terms of the agreement inlcude an order for 45 jets plus a memorandum of understanding for another 30 options. The deal took place during an official visit to France by Chinese premier Li Keqiang. Airbus has long been negotiating the landmark agreement following a preliminary deal to establish an A330 completion centre in Tianjin. The pact with China Aviation Supplies Holding, which is likely to include several aircraft configured in the lower-weight regional version. Meanwhile, Airbus CEO Fabrice Bregier says the package is a “new vote of confidence” in the twinjet. “China is today the most important market for aviation in the world,” he adds - Morningstar has upgraded the Royal London UK Equity Income fund to a Morningstar Analyst Rating of Silver. The fund was previously rated Bronze. Experienced manager Martin Cholwill has, over his decade-long tenure on the fund, consistently applied his proven investment process to good effect. His strategy is sensible for delivering yield and competitive total returns for investors, with a focus on free cash flows and valuations. The fund also enjoys a cost advantage over its rivals, with ongoing charges lower than the category norm. These factors have led to a strong and consistent performance profile over a number of years - The amount of outstanding Euro commercial paper (CP) and certificates of deposit (CD) declined significantly in the week ending July 1st, according to CMDPortal data. Outstandings dropped by $11.80bn to $861.59bn during the week. Sovereign, supranational and agency CP outstandings dropped by $2.80bn to $219.44bn. Corporate CP outstandings declined the most during the week by $5.56bn to $89.83bn. Meanwhile financial CP outstandings declined by $3.04bn to $503.37bn - SWIFT says that BTG Pactual, one of Latin America’s largest financial services firms, has joined the Know Your Customer (KYC) Registry, a centralised repository that maintains a standardised set of information about correspondent banks required for KYC compliance. For the KYC Registry, banks contribute an agreed ‘baseline' set of data and documentation for validation by SWIFT, which the contributors can then share with their counterparties. Each bank retains ownership of its own information, as well as control over which other institutions can view it - Laurel Powers-Freeling is to join the board of Atom, the UK’s newest bank, as its senior independent non-executive director. The appointment comes hot on the heels of Atom’s announcement that the Prudential Regulation Authority and the Financial Conduct Authority have approved its digital business model. Powers-Freeling was recently appointed as Chairman of Sumitomo-Mitsui Banking Corporation Europe - China has guaranteed that 100% foreign-owned firms (typically known as WFOEs – Wholly Foreign-Owned Entities) will be able to manufacture and market their own products for sale to mainland clients, operating under exactly the same rules as local private funds. The announcement comes at the end of the US-China Strategic and Economic Dialogue, which appears to have resulted in unprecedented rights for foreign firms participating in China’s financial markets. Greater access to China’s Interbank Bond (IBB) market has also been granted, with the elimination of firm-level ownership quotas in addition to improved access and operating rights for foreign banks. Finally, Shanghai’s Free Trade Zone (FTZ) has been specified as the testing ground where foreign owners can establish wholly-owned futures companies with access rights to domestic exchanges. China’s opening-up to foreign asset managers is now moving faster than our most optimistic predictions. With that speed in mind, we predict that all of the above opportunities will be available to foreign owners by the end of 2015.

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IOSCO consults on liquidity risk management for collective investment schemes

Thursday, 26 April 2012
IOSCO consults on liquidity risk management for collective investment schemes The Technical Committee of the International Organisation of Securities Commissions has published the consultation report Principles of Liquidity Risk Management for Collective Investment Schemes, which outlines a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS).  http://www.ftseglobalmarkets.com/

The Technical Committee of the International Organisation of Securities Commissions has published the consultation report Principles of Liquidity Risk Management for Collective Investment Schemes, which outlines a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS). 

The Technical Committee of the International Organisation of Securities Commissions has outlined a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS).   

Since the outbreak of the global financial crisis, the issue of liquidity has been a major concern for regulators, although the discussions on regulatory reform have focused more on the importance of liquidity in the banking sector rather than in other sectors. However, the asset management sector has specificities to be kept in mind when setting policy recommendations.



 Good liquidity risk management is a key feature of the correct operation of a CIS, as the right to redeem units/shares is a defining characteristic of open-ended schemes. Liquidity risk management is complex and a CIS may experience liquidity issues as, for example, when the market in which it is invested closes unexpectedly. However, asset managers have regulatory and practical tools to manage liquidity both on the asset side and on the investor side.  In exceptional circumstances, a liquidity issue could lead to a CIS temporarily suspending all investor redemptions. IOSCO recently published the report Principles on Suspensions of Redemptions in Collective Investment Schemes addressing this issue.

The fundamental requirement of liquidity risk management is to ensure that the degree of liquidity that the open-ended CIS manages allows it in general to meet redemption obligations and other liabilities.  The principles of liquidity risk management provide details on how compliance with this requirement can be achieved. Generally, these principles aim to reflect a level of common approach and to be a practical guide for regulators and industry practitioners. Implementation of the principles may vary from jurisdiction to jurisdiction, depending on local circumstances and legal and regulatory structures.

The principles of liquidity risk management for CIS

 The principles of liquidity risk management for CIS are divided into two groups related to the life span of a CIS: the pre-launch and the day-to-day liquidity risk management. They include the following:

 Principle 1

The responsible entity should draw up an effective liquidity risk management process, compliant with local jurisdictional liquidity requirements

 Principle 2

The responsible entity should set appropriate liquidity limits which are proportionate to the redemption obligations and liabilities of the CIS

 Principle 3

The responsible entity should carefully determine a suitable dealing frequency for units in the CIS  

 Principle 4

Where permissible and appropriate for a particular CIS, and in the interests of investors, the responsible entity should include the ability to use specific tools or exceptional measures which could affect redemption rights in the CIS’s constitutional documents

 Principle 5

The responsible entity should consider liquidity aspects related to its proposed distribution channels

 Principle 6

The responsible entity should ensure that it will have access to, or can effectively estimate, relevant information for liquidity management

 Principle 7

The responsible entity should ensure that liquidity risk and its liquidity risk management process are effectively disclosed to prospective investors

 Principle 8

The responsible entity should effectively perform and maintain its liquidity risk management process

 Principle 9

The responsible entity’s liquidity risk management process must be supported by strong and effective governance

 Principle 10

The responsible entity should regularly assess the liquidity of the assets held in the portfolio

  Principle 11

The responsible entity should integrate liquidity management in investment decisions

Principle 12

The liquidity risk management process should facilitate the ability of the responsible entity to identify an emerging liquidity shortage before it occurs

 Principle 13

The responsible entity should be able to incorporate relevant data and factors into its liquidity risk management process in order to create a robust and holistic view of the possible risks

 Principle 14

The responsible entity should conduct assessments of liquidity in different scenarios, including stressed situations

 Principle 15

The responsible entity should ensure appropriate records are kept, and relevant disclosures made, relating to the performance of its liquidity risk management process

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