Thursday 18th December 2014
NEWS TICKER: THURSDAY DECEMBER 18TH 2014: Scotiabank’s Commodity Price Index dropped -4.8% m/m in November (-6.1% yr/yr) and will end 2014 in a ‘deflationary’ mode, says economist Patricia Mohr. "Significant capacity expansion and the defence of market share by major oil and iron ore producers— against a backdrop of lacklustre world economic growth — account for the softness at the end of the year," she says. Mohr adds that the decision by Saudi Arabia not to reduce output to shore up international oil prices, but instead to allow prices to drop to levels curbing US shale development appears to be having a negative impact on confidence in a wide variety of other commodity as well as equity markets. She predicts prices will fall further this month, but will start to rebound in mid 201 - Jonathan Hill, the EU's financial-services commissioner, says he plans to pursue rules that separate a bank's proprietary trading from retail operations. "The sensible thing to do is to seek to make progress quickly" on the issue, Hill said. "There are still areas of risk in some of the biggest and most complicated banks,” reports Bloomberg- CME Group, said yesterday that it will change daily price limits in its CME Feeder Cattle futures effective today, pursuant to its emergency action authority. The current daily price limit for CME Feeder Cattle futures is $3.00 per hundredweight and will change to $4.50 per hundredweight effective on trade date December 18th Additionally, effective December 19th (tomorrow) these limits will have the ability to expand by 150% to $6.75 per hundredweight on any business day in the event that one of the first two contract months settles at limit on the previous trading day. CME Feeder Cattle futures have been locked limit for five consecutive days as a result of various factors. The change to daily price limits is necessary to ensure continued price discovery and risk transfer, says the CME. Daily price limits for CME Live Cattle futures will remain unchanged at $3.00 per hundredweight. Effective Friday, December 19th, these limits will have the ability to expand by 150 percent to $4.50 per hundredweight in the event that one of the first two contract months settles at limit on the previous trading day - The Straits Times Index (STI) ended +16.42 points higher or +0.51% to 3243.65, taking the year-to-date performance to +2.49%. The FTSE ST Mid Cap Index gained +0.29% while the FTSE ST Small Cap Index gained +0.71%. The top active stocks were Keppel Corp (+2.68%), SingTel (-1.02%), DBS (+2.36%), Global Logistic (-3.21%) and UOB (+0.30%). The outperforming sectors today were represented by the FTSE ST Basic Materials Index (+3.13%). The two biggest stocks of the FTSE ST Basic Materials Index are Midas Holdings (+6.38%) and Geo Energy Resources (unchanged). The underperforming sector was the FTSE ST Telecommunications Index, which declined -0.98% with SingTel’s share price declining -1.02% and StarHub’s share price declining-0.73%. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+2.56%), DBXT CSI300 ETF (+0.42%), STI ETF (+0.61%). The three most active Real Estate Investment Trusts (REITs) by value were Ascendas REIT (-0.42%), Keppel DC REIT (unchanged), Suntec REIT (+0.26%). The most active index warrants by value today were HSI23400MBeCW150129 (+7.32%), HSI22600MBePW150129 (unchanged), HSI24000MBeCW150129 (+12.50%). The most active stock warrants by value today were KepCorp MBeCW150602 (+21.95%), DBS MB eCW150420 (+29.29%), DBS MB ePW150402 (-18.03%) - Spain’s Director of Public Prosecutions, Eduardo Torres Dulce, has resigned from the post for “personal reasons”, Spanish daily El Mundo reported this morning. A spokesman for the Public Prosecutor’s office confirmed the news by telephone to The Spain Report, saying that Mr. Torres Dulce had informed Justice Minister Rafael Catalá of his decision: “but that it perhaps would not come into effect until they find a replacement”. That decision is taken at cabinet level. The next cabinet meeting for Rajoy’s government is tomorrow morning - Hedge funds including Marshall Wace, Odey Asset Management and Lansdowne Partners are shorting OTP Bank Plc, a Hungarian lender with a Russian subsidiary whose shares have fallen almost 6% this month reports Albourne Village. All three London-based funds took or increased their position this month in OTP, Hungary’s largest lender, according to data compiled by Bloomberg. The ruble rose today in Moscow after plunging as much as 19%against the dollar yesterday, when Russia’s central bank increased interest rates to 17% percent from 10.5 percent in an attempt to stem the decline. The ruble is down 52% this year and has taken a disproportionate beating in the wake of sanctions and falling oil prices. The country still has the third largest currency reserves in the world and so is unlikely to default. According to Eric Chaney, Manolis Davradakis and Greg Venizelos from AXA IM’s Research and Investment Strategy team Russia will likely resort to fiscal stimulus to contain the risk of social and political unrest. Capital controls, political unrest and even default on private hard currency debts are possible outcomes they say. They credit default swaps market is pricing a one-third probability of sovereign default within five years - Indonesia is ramping up financing for its $439bn development program, planning an almost fivefold increase in sales of project sukuk. The government is seeking to raise IDR7.14trn rupiah (around $568m) from notes that will fund particular construction ventures next year, compared with IDR1.5trn this year, which say local press reports, will help finance its estimated spending of about IDR5,519trn from 2015 to 2019 to build roads, railways and power plants.

IOSCO publishes its final report on International Standards for Derivatives Market Intermediary Regulation

Wednesday, 06 June 2012
IOSCO publishes its final report on International Standards for Derivatives Market Intermediary Regulation The International Organisation of Securities Commissions has published today a report entitled International Standards for Derivatives Market Intermediary Regulation, which recommends high-level international standards for the regulation of market participants that are in the business of dealing, making a market or intermediating transactions in over-the-counter (OTC) derivatives. Historically these derivatives market intermediaries (DMIs) often have not been subject to the same level of regulation as participants in the traditional securities market. Without sufficient regulation, some DMIs operated in a manner that created risks to the global economy that manifested during the financial crisis of 2008.  http://www.ftseglobalmarkets.com/

The International Organisation of Securities Commissions has published today a report entitled International Standards for Derivatives Market Intermediary Regulation, which recommends high-level international standards for the regulation of market participants that are in the business of dealing, making a market or intermediating transactions in over-the-counter (OTC) derivatives. Historically these derivatives market intermediaries (DMIs) often have not been subject to the same level of regulation as participants in the traditional securities market. Without sufficient regulation, some DMIs operated in a manner that created risks to the global economy that manifested during the financial crisis of 2008. 

In 2009, the leaders of the G-20 committed to reforms in the over-the-counter (OTC) derivatives market to improve transparency, mitigate systemic risk, and protect against market abuse. The intent of this new report by IOSCO is to help further these objectives by providing high-level international standards for the regulation of market participants that are in the business of dealing, making a market or intermediating transactions in OTC derivatives (OTC derivative market intermediaries, or DMIs). IOSCO is the leading international policy forum for securities regulators is recognised as the global standard setter for securities regulation.  The organization's membership regulates more than 95% of the world's securities markets in 115 jurisdictions and its membership continues to expand.

Historically, market participants in the OTC derivatives market have, in many cases, not been subject to the same level of regulation as participants in the traditional securities market. This lack of sufficient regulation allowed certain participants to operate in a manner that created risks to the global economy that manifested during the financial crisis of 2008. This Report focuses on the regulation of DMIs, taking into account the distinctions between the OTC derivatives market and the traditional securities markets, and the differences in jurisdictional approaches of international market authorities. The recommendations in the Report are intended to address:



 DMI obligations that should help mitigate systemic risks;

 Requirements intended to manage counterparty risk in the OTC derivatives markets; and

 Protecting participants in the OTC derivatives markets from unfair, improper or fraudulent practices.

In particular, the report focuses on the market participants who should be regulated as DMIs, given their type and level of involvement within the OTC derivatives market, and describes the substantive areas that generally comprise regulation. The regulation of DMIs should be primarily focused on areas where capital, counterparty or client money and public confidence may be most at risk.

The report provides a description and definition of the market participants who should be considered DMIs, including a discussion of the characteristics distinguishing DMIs from traditional securities market intermediaries.  Moreover, the report makes recommendations covering :

 Registration/licensing standards;

 Capital standards or other financial resources requirements for non-prudentially regulated DMIs;

 Business conduct standards;

 Business supervision standards; and

 Recordkeeping standards.

Cross-border consistency among market authorities with respect to the regulation of DMIs is essential to successful oversight of the global OTC derivatives market particularly because many DMIs operate in multiple jurisdictions.  

The report draws on the extensive work IOSCO has done on traditional securities market intermediaries, in an effort to harmonize the recommendations applicable to DMIs and to avoid the creation of unnecessary burdens on entities that act as both traditional securities market intermediaries and DMIs.  

Consistency among market authorities with respect to the regulation of DMIs is essential to the successful oversight of the global OTC derivatives market particularly because many DMIs operate in multiple jurisdictions.

The report makes some 15 or so specific recommendations, which include the following:

1. DMIs should generally include those who are in the business of dealing, making a market or intermediating transactions in OTC derivatives. However, DMIs should not include end-users and market participants who enter into OTC derivatives transactions but are not engaged in the business of dealing, making a market or intermediating transactions.

2. DMIs should be subject to registration or licensing and applicable substantive regulations and/or requirements and standards once registered or licensed in some form by the relevant market authority or authorities, recognizing that in certain limited circumstances full application of substantive regulations and/or requirements and standards may not be appropriate for certain types of entities.

3.  Registration or licensing requirements applicable to DMIs should be tailored to OTC derivatives activities.

4. The registration or licensing of DMIs should establish minimum standards and require DMIs to provide and update information with regard to their OTC derivatives activities to regulators to assist them in determining whether registration or license should be granted and/or revoked. All registering or licensing authorities should have the power to grant or reject and suspend or withdraw the registration or license of DMIs registered or licensed by such authority.

5. Relevant material information on licensed or registered DMIs should be made publically available. If a DMI registered or licensed in its home jurisdiction is carrying on OTC derivatives business in another jurisdiction in which the DMI is not registered or licensed, the market authority of the host jurisdiction in which the DMI is carrying on business should ensure that there are appropriate supervisory arrangements in place for the OTC derivatives business carried on by that DMI. These arrangements should take into account how the DMI is supervised in the host jurisdiction and any cooperative arrangements in place between the market authorities of the home and host jurisdictions. Market authorities should closely cooperate to identify overlaps, conflicts and gaps between jurisdictions with respect to cross-border issues relating to DMI supervision and to ensure that the DMI’s activities in the host jurisdiction are adequately supervised. It is further recommended that jurisdictions coordinate their approaches via multilateral or bilateral channels to reduce overlaps and conflicts, to the extent possible.

6. Market authorities should consider imposing some form of capital or other financial resources requirements for DMIs that are not prudentially regulated that reflect the risks that these intermediaries undertake.

7. DMIs should be subject to business conduct standards. These standards would include, among other things, prohibitions against fraud, misrepresentation, manipulation and other abusive practices.

8.  Business conduct requirements should be tailored, as appropriate, for the OTC derivatives market. This could be based on the reasonable assessment of the nature of the party dealing with a DMI or on the complexity of and the risk associated with the specific OTC derivatives market product or service.

9. For cleared OTC derivatives transactions, DMIs should segregate collateral belonging to clients from their own proprietary assets and employ an account structure that enables the efficient identification and segregation of positions and collateral belonging to DMI clients. Where applicable and possible, DMIs should have in place procedures to facilitate the rapid transfer or porting of cleared client positions and collateral.

10. DMIs should be required to have effective corporate governance frameworks designed to ensure appropriate management of OTC derivatives activities within the DMI.

11. DMIs should be required to design supervisory policies and procedures to manage their OTC derivatives operations and the activities of their representatives.

12. DMIs should be required to maintain risk management systems and organization to properly identify and manage their OTC derivatives related business risks.

13. DMI’s management should be required to establish, maintain and apply policies, procedures and systems of control sufficient to provide reasonable assurance that the DMI and each individual acting on its behalf are competent and comply with applicable regulatory standards and the DMI’s internal policies and procedures.

14. DMIs should be required to develop and maintain an effective business continuity plan, based on their size, risks, and the nature of their operations, to allow them to mitigate, respond to and recover from business disruptions or disasters.

15. DMIs should be required to retain OTC derivatives transaction records and be able to provide them in a timely, organized and readable manner. The record retention period for OTC derivatives transactions should apply for a specified period after its termination, maturity or assignment.

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