Monday 24th April 2017
NEWS TICKER, 24st April: HSBC has secured the advisory mandate for Saudi Aramco’s upcoming IPO, which is expected to be the benchmark deal of this deal, both in terms of pricing, demand and size of offering -- InfraCo Africa will contribute $1.65m to the financing of the 50-MWp Abiba Solar project in Nigeria -- Fiat Chrysler Automobiles UK Ltd has announced a major restructuring of its senior management team. The changes come with immediate effect. Alejandro Noriega has been appointed country manager, Fiat and Abarth, and will oversee retail sales and marketing for the two brands. Noriega was previously head of the Fiat Professional brand and his experience and track record in commercial vehicles equips him well to take on Fiat and Abarth. Richard Chamberlain is the new country manager, Fiat Professional, responsible for all business activities of FCA UK's award-winning commercial vehicle division. Richard joined FCA in November 2016 from Renault Trucks, and has experience at both OEM level and dealer retail, having also worked for Inchcape Mercedes as National Corporate Manager. Lee Titchner has been appointed Network Development Director, responsible for FCA dealers across the UK and Ireland. Lee moves from his previous role as head of FCA UK’s Mopar division to oversee the dealer network, where he is already well-regarded. Also, Sebastiano Fedrigo has been named as the new Mopar Service, Parts & Customer Care Director. Sebastiano previously headed up the Fiat and Abarth brands in the UK and Ireland, and will now leverage his considerable passenger car and commercial experience to grow Mopar, its products and its services, in this country. Previous country manager for Jeep/Alfa Romeo, Damien Dally, has moved to a role in FCA HQ, Turin. His replacement will be announced in due course -- MNI PINCH reports market pricing no chance of a 25bp rate hike at the next meeting on May 3rd, however the probability of a hike in June has risento 66% from 41.5% seen last Wednesday and in July, markets are pricing in a 70% chance of a hike, up from 50%. While the next full 25bp rate hike has been brought forward to September 2017 from Dec, according to MNI PINCH calculations - According to US GovInfoSecurity E news, new documents dumped online by the Shadow Brokers group have revealed apparent NSA programs designed to target SWIFT service bureaus in the Middle East, as well as a slew of exploits designed to infect Windows systems, patched last month by Microsoft – The US is gradually upping the stakes in its attempt to change the terms of trade with selected countries. In the latest salvo by the Trump administration, Secretary of Commerce Wilbur Ross has announced the initiation of a new antidumping duty (AD) investigation of imports of carton-closing staples from the People’s Republic of China. “The Department will act swiftly, while assuring a full and fair assessment of the facts, to ensure that everyone trades on a level playing field,” says Secretary Ross. “The Trump administration is committed to the enforcement of America’s vital trade laws that ensure US businesses and workers have a fair chance to compete.” The petitioner, North American Steel & Wire, Inc./ISM Enterprises, filed a petition seeking relief from the effects of dumped merchandise on the US industry on March 31st. More than 30 Chinese producers of carton-closing staples are identified in the petition. The estimated dumping margins range from 13.76% to 263.43%. In 2016, imports of carton-closing staples from China were valued at an estimated $73.2m -- Private equity-owned ING Life Insurance Korea says it has priced its IPO near the lower end of an indicative range to raise a total of $973.54million. It priced the IPO at 33,000 won per share, compared with an indicative range of 31,500 won to 40,000 won per share, ING Life said in a filing.

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Why moving clearing from London to Europe is no piece of cake!

Wednesday, 05 April 2017
Why moving clearing from London to Europe is no piece of cake! “Britain cannot have its cake and eat it over Brexit negotiations”, the words of the Luxembourg Prime Minister at the height of political tension after the referendum. Many comments like this have, perhaps unsurprisingly, become synonymous with the Brexit debate since June 23rd. But with the triggering of Article 50 just around the corner, it is surely high time for both sides to stop the political back biting and consider some cold hard truths. By Fraser Bell, chief revenue officer, at BSO http://www.ftseglobalmarkets.com/media/k2/items/cache/216960af2802aae876811ebe3db19323_XL.jpg

“Britain cannot have its cake and eat it over Brexit negotiations”, the words of the Luxembourg Prime Minister at the height of political tension after the referendum. Many comments like this have, perhaps unsurprisingly, become synonymous with the Brexit debate since June 23rd. But with the triggering of Article 50 just around the corner, it is surely high time for both sides to stop the political back biting and consider some cold hard truths. By Fraser Bell, chief revenue officer, at BSO

Nowhere is a good dose of reality needed more than the current debate surrounding whether London should remain the central hub for Eurozone clearing. While, any shift in operations would clearly be a blow to the City, is it really feasible for Europe to seamlessly become the new kings of clearing given the huge costs and complexity involved?

Per a recent study by the International Regulatory Strategy Group (IRSG), a lack of clarity over post-Brexit clearing will lead to higher costs and decreased growth prospects for banks operating inside the EU. And let’s face it, with a swathe of populist opinion currently sweeping France in an election year, no member state wants to commit to long-term capital expenditure projects with so much political uncertainty in the air.  

London’s current dominance means that any move in operations to mainland Europe would be a huge expense, and would be far from easy to implement. To put this into context, around 1 trillion euros are exchanged in the City every day. When it comes to clearing derivative contracts, such as interest rate swaps, options and other exotic products, the UK is the market leader in euro-denominated transactions, a daily turnover of over €900bn.

That’s a staggering 75% of all euro-denominated derivatives transacted in London, according to the Bank for International Settlements.  

 With these figures in mind, it is hard to envisage a speedy and cost efficient rerouting of clearing business, especially if a transitional deal is not reached.

Unless extended time is factored in to gradually phase out clearing operations beyond the two-year Lisbon Treaty timetable, there is an uphill task to replicate the reliable and sophisticated infrastructure currently underpinning London’s clearing houses.

Take the underlying network connectivity that has become an integral part of clearing. The settlement of exchange-traded derivatives, where gains and losses on every contract are calculated and reported on a daily basis, would be severely affected by a sudden shift in operations. Any disruption to the links connecting clearing services could lead to a trading firm incurring losses that wipe out initial upfront margin. In this situation, the firm would have to restore the capital quickly, or risk its trading position being sold off. With these risks, heightened by the vast volume of trades cleared daily, reliable and stable connectivity to clearing services is fundamental.

On top of this, with firms in the middle of adjusting their business models to fall in line with regulation such as MiFID II, which is forcing all standardised derivatives contracts onto exchange, the last thing the industry needs is a lack of clarity on where and when to relocate operations. Despite no clear timescales set, clearing houses are pressing ahead by reviewing their existing business to ensure operations run smoothly. Quite apart from the risk element, clearing is a fiercely competitive environment. And with the volumes continuing to increase, clearing houses will be jostling for position. With this in mind, the ability to maintain a consistent customer experience if and when they relocate may prove make or break for some.

Beyond time scales and reviewing operational models, there are wider geographical implications at play here. Financial institutions with major global footprints benefit greatly from focusing their clearing efforts across a few locations, mainly because it reduces the running costs of their client’s derivatives portfolios.

As tempting as it may be for European and UK Politicians to make life as difficult as possible for each other, as soon as Theresa May triggers the formal renegotiation starting gun, the point scoring needs to stop, and a concise transitional plan needs to be agreed. The City’s stronghold on clearing has been in place for so long now, that any sudden move in operations based on politics rather than pragmatism, will only serve to hurt both sides. The clearing cake will be one of the centerpieces up for grabs in the renegotiation. However, with the costs and complexity involved, Europe needs to ensure it doesn’t bite off more than it can chew. After all, whoever takes the spoils, global banks will only settle for one outcome – seamless and reliable access to clearing services.

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