A synopsis of the headlines in the derivatives industry from the last week.UK
LCH.Clearnet joins the stress testing fray
LCH.Clearnet is the latest clearinghouse urging regulators to adopt a global standard for stress testing central counterparties (CCPs) to enable clearing members to assess risk and default management procedures on a consistent basis.
In its recent White Paper – Stress this house – a framework for the standardised stress testing of CCPs (http://www.lchclearnet.com/risk-collateral-management/risk-management-overview/ccp-risk-managment-recovery-resolution) – the London Stock Exchange owned clearer noted, that ,”the ability of clearing members to make informed decisions based upon the resiliency of clearing houses is fundamental to minimising systemic risk and strengthening international financial markets. It should be based around three principles – transparency, simplicity and comparability.”
LCH.Clearnet warned that if global stress testing standards are not adopted, clearing houses may engage in a race to the bottom, where they compete on lower margin requirements in order to attract more business. It believes that a global standard could be achieved within a reasonable timeframe.
The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions have undertaken a review of stress testing by CCPs.
Grip to tighten over UK bitcoin industry
The UK government intends to apply anti-money laundering regulation to digital currency exchanges as part of its efforts to restrict criminal activity through anti-money laundering, according to a new report from the Treasury Report on the bitcoin industry (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414040/digital_currencies_response_to_call_for_information_final_changes.pdf.
Part of the plan will also include the government working with the British Standards Institution (BSI) and the digital currency industry to develop voluntary standards for consumer protection. The government will also inject £10m into further research development and application of new technology as well as promote competition and innovation in payment systems, financial services, and other relevant sectors
The new document comes in response to a consultation published in November on developing digital currency regulations. It received 120 responses from digital currency developers, businesses providing digital currency related services, banks, payment scheme providers, academics, consultants, and other government agencies.
Source: https://www.cryptocoinsnews.com/u-k-treasury-regulate-digital-currency-bitcoin/
Europe
Bank of England and ECB reach pact after four year battle
The Bank of England and the European Central Bank (ECB) have struck a deal to enhance sharing information about central counterparties located in Britain that have significant euro-denominated business. They also agreed to extend their standing swap line to provide multi-currency support to CCP.
The settlement of differences put an end to a long running battle which started in 2011 over ECB’s so-called location policy. It was challenged in court by Britain as discriminatory because it required clearing houses handling significant euro-denominated business to retreat to the eurozone in order to be more closely monitored. It became a test as to whether Britain could remain Europe’s top financial centre and enjoy the full benefits of the EU’s common market while remaining outside the euro.
Britain won the first of its three lawsuits in early March. The EU general court told the ECB to scrap the location policy on the grounds that it went beyond the ECB’s regulatory authority. As part of the deal, the ECB will not appeal the ruling and the UK will drop its outstanding cases. This is significant because the first judgment was relatively narrow and did not address the most contentious question: whether the ECB discriminated against UK operators and undermined the fundamental freedoms of the EU single market.
Source: http://www.reuters.com/article/2015/03/29/britain-boe-ecb-idUSL6N0WV0C820150329
Source: http://www.ft.com/cms/s/0/4a244974-d608-11e4-a598-00144feab7de.html#axzz3VrZGJbd6
Source: https://www.ecb.europa.eu/press/pr/date/2015/html/pr150329.en.html
