2021 was as incremental as 2020 was monumental.
In many ways the last 12 months have mirrored that of the previous year with some incremental differences. But are these differences in fact evidence that progress on all fronts is being made albeit at a slower pace that some might hope or notice? I’m sharing my top reads from DerivSource in the last year which I believe are not only still relevant today, but also give our readers insight into the base of which steps might be taken forward in the coming months.
I would be remiss not to mention one big step for DerivSource that was made this year. Many of our readers will already know that Markets Media Group acquired DerivSource in Q4 of 2021. We are incredibly excited to join a wider group including a top-notch team of editorial and publishing professionals who share our passion and dedication to the financial trade media space.
Our readers will notice some changes as we transition to join the Markets Media portfolio of platforms and harness timely opportunities to deliver greater industry insight and commentary for our community of financial professionals. Thank you to all of the DerivSource readers, followers, clients and my personal champions who have supported DerivSource in the past decade. I’m forever grateful to you all.
In the meantime, please see below my favourite pieces from last year and watch out for our 2022 outlook insight in January (first article on Brexit & the impact on derivatives here).
And if you have suggestions or ideas for how we better serve our community in 2022, we welcome your feedback via email this short and anonymous survey (3 mins to complete).
All the best for a happy, healthy and prosperous 2022!
Julia Schieffer, Founder of DerivSource.com
Top Editorial Pics
Environmental, Social and Governance
Lynn Strongin Doddsassesses the sustainability evolution of the derivatives market but why it may take longer than its equity and bond counterparts.
Over the last 12-18 months, environmental, social and governance (ESG) investing has reached a tipping point and moved from a hot new trend to a mainstream investing choice, with multi-asset opportunities in the equities, fixed income and derivatives worlds. In this article, representatives from Quintet Private Bank, Blackrock, ESG Portfolio Management and Eurex explore recent trends, including the role the nascent ESG derivatives market will play as the market matures.
Digitalisation and Digital Assets
Lynn Strongin Dodds assesses the different approaches regulators across the globe are adopting to catch up with the fast-moving world of digital assets.
Lynn Strongin Dodds canvasses the post trade DLT scene and finds derivatives are not yet part of the wider eco system, but could legislation change this in the future?
Post-trade Processing Trends
Lynn Strongin Dodds looks at the changing attitudes towards outsourcing and the different paths markets participants are considering including a look at front-office activities in addition to middle and back-office functions.
Digitalisation has come a long way from its original premise of simple automation of processes. Firms still need to reduce manual processes and the potential for human error, but they are also looking to leverage tokenization technology and the blockchain, as well as feed data generated in the back office to inform trading decisions. In a recent DerivSource podcast series, we spoke with industry experts from McKinsey & Co, Capco and Torstone Technology about the top trends influencing post-trade digitalisation.
Derivatives reconciliations failures have been in the spotlight frequently in recent years, which has instigated sell-side institutions to turn their attention (and budgets) to this post-trade function. In a Q&A with Will Mitting, Founder and Managing Director at management intelligence platform, Acuiti, discusses the results of Acuiti’s recent research into derivatives reconciliations, top challenges firms still need to address, the role of AI can, and how the right investment can drive strategic change in derivatives reconciliations processing.
Regulation and Compliance
As the market prepares for the transition away from the use of LIBOR to alternative benchmarks or risk-free rates (RFRs), financial institutions must closely look at their strategies for tackling legacy trades, which reference this soon to expire interbank lending rate. In this podcast series, we explore the complexities, challenges and opportunities firms have when looking to execute their own strategy to migrate legacy trades away from LIBOR. In this 3-part series, we take a look at some of the market-wide, legal, operational and technological hurdles, inherent in this journey for the derivatives and cash markets. Tune in to also learn more about the options and solutions that may assist a firm as it works towards the upcoming deadlines.
The global market is making great strides in its transition away from Interbank Offered Rates (IBORs) to Risk Free Rates (RFRs), according to recently published Q3 2021 research from OSTTRA and based on data processed by MarkitSERV. In a Q&A with DerivSource, Kirston Winters, Head of Legal, Risk, Compliance and Government and Regulatory Affairs at OSTTRA, shares the milestones met in the recent quarter and how this paves the way towards future compliance across various currencies and jurisdictions in the swaps market.
As we hit the deadline for Phase 5 of the Uncleared Margin Rules (UMR), the industry has only one more year of preparation ahead of the final deadline impacting Phase 6 firms. Meanwhile, this set of new rules, among other regulatory changes, has transformed the collateral management space with the entrance of new industry solutions, multiple technological alliances and services launched to assist firms with compliance. As we enter the final sprint for UMR, DerivSource looks ahead at the big challenges collateral managers face now and what opportunities lie ahead to continue the evolution of this changing space.
As market participants come to terms with the latest batch of uncleared margin rules (UMR), Phil Hermon, Executive Director, FX Products at CME Group, unpicks the challenges that numerous buy-side firms caught in phase 5 will have to overcome.
Simon Appleton, Director, MiFID II Transaction Reporting, Kaizen Reporting shares answers to common questions on the proposed changes to MiFIR’s transaction reporting requirements.
The final version of the Digital Operational Resilience Act (DORA) may not be out yet, but firms can start planning compliance programs now. In a Q&A with DerivSource, Alexandre Vendeput, Principal Consultant at Capco Belgium, offers a quick view on this upcoming EU regulation which will require financial institutions of various types to up their game in digital operational resilience processes.
Derivatives Products and Liquidity
Repurchase agreements or repos are balance sheet intensive products. In a bid to support both direct access to repo markets amongst the buy side and deliver greater capital benefits for banks and dealers, Eurex has launched a balance sheet netting solution for repo trades. Dale Fullilove, Senior Vice President, Sales & Relationship Management at Eurex and Richard Glen, General Manager, Head of Collateral Management – Banking, Funding and Financing at Clearstream, share how the balance sheet netting solution meets accounting standards and can provide capital efficiency through the greater interlinking of its GC Pooling and Special repo services and enhancements to the Eurex and Clearstream infrastructure.
As the TRF segment grows, market participants are using these listed solutions to trade implied repo rates and generate alpha. In a recent Eurex webcast, market participants, representing both the buy and sell side, shared how they are using TRFs as part of their futures trading strategy, and specifically with UCITS funds.
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