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Reforming OTC Derivative Markets-UK Prospective
December 16, 2009--Executive summary
Financial Services Authority/HM Treasury 3
Risks highlighted by the financial crisis
1.1 The financial crisis has highlighted deficiencies within the over-the-counter
(OTC) derivative markets: most notably shortcomings in the management of
counterparty credit risk and the absence of sufficient transparency. This paper
sets out the steps required to address these issues, where relevant identifying
further necessary work streams
1.2 In summary, the Treasury and the FSA (‘UK Authorities’) propose that the following
measures need to be implemented and/or developed to address systemic shortcomings
in OTC derivative markets:
• Greater standardisation of OTC derivatives contracts. Greater standardisation would enhance the efficiency of operational processes; facilitate the increased use of central counterparty (CCP) clearing and trading on organised trading platforms, and support greater comparability of trade information.We will work with international regulators and the industry to take steps to identify and agree which products can be further standardised, both in terms of underlying contract terms and operational processes, and ensure that this is implemented on a timely basis.
• More robust counterparty risk management. All OTC derivative trades, whether or not centrally cleared, should be subject to robust arrangements to mitigate counterparty risk. For all financial firms this should be through the use of CCP clearing for clearing eligible products. For trades which are not centrally cleared these should be subject to robust bilateral collateralisation arrangements and appropriate risk capital requirements. This approach may differ for non-financial firms given the different nature of the risks they pose to the financial system. It is important that all participants bear the cost of managing the risk they pose.
View the Reforming OTC Derivative Markets-UK Prospective report
Source: FSA
FSA consults on raising professional standards for all investment advisers
December 16, 2009--The Financial Services Authority (FSA) has today published proposals for enhancing the professionalism of investment advisers under the Retail Distribution Review (RDR).
The RDR is seeking to rebuild people’s trust and confidence in the retail investment market by raising standards of professionalism. A key element of the FSA’s wide-ranging reforms is that by the end of 2012, advisers, whether independent or restricted, will need to demonstrate greater knowledge and skills and meet enhanced standards in dealing with clients.
The FSA is proposing to create a new in-house governance structure to ensure advisers achieve this greater level of professionalism, both initially and on an ongoing basis through the achievement of new, higher level qualifications; meeting enhanced standards of continuing professional development; and adhering to common ethical standards.
This streamlined approach fits with the FSA’s existing role in approving and supervising investment advisers, and would enable the FSA to apply its more intensive supervisory approach, including its greater focus on individuals in key positions, to the retail investment advice sector. At the same time, the FSA is proposing that professional bodies, registered with and overseen by the FSA, should play a greater role in helping their members meet its new professionalism requirements.
7th Extract from EECS’s Database of Enforcement
December 16, 2009--Introduction
EU National Enforcers of financial information monitor and review financial statements and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.
Operating under the operational CESR group charged with accounting issues, CESR-Fin,
EECS is a forum in which all EU National Enforcers of financial information, whether CESR members or not, meet to exchange views and discuss experiences of enforcement of IFRS. A key function of EECS is the analysis and discussion of decisions taken by independent EU National Enforcers in respect of financial statements published by issuers with securities traded on a regulated market and who prepare their financial statements in accordance with IFRS. EECS is not a decision-making forum. It neither approves nor rejects decisions taken by EU National Enforcers who apply their judgement, knowledge and experience to the particular circumstances of the cases that they consider. Relevant factors may include other areas of national law beyond the accounting requirements. Interested parties should therefore consider carefully the individual circumstances when reading the cases. As IFRS are principles based, there can be no one particular way of dealing with numerous situations which may seem similar but in substance are different. Consistent application of IFRS means consistent with the principles and treatments permitted by the standards.
Decisions taken by Enforcers do not provide generally applicable interpretations of IFRS, which remains the role of the International Financial Reporting Interpretations Committee (IFRIC).
As proposed in CESR Standard No 2 on Financial Information, „Co-Ordination of Enforcement Activities‟, CESR has developed a confidential database of enforcement decisions taken by individual EECS members as a source of information to foster appropriate application of IFRS. In response to public comment to the Standard, CESR committed to publish extracts of the database to provide issuers and users of financial statements with similar assistance. Publication of enforcement decisions will inform market participants about which accounting treatments EU National Enforcers may consider as complying with IFRS; that is, whether the treatments are considered as being within the accepted range of those permitted by the standards or IFRIC interpretations. Such publication, together with the rationale behind these decisions, will contribute to a consistent application of IFRS in the European Union
view report
Source: CESR
Treasury sets out plans to manage investment bank failures
December 16, 2009--The Treasury has today published proposals to strengthen the UK's ability to deal with any future failure of an investment bank. The proposals will enhance the UK’s reputation as one of the world’s leading centres for conducting investment business.
These proposals are part of the Government’s broader work on reducing the impact of failing firms. They build on the steps the Government took in the Banking Act earlier this year to resolve failing retail banks.
Financial Services Secretary Paul Myners said:
“The collapse of Lehman Brothers last October had a major impact on financial centres across the world. It is important that the Government acts to ensure that any future failure of an investment bank does not cause the same degree of damage to markets or investors.
“Moving quickly to address these issues will be a significant advantage for the City and for the wider UK financial sector. Today’s proposals are about enhancing the UK’s reputation as the world’s premier destination for investment banking services.”
This report builds on ideas outlined by Government in a discussion paper in May this year.
The Government has worked extensively with industry experts, the Bank of England and the Financial Services Authority (FSA) to refine its ideas for balanced and proportionate policy response to any future failure of a major investment bank. The latest report considers a package of market, regulatory and legislative policy proposals that aim to improve resolution arrangements.
These proposals look at introducing processes that will allow for the managed wind-down of a future failed investment firm, including resolution plans and a new insolvency regime for investment banks, with special administration objectives.
The consultation paper looks at proposals that will help client assets and money held on trust by an investment firm be returned as quickly as possible, as well as proposals to allow the trades that the failed firm has entered into to be resolved effectively to ensure clarity for affected counterparties and creditors.
Although the Government has powers to lay secondary legislation under the Banking Act 2009 to introduce its proposals, it is seeking market and regulatory solutions wherever possible.
View Establishing resolution
arrangements for investment banks report
Source:HM Treasury
ETF Securities lists Europe’s first Swiss vaulted Gold ETC backed only by LBMA ‘Good Delivery’ Bars on the London Stock Exchange
December 16, 2009-Highlights of the New Offering
London Stock Exchange - ETFS Physical Swiss Gold (SGBS) will list on the London Stock Exchange (LSE) on 16 December 2009
Gold stored in Switzerland: ETFS Physical Swiss Gold (SGBS) will custody all of its physical gold bullion in vaults in Zurich, Switzerland offering diversification benefits across issuer, custodian and geographies
Physically-backed: ETFS Physical Swiss Gold (SGBS) is backed by allocated physical gold bullion that meets London Bullion Market Association (LBMA) “good delivery” standards. This is the only Swiss vaulted exchange-traded product that follows this global standard
Liquid: ETFS Physical Swiss Gold is the latest Gold offering from ETF Securities which has over $11bn of AUM in physically backed allocated bullion products globally as of December 2009
Transparent: Gold bars underlying: ETFS Physical Swiss Gold (SGBS) will undergo a bi-annual inspection performed by an independent external auditor and all gold bar identification numbers will be published on www.etfsecurities.com
World Gold Council (WGC) - ETFS Physical Swiss Gold is part of the WGC Exchange Traded Gold global stable of Gold ETFs
read more
Source: ETF Securities
UK Deregulatory Review
December 16, 2009--Following the Government response to the risk sharing consultation paper, an assessment of whether and how collective defined contribution schemes might operate in the UK was published on 15 December 2009.
The assessment is covered in the two following documents and the link to the research report:
view Collective Defined Contribution Schemes report
view Modelling Collective Defined Contribution Schemes report
Source: Department for Work & Pensions (DWP)
ETF Statistics November 2009-London Stock Exchange
December 16, 2009--The ETF Statistics Report from the London Stcok Exchange.
view report
Source: London Stock Exchange
ETF Landscape: European DJ STOXX 600 Sector ETF Net Flows, week ending 11-Dec-09
December 16, 2009--Highlights
Last week saw US$35.5 Mn net outflows to DJ STOXX 600 sector ETFs. The largest sector ETF inflows last week were in Chemicals with US$19.7 Mn and Automobiles & Parts with US$18.0 Mn while Banks experienced net outflows of US$68.1 Mn.
Year-to-date, Telecommunications has been the most popular sector with US$491.4 Mn net new assets, followed by Basic Resources with US$435.1 Mn net inflows, while Travel & Leisure sector ETFs have been the least popular with US$15.0 Mn net outflows YTD.
The assets invested in the ETFs are greater than the open interest in the corresponding futures contract in 17 out of the 19 sectors.
Visit Blackrock for more information.
Source: ETF Research and Implementation Strategy Team, Blackrock
NYSE Euronext lists Think Capital ETFs- first five ETFs on the NYSE Euronext Amsterdam market
November 15, 2009-- NYSE Euronext is pleased to announce that another new issuer, Think Capital ETFs, has listed its first five ETFs on the NYSE Euronext Amsterdam market:
Think AEX Tracker-ISIN:NL0009272749-Bloomberg Ticker:TDT NA
Think AMX Tracker-ISIN: NL0009272756
;Bloomberg Ticker:TMX NA
Think Total Market Tracker Defensief-ISIN:NL0009272764-Bloomberg Ticker:DTM NA
Think Total Market Tracker Neutraal-ISIN:NL0009272772; Bloomberg Ticker: NTM NA
Think Total Market Tracker Offensief-ISIN: NL0009272780; Bloomberg Ticker: TOF NA
Source: NYSE Euronext
Eurex to Further Expand its Equity Options Offering Covering UK Equities
30 new UK equity options with home market settlement to be introduced in January 2010
December 15, 2009--The international derivatives exchange Eurex announced today that it will launch new equity options based on 30 of the most liquid British stocks on 18 January 2010. With this new product suite, Europe’s largest derivatives exchange for the first time will also offer British pence denominated equity options with home market settlement. The new UK equity options will be physically settled in the Crest system of Euroclear UK & Ireland.
Peter Reitz, member of the Eurex Executive Board, said: “This launch represents an important step in our strategy to continuously expand our product offering with new contracts. The new UK equity options extend our broad coverage of the Dow Jones STOXX 600® index components. We provide our customers with extended cross margining opportunities as we offer trading of all the major European blue chips derivatives on one platform. UK equity options will enable our customers to better hedge their exposure to the UK equity market and will simultaneously offer new trading opportunities.”
The new options will be denominated in GB pence and physically settled in the Crest system of Euroclear UK & Ireland. Eurex and Eurex Clearing have been officially recognized by statutory instruments as financial intermediaries in the UK and will thus be exempted from SDR taxation (stamp duty). Further the customer business of all Eurex Clearing members will also automatically be exempted.
The new suite of options will have maturities of up to two years. To support order book trading, a market making scheme will be initiated to ensure on-screen liquidity. During the first eight months of trading, supporting market makers can qualify for a 50 percent revenue sharing program lasting for two years. Trading hours will be from 9:00 am until 5:30 pm CET.
Source: Eurex
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