• Funds can still exploit US investors under SEC `soft dollar’ policy, Morningstar says
    19 April 2019
    A US Securities and Exchange Commission policy giving US brokers and asset managers relief from an EU rule requiring disclosure of investment-research costs could worsen conflicts of interest from “soft dollar” commissions, research firm Morningstar said.

    The Chicago-based firm said the SEC’s temporary exemption allows global investment managers to charge their US clients more than those in Europe.

    The SEC relief allows US funds to continue using trading commissions to pay for research from brokers through soft-dollar arrangements. The undisclosed research costs are passed on to US customers.

    To request the full article please click here >

  • US exchanges' circuit-breaker pilot made permanent by SEC
    18 April 2019
    The US Securities and Exchange Commission made permanent a five-year pilot program of circuit-breakers with tighter bands to pause trading on securities exchanges during unusual stock market swings.

    The “limit-up limit-down” program, or LULD, is to be reviewed in quarterly and annual reports by the New York Stock Exchange, Nasdaq and other national securities exchanges that proposed the permanent plan, the SEC said.

    “The Commission believes that the LULD mechanism effectively addresses extraordinary market volatility, and therefore is approving the plan on a permanent basis,” the order last week said.

    To request the full article please click here >

  • Green finance efforts should include the US, central bankers say
    17 April 2019
    Central bankers looking to encourage environmentally friendly investment today tried to draw into their ranks the one notable absentee — the US.

    The national banks of France, Germany, Mexico and China are fully on board with plans to ensure climate change risks are integrated into financial market decisions. The Federal Reserve, by contrast, is merely looking on from the sidelines.

    The US would be “very welcome” to join a global network aiming to make the financial system greener, Bank of England Governor Mark Carney told a conference in Paris today dedicated to the subject.* “There’s space for the world’s largest economy.”

    European regulators hope that the political realities of the current US government, will be tempered by a realization that the issue is a financial one like any other.

    To request the full article please click here >

  • Nonbanks account for 90 percent of US ‘leveraged loans,’ increasing run risk, IMF says
    16 April 2019
    Nonbanks such as hedge funds, private equity firms and mutual funds have come to account for just over 90 percent of US loans to highly indebted companies, increasing the risk that investor redemptions could aggravate a crisis, an International Monetary Fund report said.

    These nonbanks’ share of so-called leveraged loans has increased from around 70 percent of the US market in 2009, and a little over 30 percent two decades ago, the IMF said in its Global Financial Stability Report last week. The remainder was accounted for by banks and securities firms.

    “Greater participation of investment funds in the leveraged loan market means that a flood of investor redemptions could lead to additional market stress,” the 106-page report said.

    The loans, usually arranged by banks, are often extended to individual companies and then bundled into securities called “collateralized loan obligations” for sale to institutional investors. Looser underwriting standards on the loans have increased their risk to investors, the semi-annual report said.

    To request the full article please click here >

  • Libor fallback rates in derivative contracts to get public consults this month
    15 April 2019
    The International Swaps and Derivatives Association plans to issue two consultations this month on introducing fallback benchmarks in derivative contracts that reference Libor rates at risk of discontinuation.

    The consultations, supported by the Financial Stability Board, the regulatory coordinator for the Group of 20 economic powers, are part of a push to announce a market protocol by year-end, the bank group’s letter last week said.

    “We look forward to working with our members and the public sector to address issues related to regulatory margin, capital, tax, accounting and collateral in order to ensure broad market adoption of [risk-free rates] and implementation of robust fallbacks,” the letter to an FSB steering group said.

    To request the full article please click here >