In this regulatory round-up, the Commodities Futures Trading Commission outlines the results of its fourth Supervisory Stress Test (SST) of derivatives clearing organisation (DCO) resources, while the European Securities and Markets Authority opens a consultation on liquidity management tools. Elsewhere, the International Capital Markets Association partners with Singapore’s NUS Asian Institute of Digital Finance on artificla intelligence best practices.
- CFTC confirms stability of derivatives clearing firms
- AFME’s Jacqueline Mills’ appointed to ESMA’s securities and markets stakeholder group
- Caroline Liesegang appointed to European Banking Authority’s nanking stakeholder group
- ESMA opens consultation on liquidity management tools
- Three ESMA board members appointed for second terms
- ICMA and the NUS Asian Institute of Digital Finance announce strategic collaboration
- ICMA provides guidelines for Sustainability-Linked Loan financing Bonds
- ISDA confirms development of industry notices hub
Americas
CFTC confirms stability of derivatives clearing firms
The Commodities Futures Trading Commission (CFTC) has confirmed the stability of derivatives clearing firms, in the face of extreme market conditions, following eleven volatility simulations.
The CFTC report, Supervisory Stress Test of Derivatives Clearing Organizations: Reverse Stress Test Analysis and Results, outlines the results of its fourth Supervisory Stress Test (SST) of derivatives clearing organisation (DCO) resources.
The report concluded that the DCOs studied hold “sufficient financial resources to withstand many extreme and often implausible price shocks”, even with multiple clearing member defaults.
Conducted by the CFTC’s Risk Surveillance Branch of the Division of Clearing and Risk, the stress test was the most comprehensive to date, examining nine DCOs across futures and options, cleared interest rate swaps, credit default swaps, as well as foreign exchange (FX) products.
The test used actual positions as of 1 September 2023, and simulated eleven volatile dates since 2020, including market stresses from the COVID-19 pandemic, the war in Ukraine, and recent inflation-related impacts.
EMEA
AFME’s Jacqueline Mills appointed to ESMA’s securities and markets stakeholder group
The Association for Financial Markets in Europe’s (AFME) managing director, head of advocacy, Jacqueline Mills, has been appointed to the European Securities and Markets Authority (ESMA)’s Securities and Markets Stakeholder Group (SMSG).
Starting on 1 July 2024, the new members of the SMSG will begin their four-year term, during which they will provide ESMA with guidance on policy matters and be consulted on technical standards and guidelines.
Mills brings extensive sell-side experience and expertise to the SMSG. As AFME’s head of advocacy, she is responsible for shaping and delivering the association’s advocacy efforts across external stakeholders in the EU27 and UK.
Caroline Liesegang appointed to European Banking Authority’s nanking stakeholder group
AFME’s Caroline Liesegang, managing director, head of capital and risk management, sustainable finance and research, has been appointed to the European Banking Authority (EBA)’s Banking Stakeholder Group (BSG).
The BSG is composed of 30 members and focuses on examining specific technical issues related to its work plan and formulating opinions to be sent to the EBA on key areas of relevance. In particular, the BSG will be consulted on actions concerning regulatory technical standards, implementing technical standards, guidelines, and recommendations.
ESMA opens consultation on liquidity management tools
The European Securities and Markets Authority (ESMA) has opened its consultation on draft guidelines and technical standards under the revised Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive.
The draft regulatory technical standards define the constituting elements of liquidity management tools (LMTs), with further guidelines on the LMTs of UCITS and open-ended AIFs. These guidelines are in place to support managers in the selection and calibration of their LMTs with consideration to their investment strategy, liquidity profile and the fund’s redemption policy.
Three ESMA board members appointed for second terms
The European Securities and Markets Authority (ESMA) has reappointed three members of its management board.
Thorsten Pötzsch, chief executive and director of securities supervision for asset management at BaFin, Rodrigo Buenaventura, chairman of the Comisión Nacional del Mercado de Valores (CNMV), and Eduard Müller, executive director of the Austrian Financial Market Authority (FMA), begin their second terms on the board from 1 October. They will hold the positions until 31 March 2027.
Global
ICMA and the NUS Asian Institute of Digital Finance announce strategic collaboration
The International Capital Market Association (ICMA) has partnered with the Asian Institute of Digital Finance (AIDF), a university-level research institute under the National University of Singapore, to advance educational excellence with industry relevance.
ICMA and NUS-AIDF have signed a Memorandum of Understanding (MoU) to develop the AI Governance Executive Programme in Global Capital Markets, designed to equip participants with advanced insights and practical competencies in AI risk management practises.
Georgina Jarratt, managing director and head of fintech and digitalisation, ICMA, said: “Raising and maintaining high professional standards in financial markets through training and education has always been a core part of ICMA’s mission. We are delighted to be collaborating with the National University of Singapore to deliver a programme on AI and risk management, a key topic that will shape the future of the capital markets.”
ICMA provides guidelines for Sustainability-Linked Loan financing Bonds
ICMA’s Green, Social, Sustainability and Sustainability-Linked Bond Principles have announced guidance for green enabling projects and guidelines for Sustainability-Linked Loan financing Bonds (SLLB). The Principles are the global standard for the $5 trillion sustainable bond market that represents the largest source of market finance dedicated to sustainability and climate transition, available internationally to corporates and financial institutions, as well as supranationals, agencies and sovereigns.
The Guidelines for Sustainability-Linked Loan financing Bonds (SLLBs), developed jointly with the Loan Market Association (LMA), define a dedicated bond instrument designed for issuers wishing to finance or refinance a portfolio of eligible sustainability-linked loans (SLLs) aligned with the LMA’s Sustainability-Linked Loan Principles (SLLP). SLLBs may serve as an incentive to enhance the robustness of sustainability-linked loan structures in the market over the longer-term.
The Principles also released further guidance around clarifications to support KPI selection and a new SLB disclosure data checklist; an expansion of the SLB KPIs Registry related to environmental themes; and a new annex of the Impact Reporting Handbook covering potential environmental and/or social risks associated with eligible project categories for green bonds.
ISDA confirms development of industry notices hub
ISDA will develop an industry-wide notices hub, it has announced, following support from global buy- and sell-side institutions on the endeavour.
Currently, under the ISDA Master Agreement, termination-related notices must be delivered under particular prescribed methods – including physical delivery. However, if company address details have been changed or physical delivery is possible, users risk considerable losses.
The new secure, central, online platform will provide immediate delivery and receipt of critical termination-related notices, with automatic alerts sent to the receiving entity. Market participants will be able to update their physical address details through a single entry, with the platform accessible by multiple designated individuals at each firm regardless of geographical location.
The implementation of the service will reduce the risk of uncertainty and potential losses for both senders and recipients of the notices, ISDA stated.
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