Weekly Roundup | 3rd August 2014
A selection of the previous weeks stories, by Sol Steinberg.
CME acquires GFI technology assets in strategic transactions (Buying Fenics and Trayport)
CME Group and GFI have agreed to a pair of strategic transactions through which CME will acquire GFI in an all-stock transaction. Immediately following the acquisition, an investor group led by current GFI management will acquire the broking and clearing operations of GFI, leaving CME with just the Trayport and FENICS technology companies. CME indicated that it highly values the technology businesses it is purchasing because of their broad connectivity to clients in Europe and Asia. The investor group that will acquire the GFI broking and clearing business with maintain that business as a private company.
Argentina declared in default on debts
Argentina has been declared in default after it failed to make a $539 million payment to bondholders that has become part of a lengthy legal dispute. The issue is that a New York judge ruled Argentina’s bond payment couldn’t be distributed unless the country also paid hedge funds holding earlier defaulted debt that dates back to 2001. The hedge funds represent the small subset of investors who did not accept a deal on the earlier defaulted debt. Argentina is concerned that it can’t pay the hedge funds at a higher rate than the other investors in the 2001 default received, without triggering a clause requiring it to pay all the 2001 default investors at the same level.
CFTC argues for flexibility in regulating cross-border swaps
A CFTC lawyer defended the agency’s use of guidance rather than formal rule to oversee cross-border swaps, saying the agency needs flexibility. Attorney Robert Schwartz was defending the CFTC in federal court in a suit filed against the agency by the Securities Industry and Financial Markets Association (SIFMA), the International Swaps and Derivatives Association (ISDA) and the Institute of International Bankers. A SIFMA attorney told the judge that by issuing guidance the CFTC sets policy without industry input. Schwartz countered that formal rules take a year or more to approve, while guidance allows the agency to implement reforms more expediently.
HFT may prompt rule change on exchange execution speeds
The Securities and Exchange Commission may consider relaxing rules requiring the fastest possible execution on exchanges, Bloomberg reported. A looser requirement about execution speed would benefit IEX, the company made famous by the Michael Lewis book Flash Boys, when IEX applies to become an exchange. IEX has a “speed bump” built into its trading system that slows the immediacy of trades, and SEC officials may take into account the growth of high frequency trading in weighing IEX’s exchange application.
New credit default swap design expected within weeks
Market participants are preparing for substantial changes when new credit definitions for the credit default swaps market are unveiled on Sept. 22. The changes will include a new government intervention credit event for when bank debt is forcibly written down and other reforms. The changes address issues that became apparent during the financial crisis.
Regulatory demands can be turned into operational improvements
There is potential opportunity in regulatory constraints, Bill Kramer, Linedata’s SVP of product management writes. By embracing change with a quick response to regulations and by leveraging risk management technology, firms can improve data governance, technology and processes.