In 2024 I was commenting on an ISDA white paper that discussed the possible uses of the then new concept of ‘GenAI’ (or Generative AI to use its full title) in the derivatives market.
The world of AI has rapidly moved on and the FCA is now conducting a review on how AI might reshape retail financial services in the long-term. One of the areas the FCA will explore is the potential use of Agentic AI … but what is it? …
Following its consultation of November 2024, the International Organisation of Securities Commissions (IOSCO), the leading policy forum for securities regulators, has published its final report on pre-hedging and associated risks.
As a reminder, pre-hedging can be applied to a range of assets including equities, fixed-income, currencies and commodities. It is used by dealers to manage risks associated with anticipated wholesale principal orders in relation to primary market offerings and secondary market …
In Markets businesses, risk management and business performance are often discussed as if they were related but fundamentally separate domains. Performance is something to be generated. Risk is something to be controlled. The two are connected rhetorically, but rarely analysed together in a way that shapes how the business is actually run.
Over the past decade, Markets businesses have invested heavily in change. New operating models, new control frameworks, new technologies, new governance structures. On paper, many institutions are more sophisticated, more regulated and more tightly managed than at any point in their history.
And yet something critical has been quietly eroded in the process: judgement. …
As part of its 40th anniversary celebrations ISDA has published a new report on how the uses and value of derivatives have developed during its 40-year history.
Those of us with long enough memories will remember what a fast-moving, innovative and exciting time it was in those early years, when we wrestled with understanding and …
We are now some 16 years+ on from the financial crisis of 2008-9. However, Basel III - which is aimed to be a comprehensive set of international banking reforms designed off the back of the lessons learned from the crisis to fortify banks against future shocks - is still seemingly a big distance away from being fully implemented.
We've seen a stream of heavy criticism from the largest U.S. banks - those with assets …
Pre-hedging has long been seen as a notorious and controversial grey area in global regulatory terms, leading to different practices in different jurisdictions with different conduct risk outcomes.
As it is largely undefined, the International Organisation of Securities Commissions (IOSCO), the leading policy forum for securities regulators has published a valuable and …
The FCA has recently reviewed a sample of ten principal trading firms (PTF’s) who undertake algorithmic trading, to assess their compliance with MIFID Regulatory Trading Standard (RTS) 6. RTS 6 was introduced in 2018 as part of MIFID II, specifically addressing algorithmic and high frequency trading by requiring firms to implement stringent controls over trading activities to ensure robust risk management and market stability.
In their ‘Dear CEO’ letter of August 2023 the FCA said that algorithmic trading controls …
The FCA has released its latest newsletter in the series on market conduct and transaction reporting issues (Market Watch 79).
This issue covers the highly complex matter of failure of market abuse surveillance systems caused by issues with factors such as data and automated alert logic. It also covers faults found in their recent peer review of firms’ testing of front-running surveillance models.
ISDA has published a white paper setting out its guidance for industry stakeholders, regulators and technology providers who are looking to harness the power of generative artificial intelligence, or 'genAI' as it’s known, in the over- the-counter (OTC) derivatives market.
Those not familiar with the term will be asking ‘what is genAI?’.
GenAI is a novel set of algorithms that can automatically generate new content by synthesising existing content.
As part of the ongoing fallout of the collapse of Archegos Capital Management in 2021 the PRA has conducted a thematic review of private equity financing.
The PRA has published its findings in a ‘Dear Chief Risk Officer’ letter, which has been sent to all relevant CRO’s and backed up by a speech by Rebecca Jackson, Executive Director for the PRA’s Authorisations, RegTech, and International Supervision Directorate (ARTIS).
She opened her speech by highlighting how private equity had grown as an asset class from …
In contrast to the EU, crypto assets have had a tougher time gaining acceptance in both the U.S. and the U.K. but there is now a distinct ray of light at the end of the tunnel in both countries.
Until January of this year the U.S. Securities and Exchange Commission (‘SEC’) and, in particular, Gary Gensler, its chair, had adopted a ‘just say no to crypto’ approach to crypto assets, deeming virtually every American crypto business activity conducted by the platforms as requiring registration with the SEC as a ‘security’ which would require them to follow the SEC’s complex security regulations.
Following its initial observations of February last year, the FCA has published a concluding report, on ICARA (Internal Capital Adequacy Risk Assessment) and IFPR (the Investment Firms Prudential Regime) reporting, bringing to a close the FCA’s multi-firm review.
Their review highlighted that, despite making progress, there are still areas for improvement around group ICARA processes, internal intervention points, wind-down assessments …
CumEx is a complex subject and the variety of CumEx variants that were seemingly employed by traders can be bemusing. Below we outline some schemes which have appeared in the public domain.
It should be noted that there were also additional mechanisms seemingly adopted to further disguise the nature of the activity.
The fallout from the collapse of Archegos Capital in 2021 and the Liability Driven Investment (‘LDI’) crisis of last autumn rolls on with much of the recent focus on remedial work around the LDI liquidity problems.
In a recent ‘Dear Chief Risk Officer’ (‘CRO’) letter from the PRA to firms involved in the PRA’s planned thematic review of firms’ matched book repo businesses, the PRA explained that they …
In its latest ‘Dear CEO letter’, the FCA has written to wholesale banks setting out their supervisory strategy for the next two years based on recent market events.
It includes information on their internal restructuring, which creates a ‘Sell-Side Directorate’ where the Wholesale Banks Department now sits alongside the supervision of market intermediaries and an area that analyses market interactions. …
In a co-ordinated global regulatory action, which included the Swiss Financial Market Supervisory Authority (FINMA), the U.S. Federal Reserve and the U.K.’s Prudential Regulation Authority (PRA), Credit Suisse, now a subsidiary of UBS, has been fined a total of $388 million over their dealings with the collapsed firm Archegos Capital Management.
For the PRA’s part their proportion of the fine was £87 million, the largest ever imposed on …
There have recently been a number of high profile “Spoofing” cases in the US, resulting in several convictions of traders. Spoofing is a form of market abuse which can sometimes be subtle, and hard to distinguish from “normal trading”, and is therefore challenging to monitor.
However, there is a clear message from authorities that spoofing is market abuse and will not be tolerated - so the responsibility falls firmly on senior management to ensure that the level and quality of trader surveillance is adequately robust to prevent spoofing. …
As international legislators and policy makers rush to catch up with the exponential growth of the cryptoasset market the PRA is applying the existing regulatory framework to control their expanding use, while the FCA is focusing on the management of growing risks in the areas of financial crime and custody.
