Securities Finance Monitor

Bank of New York Mellon (BNYM) has told their tri-party customers about the next step in reducing the systemic risk….and some market players fear it will create some nasty unintended consequences. Maturing tri-party trades with collateral that clear in the Depository Trust & Clearing Corp. (DTC) will have to be pre-funded. This will impair the ability to fund corporates, equities, money markets, ABS, Private Label CMOs, and muni bonds. It may limit the number of banks/broker/dealers who can offer financing. Read the rest of this entry →

From Nomura, by way of businessinsider.com comes a nice graphic showing the growth and falloff in “safe assets”. We have written before about the double squeeze in the market for safe collateral. The growth of CCPs, Basel III liquidity rules, and the overall desire to collateralize every exposure possible generates demand for trillions in high quality paper. But the issuers which are considered safe have been falling away (read: Greece, Spain, Ireland, etc.) and the club is still shrinking. We can spend so much time focusing on the micro side of collateral management, that we forget there is a macro issue out there staring us in the face.

A link to the businessinsider.com post is here. Some of our earlier related posts can be found here and here and here.

We have written a few times lately about the potential impacts of Moody’s downgrading banks by one or two notches and what the impacts for funding, collateral and the buy-side might be (see our articles here and here. Today we look at what potential bank downgrades mean for securities lending and in particular for CCPs.
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Finadium has released a report on Central Securities Depositories and the business of collateral management. Central Securities Depositories (CSDs) have traditionally focused on the business of custody as background utilities in financial markets. But with the growth of for-profit stock, options and futures exchanges, CSDs are now evaluating their commercial opportunities. This is an important change in how financial markets work and brings CSDs into direct competition with both each other and major investment banks.
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The likelihood that Moody’s will downgrade bank debt in the coming weeks and months is bad news for the banks themselves. But we would like to look at the other side of the equation: what will the Bank’s customers do in response? Read the rest of this entry →

Moody’s is reviewing 17 global banks for downgrades that may come as early as June. The news is starting to fill with stories on how much extra collateral banks will have to pony up if they are downgraded and what could happen to funding sources. It’s not pretty.

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We had a close read of the European Parliament’s adopted regulations on short selling and credit default swap disclosure and a few things popped out. These regs were published in the Official Journal of the European Union on March 24, 2012. First of all, this document is not that different from the European Commission’s September 15 2010 proposal. But as time has gone on and we have some distance from the financial crisis, we wonder if it is fair for regulators to mandate public disclosure of large short sale positions in equities and corporate debt, but require only private disclosure on short sales of member-state and EU-wide government debt. Regardless of the politics, it seems like there should be one rule for transparency across financial market products.
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