regulation update - lbma 2016/s3_mirzav2.pdf · aurum lbma interface post trade . vaults . s trade...
TRANSCRIPT
Regulation Update
Sakhila Mirza
General Counsel, LBMA
REGULATION: WORLD OF ACRONYMS Key Points
EMIR NSFR/
Basel III
FEMR
SFTR
REACH
Benchmark IOSCO
Principles
Conflict Mineral
s
Precious Metals
Code
MAD/ MAR
BREXIT
MIFIR/ MIFID
EU CONFLICT MINERALS UPDATE Regulation on Responsible Sourcing of minerals from conflict-affected and high-risk areas (global focus)
► European Commission and European Parliament moving towards anagreement by Q1 2017.
► Support for Industry Schemes to be recognised:► OECD Alignment Assessment.
► Voluntary reporting:► Downstream to report on voluntary basis, subject to the results of a study;
► What % of downstream use 3TG;► Who is actually reporting.
► Potential for voluntary to move to mandatory.
Requirement for all importers of gold into the EU (including bullion & coins)
NET STABLE FUNDING RATIO 85% Haircut on banks’ gold holdings Purpose
► Banks should hold a minimum amount of stable funding based on the liquidity characteristics of theirassets and activities over a one year horizon.
Impact
► Fall in liquidity – banks departure from business.
► Increase in costs – transferred potentially to end user.
Lobbying
► Basel Committee on Banking Supervision, European Commission.
► Proposal: carve out for short term loans i.e. less than 3 months.
► Need engagement from wider membership.
PRECIOUS METALS CODE New Code to be launched in May 2017: replaces NIPS
Purpose
To promote integrity and effective functioning
To provide guidance to the precious metals market
FX Code (BIS); Wholesale Money Markets (Bank of
England)
Applicability
Supply Chain
Guidance provided where it only
applies to Financial Institutions
Mandatory – input important
PRECIOUS METALS CODE Public Consultation : November 2016 – January 2017
Content Ethics
Governance, risk management and compliance
Information sharing
Business conduct: pre-trade and execution
Business conduct: post-trade (confirmation process, netting, settlement, shipping)
Illustrative examples: definitions, conventions
Global Consultation: Open to ALL
Members; Non-members; International Associations; Government authorities
IMPORTANT: opportunity to shape a code that will apply to you
What would you like to see covered?
How should this apply?
What aspects of the market practices require further clarity?
Are there examples missing
How to demonstrate compliance?
Available on the LBMA website
FAIR AND EFFECTIVE MARKETS REVIEW Joint report by Bank of England, UK Financial Conduct Authority and HM Treasury
Recommendations provided to improve the fairness and effectiveness of the FICC markets
► “…authorities and firms look for ways to improve transparency in ways that maintain or enhancethe benefits of diverse trading models, including over-the-counter (OTC) transactions.”
► “…(LBMA) issued a formal ‘Request for Information’ inviting potential solution providers to assistit in delivering greater bullion market transparency through, for example, trade reporting andincreased reporting and risk management efficiency via enhanced IT solutions. Following thisprocess, the LBMA launched a specific ‘Request for Proposal’, focusing on trade reporting as apriority in response to the market commitment by LBMA members to enhance transparency.”
REPORTING LBMA’s commitment to enhance transparency
Benefits
► Transparency and help to meet regulators agenda.
► Self regulation, provides the market the flexibility to shape a fit-for-purpose solution.
► Data to support better understanding of the market.
► Assist with lobbying efforts (e.g. NSFR).
► End of valuation curves – revitalise the forward market.
REPORTING The market needs credibility, the ability to act with authority on regulatory issues and due diligence benefits
Boat ► Establish a strong equal partnership, through which LBMA and its members
retain control over scope or reporting, pricing and future services;
► Partnering directly with the underlying technology provider, rather thanrelying on an intermediary;
► Allows LBMA to remain agnostic in terms of any other new market offerings;
► Leading in reporting capabilities;
► Existing infrastructure;
► Cost effective.
DESIGN STUDY LBMA as competent authority for Precious Metals market retains the ability to control and shape services through member consultation: Launching in October
Define the scope of reporting ►reportable instruments: Loco London -spot, forwards, options.►participant structure – anyone trading loco London anywhere in the world.
Determine ►IT requirements - most have it.►reporting mechanisms and methodology – governance is critical.►market surveillance – protect integrity.
Advise on supporting services ►What else would the market like to see from this data?
Implementation ►Implementation Plan.►Q1 2017 launch.
LBMA Interface Aurum
Post Trade
Vaults
s Trade Repositories
Clearing Houses Clearing
Houses
CCP’s CCPs
Data Warehouse Data Warehouse
Pre Trade
Bilateral/OTC Trading
Exchange Traded Other Venues
Executed Trade Detail Flow
Matching and Settlement
Benefits
• Re-establish
Curves and GOFO
• Trade Compression
• Executed trade data
• Regulatory
Compliance
Post phase 1 Phase 1 – Q1 2017
MARKET DEVELOPMENT CONTINUES Build Evolution from an LBMA Interface
Regulation…regulation…regulation… Never enough time!
•PlatinumGroupMetals
•Silver
REACH
•Market Abuse Regime
•Affects all trading desks
•Physical trading impacts financial instruments
MAR
• European Market Infrastructure Regulation
• Margin rules
for
non-cleared trades
EMIR
•Markets in Financial Instruments Directive
•Position limits
•OTC Spot•Forwards
MiFID I and II •Securities
Financing Transactions Reporting
•Reporting requirements covering “repurchase transactions”, “securities/commodities lending and borrowing”
• Significant or critical?
• Gold, silver, platinum?
Benchmark Regulation
SFTR
BREXIT What does this mean for the UK?
For the next few years, NOTHING CHANGES. Thereafter ???
What does it mean for the UK? ► The Prime Minister in October 2016, announced the government will
trigger Article 50 no later than end of March 2017.
► Re-negotiations – equivalence?
► Uncertainty.
► Swiss Model?
What does this mean for the Precious Metals Markets?
► Loco London will remain.
► Implementation of regulations will continue.
Contact:
Further Information: The LBMA has launched regulatory briefings: • The first issue focused on Brexit, the second on Market Abuse. • Members to suggest topics.