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Kiffmeister's Financial Plumbing Weekly Digest

Mar 17 2020 00:01 keyboard_arrow_downkeyboard_arrow_up Comment0 language

Bond ETFs are highlighting signs of liquidity stress in broader markets, with cash prices trading at persistent and deep discounts to the value of the underlying assets.
Regulators want to transition to new risk-free rates before the end of 2021, when Libor contributors will be free to stop supporting the rate. Some industry sources now warn the timeline may need to be extended – partly because resources are being consumed by Covid-19, and partly because the industry is realising how little it knows about the behaviour of some RFRs.
CountryRisk.io API are available now. Read how to integrate its risk scores into analysis and workflows.
We believe that post-trade transparency is providing derivatives markets improved resiliency during these volatile market conditions. Whilst market prices are extremely volatile, trading activity is continuing uninterrupted, and volumes have scaled-up accordingly. Post-trade transparency is aiding price-discovery and confidence in our markets.
Clearing houses and members in Europe disagree over whether members should be compensated for assuming outsized losses in the event of another member’s default. Members say it is only fair that if they help the clearing house survive, they should be compensated for the effort. The central counterparties argue that if there were compensation to be anticipated, members might skirt the early remedial steps called for in default waterfalls, leading to a far more dangerous situation later. The two sides do agree that members should be compensated if losses are caused by mismanagement at the clearing house.
Off-balance sheet funding is large, rising and not fully accounted for in leverage metrics.

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