FSB report on OTC derivatives Trade Reporting

This peer review provides an update on the implementation of G20 requirements for trade reporting in over-the-counter (OTC) derivative markets. It shows the majority of FSB member jurisdictions have trade reporting requirements in place and calls on jurisdictions that have not fully implemented reporting requirements to do so promptly. Legal and regulatory barriers to complete reporting continue to be a concern. FSB members have agreed that jurisdictions should address legal barriers to reporting by June 2018, that masking of counterparty-identifying data be discontinued by end-2018, and that by June 2018 at the latest all jurisdictions should have legal frameworks in place to permit access to data held in a domestic trade repository by relevant authorities (whether domestic or foreign). There remain a number of challenges in the quality and usability of trade repository held data. Notwithstanding these challenges, some authorities are starting to make good use of data for some regulatory purposes.

You can find the report here

High-Frequency Trading and Its Role in Fragmented Markets

In this study, conducted by Martin Haferkorn of the Goethe University in Frankfurt, the researchers looked into the effect HFT had on price dispersion in fragmented markets. For this, they compared long term blue chip data from Euronext Paris, Deutsche Boerse and BATS-CHi-X to measure the effect of investments made in IT infrastructure (HFT trading).

The conclusion is that HFT increases market efficiency and that the introduction of the German HFT act increased price dispersion between BATS-Chi-X and Deutsche Boerse in blue chip stocks

Read the full study here

Further dissection of the flash crash

In this study the researchers from the university of Nice take a deeper look at the flash crash and conclude that the market is, even without market makers, resilient and favors a recovery. They also conclude that a ban on short-selling reduces short term volatility. Read the full article here

Does a CCP really reduce counterparty risk

In this study, published in March 2015, the researchers ask themselves if a CCP is the go-to answer to mitigate counterparty risk.

The short answer is no. In some cases, a CCP is not beneficial for the users but it is done to suit the risk aversion of the regulators. This would explain why the OTC IRS market would not be moving towards a CCP if it would not be required to.

The study is conducted by Peter Zimmerman of the NY Federal Reserve and Rodney Garratt of the University of Oxford.

Read the full article here