Finadium

There is some nervousness that financial markets could suffer a breakage as unusual volatility occurs in both equities and bonds. Memories of Lehman Brothers and meltdowns in 2000 and 2022 are on the minds of market participants. We’ll argue that we’re not yet at a point where real damage can occur to the system itself, although we can see ways this could happen in the coming weeks. More on #finadium: https://lnkd.in/eUd3cA-z

Thanks to Onepoint for inviting me to speak at their excellent event in Paris yesterday - "Europe’s move to T+1: A unique opportunity for modernization". Presentations from France Post-Marché, DTCC, BNP Paribas and Onepoint provided valuable insights into how European and UK financial firms can use T+1 as a once in a generation opportunity to modernize front to back-office processes and technology. To read my latest Finadium research report containing practical guidance on what firms should prioritize to reduce the cost and complexity of the transition please visit: https://lnkd.in/edGiS3_S Kishore Kumar R., Michel JAUBERT, Thomas Ciulla, Hugues Bessiere

OSTTRA has been building out repo capacity over the last few years, with its LimitHub service next in line to meet the UST and UST repo clearing mandate in anticipation of more clarity on an agency clearing model. We hear from Steve French, head of FX & Securities Product Strategy at OSTTRA, about adapting OTC systems for repo. Anna Reitman More on #finadium: https://lnkd.in/etCCQVCi

Finadium’s new Deriv1.com datahub for US Treasury repo shows that the cost to repo under one year US Treasuries yesterday fell to 4.15%, about 20 bps lower than other UST issues. This indicates an expected decline in very short-term interest rates; we’re thinking that this is hedge funds expecting the Fed to cut rates while UST short term purchases are being bought and not lent. Here’s the chart: https://lnkd.in/gkCYejcy

There is an ongoing debate between the need for automation versus implementing behavioral changes or increasing staffing levels. Some market participants we spoke with for a recent survey suggested that automation should be at the heart of every firm’s strategy with the mantra being “automate, automate, automate”. Others felt that process and behavior change were more important and that firms cannot just automate their way to T+1. More on #finadium: https://lnkd.in/eGBzMXRD

We’ve been reading a November 2024 paper by Stephen Miran, the newly installed chair of the US Council of Economic Advisers, titled “A User’s Guide to Restructuring the Global Trading System.” The paper makes a case for the use of tariffs in the context of US domestic policy, global markets and international security. We review the paper with a nod to a 1987 speech by US President Ronald Reagan on the dangers of tariffs, relative to today. More on #finadium: https://lnkd.in/e2Bmqujp

Current Federal Reserve Governor Michelle Bowman has been nominated to become the Fed’s next vice-chair for supervision. Bowman was appointed by President Donald Trump in 2018 and since then has spoken widely on her views of bank regulation. We expect a mostly different direction going forward from her predecessor, Michael Barr. More on #finadium: https://lnkd.in/eTTCCQVn

Jim Hraska, Managing Director, Head of Client Solutions, Clearing and Settlement Services, The Depository Trust & Clearing Corporation (DTCC), spoke about the affiliate and bank branch rules for US Treasury mandatory repo clearing at Finadium’s APAC Update on US Treasury Repo Clearing event, 04 March 2025, Singapore. More on #finadium: https://lnkd.in/e8Tx8mBF

The shortening of the security settlement cycle in the UK, Europe, and Switzerland takes effect on October 11, 2027. Like Uncleared Margin Rules and T+1 in the United States, the shortening of the settlement cycle is not only a regulatory mandate that must be addressed but also an opportunity for organizations to modernize their processes and underlying technology in order to build the infrastructure that can support real time processing. According to Finadium, this is “a fork in the road,” and will will entail fixing key elements of industry processes. Standing Settlement Instructions (SSIs) will be among the first big issues to confront. Thomas Ciulla, Onepoint More on #finadium: https://lnkd.in/eghu3-2v

Market participants in Europe and the UK should not be lulled into a false sense of security by the success of the North American move to T+1. There are notable differences in market structure that make the European transition in October 2027 riskier and more complex. Find out how to ensure a smooth move to the new operating model in Finadium’s latest research report: T+1 Settlement in Europe - A Fork in the Road https://bit.ly/T1-Europe_1