Global Trading editor Laurie McAughtry sat down with Vince Turcotte of the FIX Trading Community Asia Pacific, to discuss why APAC is such an exciting region for digital assets, why investors should have confidence in the regulatory strength of the region, and what the most ground-breaking new developments will be for the space going forwards.
Tony White has joined global advisory firm MKP Advisors as partner, responsible for developing the firm’s global corporate advisory business.
White spent almost two decades at Bank of America Merrill Lynch, before departing in 2019. There he was managing director, UK and Ireland investment banking and corporate broking. He also spent five years at Jefferies, in the UK, and in the same role as he held at Bank of America.
On his new appointment, White said: “In the current climate, it is more important than ever to help bridge the gap between corporates and investors. Our goal is to provide independent, informed and practical advice to generate optimal outcomes for all parties involved.”
MKP said White will be focused on narrowing the widening gap between corporates and their investors. His role will help companies to better understand the goals and perceptions of both new and existing shareholders, and support boards and management teams in making better-informed decisions.
Mark Kelly, MKP CEO, said: “Tony’s appointment marks a major milestone in our continuing development and growth, reinforcing our commitment to delivering tangible value and mutually beneficial outcomes for all stakeholders in complex global situations.”
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Nasdaq is to integrate its strategic clearing platform, Nasdaq Real-Time Clearing, into FIA Tech’s Trade Data Network, in an effort to reduce the complexity of post trade data processing across the exchange traded derivative market.
The Trade Data Network combines trade data from buy side, brokers, clearing houses and clearing members into a common framework, creating a shared golden source of clearing activity for participating firms.
Magnus Haglind, senior vice president and head of products, marketplace technology, Nasdaq, said: “There is a global necessity to upgrade legacy post trade technology platforms, and interoperability must sit at the heart of the new global framework. A consistent operating model for data, systems and processes can deliver substantial benefits to market participants through more efficient use of capital and a more resilient operating model.”
Nick Solinger, president and CEO, FIA Tech, said: “Nasdaq’s integration of its strategic Real-Time Clearing system into the Trade Data Network will increase standardisation and network adoption.”
Integrating Nasdaq’s clearing platform will enhance the volume and quality of post trade data available to FIA Tech’s more than 8,000 members, while empowering central counterparty clearinghouses (CCPs) using Nasdaq’s clearing platform and end-users with the ability to conduct more reliable risk analysis, operate with greater capital efficiency, and lower overall risk exposure.
Through the Trade Data Network, FIA Tech provides market participants and post trade service providers with the tools to improve middle and back-office processes including trade-date clearing, give-ups, fee and commissions management, and helps to eliminate duplicate reconciliations across these functions.
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The proposed draft technical standards have been developed in the context of the MiFIR review, ESMA said, and will help both to improve market transparency and to remove obstacles preventing CT implementation in the EU.
Comments are being accepted until 28 August, with input has been requested on a number of topics related to the draft technical standards. These include new rules for the authorisation of CTPs and initial reflections on the assessment of CTP applications, along with clock synchronisation requirements for systematic internalisers, DRSPs, trading venues and their members.
The proposed rules on input and output data for reporting instructions and data quality requirements for CTPs and data contributors are to be considered, as are draft rules for the equity CTP’s methodology to redistribute revenue to data contributors and the criteria to suspend this distribution.
The authorisation and organisational requirements for authorised publication arrangements and approved reporting mechanisms are also part of the consultation.
READ MORE: How to make a success of a consolidated tape? It’s all about the money
ESMA’s final report will be prepared based on received responses, with final draft technical standards expected to be submitted to the European Commission by 29 December 2024. Specifications on the assessment criteria for the CTP selection procedures are also expected to be published by the end of the year.
Commenting on the consultation, EuroCTP said: “EuroCTP welcomes ESMA’s consultations on the assessment criteria for the consolidated tape providers and associated technical standards. Both will support a transparent and efficient selection procedure and ensure that the successful provider operates to the highest possible standard. We are reviewing the consultation package and preparing our response.
“We view a well-functioning, fit-for-purpose consolidated tape as essential for strengthening the Capital Markets Union.”
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The European Commission is launching a consultation on macroprudential policies for Non-Bank Financial Intermediation (NBFI), a sector which will underpin the long-awaited Capital Markets Union.
In a speech by European Commissioner Mairead McGuinness at DG FISMA’s technical workshop, the commissioner said NBFI is “an important part of the financial ecosystem”, comprising investment funds, insurance companies, family offices, as well as “operators and the infrastructure of capital markets”.
“And together, these entities are very important for the Capital Markets Union, which is still very much a work in progress, but does have a sense of urgency about it,” McGuinness said.
To make a Capital Markets Union a reality requires political leadership, McGuinness said. “We will do our best in the Commission, as we’ve done, but we need greater political leadership to complete the Capital Markets Union.”
NBFI is also important for financial stability, which should underpin the Capital Markets Union, McGuinness noted, highlighting “stress events” in recent years that have revealed the often hidden interconnections between NBFI sectors across the financial system. “And this adds a layer of unpredictability and increases liquidity and leverage risks.” In response to these stressors, the Commission has legislated to mitigate systemic risk from key NBFI sectors. Looking ahead, the consultation will consider how emerging systemic risks are dealt with across NBFI.
“We are taking a complete, overall view of NBFI across all of its different parts. We want to assess macroprudential policies and supervision beyond banks in a cross-cutting way. And I think we need to better understand the risks and vulnerabilities from the different sectors and their impact on the resilience of the financial system.”
A January report examining “specific vulnerabilities” within NBFI highlighted structural liquidity mismatches; the build-up of excessive leverage across certain NBFIs; interconnectedness that could create unforeseen risk amplifiers or transfer risk from the banking to the non-banking sectors; and a lack of consistency and coordination among macroprudential frameworks across the EU.
Responding to the speech, Joseph Cordahi, product strategy director at NeoXam, said: “It’s clear that NBFIs can no longer hide from regulatory scrutiny and should be taking steps to prepare for any proposals that result from the consultation. First and foremost, firms must ensure they have robust stress testing capabilities in place to ensure compliance with any upcoming regulatory requirements.
“However, stress testing must be viewed as more than just a regulatory checkbox, and recognised for what it truly is: a powerful way to enhance financial stability and gain a competitive edge in an increasingly unpredictable market environment. By highlighting the importance of stress tests for NBFIs, the European Commission is not only enhancing the resilience of the financial sector to non-bank shocks, but also emphasising the importance of data-driven risk management practices, which are the bedrock for weathering financial storms.”
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Scott Becker, head of risk management for Archegos, stated in court this week that he “lied to banks to induce them to make loans to Archegos to pursue its trading,” following instructions from Hwang and chief financial officer Patrick Halligan. This included false statements around the size of Archegos investments, cash balances, and the time it would take to liquidate the firm’s portfolio. These lies have been corroborated by members of the firm’s counterparties, including UBS Group and Jefferies.
On the stand, Becker highlighted Hwang’s preference to invest in swaps rather than buying shares directly – which had the benefit of not needing to be reported to the SEC.
Archegos’ trading strategies have been described as aggressive and risky, with Becker stating that Hwang was trading “nonstop, all day, every day” between 2020 and 2021. Hwang was amassing leveraged positions in a number of securities using total return swaps, using a number of banks as payers. Archegos did not share its other positions with each dealer, leading it to accumulate up to 1000% leverage.
In early 2021, the family office had reached trading capacity at certain banks it was using as payers, and was required to pay up to 100% margin rates in some cases. In court, Becker stated that at this point he was instructed to lie to banks in order to increase capacity caps.
When the share price of Viacom CBS, one of the companies Hwang was invested in through multiple banks, began to fall in 2021, Archegos was in danger of being unable to meet margin calls. Despite attempts to stall the calls, the banks began to sell off the underlying stocks.
Alongside the question of what Hwang’s sentence will be, the question of how a comparable situation can be prevented in the future is also key.
In 2022, the SEC issued a proposed rule change that would require a public disclosure of positions in credit default swaps, total return swaps, security-based swaps based on equities securities and other security-based swaps with positions exceeding specified thresholds. Following a second comment period on the rule last June, it has not yet been implemented.
This is not the first time Hwang has faced the US wheels of justice. In 2012 he was fined US$44 million by the SEC and told to stay away from investment advisory after being found guilty of insider trading. Tiger Asia Management and Tiger Asia Partners, founded and managed by Hwang, short sold three Chinese bank stocks based on information from private placement offerings, and separately attempted to manipulate the prices of publicly traded Chinese bank stocks.
Following his conviction, Hwang converted his firm into a family office – exempt from SEC regulation.
The trial of Hwang and chief financial officer Patrick Halligan is expected to last multiple months.
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The API will allow for more streamlined investor onboarding, the organisation said, reducing account opening, updating and reactivation times. This will enable faster trading, and allows firms to further digitalise their processes.
Commenting on the release, Datuk Muhamad Umar Swift, Bursa Malaysia CEO, said: “The exchange actively listens to the evolving needs of our customers. This initiative is key in delivering on our commitment towards greater customer-centricity.
“We will continue to work closely with our participating organisations and introduce service innovations to attract more investors, bolstering the competitiveness of our market.”
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Working alongside Kristin Roth DeClark, global head of technology investment banking, King will be responsible for strengthening the M&A platform and the wider technology investment banking franchise.
King has more than two decades of industry experience and joins Barclays from Bank of America, where he was global co-head of telecoms, media and technology M&A. Prior to this, he was co-head of the technology M&A franchise at Deutsche Bank.
Commenting on the appointment, Roth DeClark said: “David’s reputation in the technology industry and his deep M&A expertise will help us further accelerate the strong momentum in our business. This appointment demonstrates our continued investment in Technology Investment Banking, and our ability to attract the leading talent in the market to best serve our clients.”
Essaid added: “Technology is of critical importance to our M&A franchise and is an area where we are laser focused on succeeding and delivering for our clients. David’s long-term connectivity with the Tech community, combined with his extensive transaction execution experience and proven leadership qualities, make him a tremendous addition to our team.”
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The importance of such a regulation for the financial industry is highlighted by a recent report from Broadridge on digital transformation and next-gen technology, which noted that 94% of financial services firms in Europe were making some level of investment in AI. However, the survey also found that 54% believe financial firms should be allowed to self-regulate their adoption of AI.
It appears the industry may not be best pleased by the thought of greater vigilance around use of the technology. Although 43% agreed that the pace of technology innovation was moving faster than regulators could keep up with, more than half (51%) did not agree that AI should be tightly regulated. Just 31% believed that it should be, in light of its potential to cause major risks.
Alongside the law, the EC has established four governing bodies to ensure proper enforcement. These include an AI office within the European Commission, a scientific panel of independent experts to support enforcement activities, an AI board with representatives from member states, and an advisory form for stakeholders to provide technical expertise to both the AI Board and the Commission.
Through the adoption of this legislation, the Council aims to support the uptake of safe and trustworthy AI systems by both private and public across the single market, with consideration made to EU citizens’ fundamental rights.
Stimulating AI investment and innovation in Europe is also a priority for the Council. This, according to the Broadridge survey, is something that much of the industry agrees with – 41% stated that greater regulatory clarity on the use of new technology would encourage innovation. AI regulatory sandboxes are expected to be established for the development, testing and validation of new systems.
The act will enter into force next month, after being signed by the presidents of the European Parliament and the Council, and will begin to apply after two years.
Commenting on the Council’s decision, Tom Carey, president of global technology and operations at Broadridge, said: “The EU AI Act is a landmark piece of legislation designed to ensure the safe innovation and adoption of AI technologies across Europe — but is this what financial services firms want?
“Given that almost all firms we surveyed in Europe said they are investing in AI to some extent, the EU AI Act is going to have a significant impact when it is rolled out. Now is the time for organisations to take a closer look at the current governance and controls that they have in place, and identify any gaps that need addressing in order to become compliant with the new legislation.”
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