Newsworthy

MiFID II

MiFID (Markets in Financial instruments directive) II launch, which comes into effect today, suffered a setback as London's Liffe derivatives exchange and the London Metal Exchange were given 30 month extensions and the Frankfurt-based Eurex futures exchange not required to apply rules until July 3, 2020. MiFID II is close to 7,000 pages in length, took 7 years to build and is intended for all EU members for the purpose of sharing a common regulatory framework that protects investors by increasing transparency. One of the most contentious issues is the requirement for firms to charge for research that had previously been given freely to fund managers. The intent is to avoid conflicts of interest. Dark pool trading volume is expected to fall, surveillance to increase as the investment community keeps track of nearly everything. (Jan 3, 2018)

Basel III

The Basel III accord presents a 72.5% floor on regulatory capital benefits that a bank using internal models can derive compared to revised standardized approaches. The transitioning is in stages, beginning on the 1st of January each year, 50% (2022), 55% (2023), 60% (2024), 65% (2025), 70% (2026) and 72.5% on 1 Jan 2027. The Revised standardised approach, Revised IRB framework, Revised CVA, Revised operational risk framework and Revised market risk framework are to be implemented by 1 Jan 2022. (Ref: Basel Committee on Banking Supervision. High-level summary of Basel III reforms. Dec 2017).

Global Hedge Fund Industry

IOSCO (International Organization of Securities Commissions)'s 4th Hedge Fund Survey, which provides regulators new insights into the global hedge fund industry and potential systemic risk to the international financial system, noted that in the 2 years since the prior study, global assets under management (AUM) of hedge funds in the survey rose 24% to US $3.2 trillion. The report notes it is possible this could be due to more widespread reporting and other factors, but the data is not conclusive. The most widely used strategy was equity long/short followed by global macro and fixed income arbitrage. (Ref: Media Release, IOSCO/MR/30/2017, Madrid, 23 Nov 2017)