FTF News also features FinTech updates about a white paper from ISDA, the EBF, ICMA and ISLA; Millennium Global and its new FX code of conduct; and IHS Markit working with BitSight.
JPMorgan Tests Involve National Bank of Canada
JPMorgan tested “a new blockchain platform” for debt issuance with the National Bank of Canada and other large financial services firms, officials announced on April 20.
JPMorgan is “is seeking to streamline origination, settlement, interest rate payments and other processes,” according to an official statement.
For the test, the National Bank of Canada issued a $150 million “one-year floating-rate Yankee certificate of deposit, with a parallel simulation of the issuance, using blockchain technology,” officials say. “The blockchain test involved the parties mirroring the execution of the actual transaction through a debt issuance application developed by J.P. Morgan that runs on Quorum, an open-sourced variant of the Ethereum blockchain, specifically designed to meet the needs of financial markets participants.”
The blockchain debt issuance application offers functions “across the entire debt instrument transaction lifecycle, including origination, distribution, execution, settlement, interest rate payments and maturity repayments,” officials add.
“One of the mandates of the J.P. Morgan blockchain program is to identify how blockchain technology can create value, efficiency, and a better experience for our clients across the financial markets value chain,” says Christine Moy, blockchain program lead at JPMorgan, in a prepared statement. “This is an exciting example of how J.P. Morgan leveraged our combined capabilities in capital markets and blockchain technology, delivering results to a diverse set of clients.”
Key Groups Spell Out Benefits of Post-Trade Risk Reduction Services
The International Swaps and Derivatives Association, Inc. (ISDA), the European Banking Federation (EBF), International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA) have published a white paper on the benefits of post-trade risk reduction services as a management tool.
Post-trade risk reduction services play an “increasingly important role in reducing risks in derivatives markets. Compression, for example, results in offsetting trades between multiple parties being torn up, which reduces the size of gross derivatives exposures, in turn reducing systemic risk,” the organizations state.
In the white paper, ISDA, the EBF, ICMA and ISLA recommend that the European Market Infrastructure Regulation [EMIR] “be amended as part of the Regulatory Fitness and Performance Program, or REFIT, to exempt transactions resulting from post-trade risk reduction services from the clearing obligation, or to empower the European Securities and Markets Authority [ESMA} to do so.”
The white paper is available here.
Millennium Global Commits to FX Conduct Code
Millennium Global, a United Kingdom-based currency investment manager, reports that it is the first buy-side institution to use the ACI financial market association’s e-learning, attestation and certification (ELAC) portal to train their staff and ensure adherence to the FX global code of conduct, intended to ensure “adherence to its principles in partnership with ACI financial market association (ACI FMA).
Through the portal, ACI FMA will provide the buy-side firm with standardized, high-quality training and education program “so it can demonstrate its adherence to the 55 principles of the FX Global Code of Conduct.”
ACI FMA characterizes itself as “the world’s largest financial markets association.”
The FX code was published in May 2017 and “market participants have been given approximately 12 months to commit to its principles on a voluntary basis,” according to ACI FMA.
More information about ELAC here.
IHS Markit Adds Cybersecurity Risk Ratings to Research Signals
IHS Markit, a provider of business information, analytics and solutions, reports that Research Signals, its quantitative equity research product, has “enhanced its factor-based investment analyses with 35 cybersecurity risk factors on more than 3,000 public companies.”
The risk factors are based on security ratings from BitSight, a provider of actionable risk intelligence.
“Cybersecurity weakness is an important risk that investors need to monitor, and cases such as Equifax underscore the consequences of data breaches on stock prices,” Chris Hammond, IHS Markit’s executive director for research signals, says in a statement. “BitSight Security Ratings provide a quantitative measure of a specific company’s cybersecurity risk, which fits well into quant models and risk models. It’s an example of how alternative data can help investors make better decisions and monitor risks in their portfolio that they were unable to capture in the past.”
BitSight analyzes security events, “including malware, vulnerabilities, user behaviors, and more and applies … algorithms to produce these ratings, which are derived using externally observable, non-intrusive methods,” according to a statement.
“With more than 400 factors studied and 20 years of historical data, the Research Signals team focuses on traditional and specialty themes such as value, quality, momentum, short interest, social media sentiment, ESG [Environmental, Social and Governance] and cybersecurity,” according to the statement
A Research Signals’ white paper with information about the security rankings is available at timothy.barello@ihsmarkit.com.
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