What`s next? - ABN AMRO Clearing


What`s next? - ABN AMRO Clearing
ABN AMRO Clearing Newsletter for clients | No. 40
What’s next?
April 2016
5th Amsterdam Investor Forum a great success
A leading meeting place for Institutional Investors
and Alternative Investment Managers.
ABN AMRO Clearing awarded on
SGX Annual Awards Night
ABN AMRO Clearing received three awards.
The IRS final countdown has begun
Ready, steady, CLEAR!
What’s Next | ABN AMRO Clearing Newsletter for clients | no. 40
The IRS final countdown has begun: ready, steady, CLEAR!
5th Amsterdam Investor Forum a great success
ETF in Asia Pacific: a success story
Market | product updates
ABN AMRO Clearing awarded on SGX Annual Awards Night
Stay up to date with ABN AMRO Insights
ABN AMRO and ABN AMRO Clearing go into blockchain technology together
Two times a charm
Market | product updates
ABN AMRO Clearing keeps on investing
Market | product updates
Market Infrastructures update
Equivalence Decision for US CCP’s Adopted by European Commission
US regulatory Updates
Amendment Dutch Giro Securities Act
Roundtable U.S. v. Coscia trial
ABN AMRO Clearing in the news
Events overview
How do you rate our quarterly newsletter ‘What’s Next?’
You are invited to answer 4 questions in regards to the content of this newsletter. We appreciate to
receive your feedback on topics covered and how to better meet your expectations.
Go directly to survey
Dear client, Welcome to our newsletter. I hope
you will find the time to read it. The purpose of this
newsletter is to give you a better understanding of
our firm and to share some views on industry topics
with you. We recently also restyled our website
abnamroclearing.com, and I would like to invite
you to visit us there as well.
Next to saying thank you for your business, there is one topic I want to highlight as it should impact you:
the ‘Going for Seven’ program.
Every year clients are invited to fill out a survey on how they rate our service offering. Close to 40% of
our clients participated in this exercise last fall, a percentage we are proud of. It shows our clients care
by giving their valuable feedback. The results made us less proud. In both Europe and the US our scores
slipped a bit, not a lot but still trending down instead of up. Only in the Asia-Pacific region we noticed an
increase in client satisfaction and improved client experience.
The ABN AMRO Clearing Global Management Team wants to make certain your input and remarks are
actually being heard. To steer our efforts toward higher client satisfaction a Global Program called ‘Going
for Seven’ was started. Seven is the highest score clients can give in our survey. All initiatives taken to
deal with the client survey findings will be tracked in a monthly report to the Global Management Team.
I cannot promise miracles but I can assure you we put real attention and focus on our processes and
services to give you a better experience.
Jan Bart de Boer,
Chief Commercial Officer ABN AMRO Clearing
The IRS final countdown has begun: ready, steady, CLEAR!
The IRS final countdown has
begun: ready, steady, CLEAR!
Weapons of mass destruction
In the beginning of the 21st century Warren Buffet described the OTC derivatives as “weapons of
mass destruction”. His words sounded prophetic in the late 2008 when the derivatives portfolio
of Lehman Brothers became the root cause of the financial crisis.
Following the Lehman Default, which is seen as the
peak of the financial crises, the G20 leaders in 2009
decided to take the necessary steps to mitigate the
risks in the OTC financial markets. This resulted in the
creation of extensive regulations in both the US (Dodd
Frank) and the EU (EMIR). The main pillar of both
regulations is the obligation to clear all standardized OTC
derivatives through a central clearing counterparty (CCP).
The end of the timeline confusion
The original deadline of September 2014 was postponed
several times, because the European Commission (EC)
needed to dedicate sufficient attention to the technical
aspects of this initiative. On 1 December 2015 the
regulatory technical standards (RTS) on the clearing
obligation under EMIR were published in the Official
Journal, marking the clearing obligation deadline
June 2016 for Category 1 counterparties. These are
counterparties that are already a clearing member of
a CCP. This presumably means that they already clear
READY: why consider clearing?
IRS. The more crucial deadline is December 2016,
Category 1 and 2 counterparties do not really have a
when Category 2 counterparties have to start clearing.
choice: the regulator obliges them to clear in 2016. But
Financial institutions with large IRS portfolio’s (more than
Category 3 counterparties and Pension Funds still have
EUR 8bn aggregate month-end) would theoretically
a choice. They need to consider what is more beneficial
fall in Category 2 and those with smaller portfolios in
for them: use their exemption to the max, or start clearing
Category 3. But Financial Institutions which consider
in the short term?
December 2016 faraway need to think twice, as they are
also subject to Frontloading obligation. The Frontloading
To answer this question we will use an IRS-trade with
obligation deadline for Category 2 counterparties is
a notional volume of EUR 20 million as an example
21 May 2016. Frontloading essentially is an obligation to
and compare the relative costs between keeping this
clear on 21 December 2016 all OTC derivative contracts
IRS-trade bilateral and clearing it at the CCP.
(concluded on a bilateral basis) that were entered on and
Keeping this EUR 20 million IRS-trade bilateral would
after 21 May 2016. Pension Funds are considered a special
mean it costs about EUR 10.000 each year till maturity
Category and are exempt till at least August 2017.
compared to the cost of the same IRS cleared.
The IRS final countdown has begun: ready, steady, CLEAR!
And this analysis is based on only one single IRS
up to 3 bps more for a bilateral IRS trade. This compared
position of EUR 20 million notional. IRS investors
to its cleared equivalent when all the capital costs and
usually have a much higher IRS volume. For
value adjustments are charged in the fixed leg. This pricing
example: The average Dutch pension fund has an
difference is clarified in this Deloitte study above: an IRS
IRS portfolio with a notional value of EUR 13.2 billion.
trader has to compensate nearly 2 bps for the post-trade
If the pension fund were to clear all their IRS
capital obligations of a bilateral IRS. According to IRS
positions it would realise cost savings of EUR 6.2
traders interviewed the difference in spread between
million yearly compared to them keeping their IRS
bilateral and cleared transactions can rise up to 5 bps.
positions bilateral. Let us have a closer look at the
This when the execution broker charges the client for
different cost components which make up for this
all value adjustments from the Basel CRR framework –
CVA (Credit value adjustment), FVA (Funding value
adjustment) and DVA (Debit value adjustment).
The pre-trade consideration
If we take the average price of 3 bps higher and apply it
Even if EMIR would not obligate market participants
to our example of a 10y tenor 20 million IRS, the additional
to clear, other rules such as Basel III create incentive
cost will be EUR 6.000 each year till maturity.
for smaller tier-two banks (Category 2 and 3) to clear.
This clearing incentive becomes very obvious in the
STEADY: implement clearing, but how?
calculation of the Counterparty Credit Risk (CRR)
In the previous paragraphs we examined the regulatory
requirement of CRR/CRD IV. Under this regulation
timelines for the clearing obligations and the price
banks are subject to capital requirements against
incentives to start clearing even if the clearing obligation
counterparty credit risk, which results in capital costs.
deadline has not yet kicked in. Once the decision has
been made the following logical question is how to set-up
The combination of the different capital cost components
the clearing process.
lead to a certain impact on the balance sheet. Deloitte has
made a calculation based on these capital requirements
Clear directly or use a clearing broker?
for a cleared and a bilateral IRS. Not only taking into
Non-bank counterparties do not have the choice to
account the increased collateral requirement for cleared
clear directly. They need a clearing broker to get access
IRS, but also for bilateral transactions (from one of the
to the CCP. Banks can clear directly at the CCP without
BCBS-IOSCO frameworks). The conclusion: In the current
using a clearing broker. With the growing sophistication
situation the cost per unit of notional volume is 1.705 bps
of the processes and the current trend of operations
and 0.136 bps respectively for a bilateral and a cleared
outsourcing, the option for the direct clearing connection
IRS. To give an example: for the 20 million IRS the bilateral
is not that evident as it intuitively seems.
settlement will cost EUR 3.138 more each year till
maturity than clearing the IRS. This is giving institutional
Counterparties that are Clearing Member (CM) can benefit
investors who trade long-maturity high notional volume
from a reduced risk weight of 2% for the calculation of
IRS food for thought.
their RWA. Clients of a Clearing Member (CM) can also
benefit from a reduced risk weight of 2% for the calculation
The post-trade consideration
of their RWA. The exact RWA rate applicable depends
In all tenors the price for a bilateral trade is much
on the clearing account selected (ISA or OSA), EMIR
higher than for an IRS with the same characteristics
qualification of the CCP and the ability to port the client
cleared via a CCP. Although the spreads differ from day
account at the CCP in case of clearing member default.
to day and depend on the liquidity of the required tenor
(click here for a detailed overview of applicable conditions.)
and the notional volume, the trend across all executed
Nevertheless, the fees for holding an ISA account and
trades is the same: cleared trades are cheaper than
the funding cost for the Default Fund contribution
bilateral trades under a Credit Support Annex (CSA).
charged by the CM will be compensated by many other
If in the past a normal spread over the mid-fixed rate was
0.15 bps to 0.5 bps, nowadays an IRS trader would ask
The IRS final countdown has begun: ready, steady, CLEAR!
There is no involvement in the resolution process
for the IRS positions of defaulting fellow clearing
members. This requires execution capability to
participate in an auction which means trader
headcount and systems that can price an IRS
portfolio independently
Higher operational headcount to support daily
operations. For example, clearing clients are not
subject to intraday margin calls, as most clearing
members fund intraday margin calls.
Clearing members have to open and maintain
payment accounts with the CCP to facilitate margin
payments, which means establishing relationships
with several correspondent banks.
Implementation of sophisticated IT software to
counterparties struggle with CMs that are less able
to onboard clients due to balance sheet constraints
administrate clearing positions and for the needs of
stemming from Capital Requirement Regulations.
collateral management
At the 2015 Sibos conference in Singapore one of the
Onboarding is significantly shorter with established
panellists, Alison King, head of product and platform
clearing members than getting a direct clearing
delivery SGX, said: “At many European clearing members,
relationship with one or more CCP’s.
the balance sheets are full. When we speak to buy-side
These points clearly show that the indirect set-up can
clients and tier-two banks, they are really struggling to
prove to be very efficient and more cost-effective.
find clearing members to take them on”.
The ultimate choice will of course depend on individual
strategic preferences and total cost associated with the
Like other CMs in the market ABN AMRO Clearing
client set up will depend on the portfolio size.
(AAC) in 2015 made an internal assessment about the
future of its IRS clearing offering. AAC performed an
CLEAR: choose your clearing broker wisely
extensive analysis of the future potential of the market
Financial institutions that have opted for a central
and made a deep dive of its OTC/IRS product offering
clearing solution for their OTC portfolio, need to decide
and processing. Contrary to some of its peers, AAC
if they want to become a clearing member themselves
decided to keep IRS clearing in its product portfolio as
or act through a CM. In the last few years, a number of
it perfectly fits its strategy as a sustainable global clearer
clearing members have announced their retreat from
with extensive product coverage. It is an important
the client clearing arena and more are predicted to
building block in our drive to support financial institutions
follow. As a consequence, financial institutions who
and (alternative) asset managers. With this promise for
have engaged in in the onboarding process or (even
the future and full commitment of its board, AAC has
worse) have already on-boarded with a CM may face
the ability to support its clients in their IRS clearing
the challenge that the chosen CM decides to terminate
challenge. Especially now when the final countdown
its OTC clearing offering. Those financial institutions will
has started.
have to start their whole selection and implementation
process all over again. Nowadays, the most relevant
Would you like to know more info about the IRS
question when looking for a CM is not what the fees
Clearing services of AAC please contact your
are or how the process at the CM is arranged (important
Relationship Manager.
questions, though) but for how long a client can rely on
the commitment of the CM to keep facilitating the
Mariya Bressers Dinkova
clearing of its OTC portfolio. Clearing clients need to
OTC Product Manager
assure themselves to choose a long-term relationship
[email protected]
with a sustainable CM. Even if the remaining CMs are
committed to staying in the business, many buy-side
5th Amsterdam Investor Forum a great success
5th Amsterdam Investor Forum
a great success
On 17 February ABN AMRO Clearing hosted the annual Amsterdam Investor Forum in Amsterdam
for the 5th time. The AIF, held at the Amsterdam Headquarters, has established itself as a leading
meeting place in the Netherlands for Institutional Investors and Alternative Investment Managers.
Who attended
For the 2016 jubilee edition ABN AMRO Clearing was
most pleased to welcome a fine selection of leading
industry professionals, international alternative investors
and managers. The companies represented include:
100 Women in Hedge Funds, Abbey Capital, AIMA,
Albourne Partners Limited, APG, Architas, BlackRock,
AIF website for the agenda and pictures
Video Prof. Lex Hoogduin
Video 100 women in hedge funds
Press release Devet Capital Investments wins AIF
Factor 2016
AIF recap
Candriam Investors Group, Cantab Capital Partners,
Cardano, CIAM, CME Group, Crabel Capital Management,
Deloitte, Finisterre Capital, In Ink (London), ISAM,
AIF Factor
Lansdowne Partners, Laven Partners, LGT, Lyxor Asset
This year we’ve again set out a competition for funds –
Management, Maples and Calder, M&G, Mint Tower,
active or prospective, of any size, location, investment
Murano Systems Connect, Neuflize OBC Investissements,
target or style – to explain their investment strategies to
Parus Finance, Pictet Alternative Advisors, PRI, Privium
professional investors. During the AIF 5 shortlisted funds
Fund Management, RCMA, Robeco, Saemor, Schroders,
pitched their funds on stage, Devet Capital Investments
Tages Group and Unigestion.
was the winner of the AIF Factor 2016.
Want to stay up to date on future events? Follow our Amsterdam Investor Forum group events here.
ETF in Asia Pacific: a success story
ETF in Asia Pacific:
a success story
The introduction of listed Exchange Traded Funds, commonly known as ETFs, is undoubtedly one
of the major innovations in recent financial history. Investors use ETFs as a simple but popular
means of gaining exposure to an index, a bond portfolio, commodities and much more. Electronic
trading firms across the globe provide liquidity in these instruments on a continuous basis,
which is one of the major success factors for ETFs.
a key area for future development. Already now many
Uniquely Singapore
of our clients are very active as a liquidity provider in
“Uniquely Singapore” was the tourism brand of Singapore
this market, making it a strategic segment in our
some years ago, and still applies to multiple unique
development plans. To further stay on track with ETF
characteristics of the Lion City amongst others our ETF
market developments, Onno Porskamp was recently
At ABN AMRO Clearing we consider the ETF market as
hired as dedicated Global ETF Product Manager.
In Asia ETFs are considered to be a growth market, as
witnessed by the significant increment in traded
volumes in recent years. We are proud that some of
the leading exchanges for ETFs in Asia have accepted
our invitation to present their market to our clients and
prospects. In the following articles the Tokyo Stock
Exchange (TSE), Hong Kong Exchanges (HKEX) and
Singapore Exchanges (SGX) will highlight ETF listings in
their market and comment on recent developments.
In case you need more specific information on some of
the traded ETFs, don’t hesitate to reach out to your
Relationship Manager. We will be more than happy to
help and introduce you with the relevant exchange.
Market | product updates
ETF in Asia Pacific: a success story
Singapore Exchange
China, India, Japan etc. with extended trading hours.
The global Exchange Traded Fund (ETF) market has
The range of liquid Asian index futures offered on SGX
experienced an impressive trajectory growth with ETFs
offer firms the possibility to hedge or take advantage
holding close to US$ 3 trillion of assets globally. Whilst
of arbitrage possibilities for our range of ETFs or ETFs
the asset flows in the developed markets of the US
tradable on other markets.
and Europe will continue to dominate the global ETF
of global assets) is expected to experience significant
SGX is the Largest Trading Venue in Asia
for SPDR Gold ETF
growth in the coming years due to the sheer number
SGX is the most liquid venue for trading SPDR Gold
of investors in the region combined with economic
ETF (GLD SP Equity) in Asia, and hosts two-thirds of
growth, rapid wealth creation and a quickly evolving
the turnover traded over Asian markets.
landscape, Asia (currently accounting for less than 10%
financial services landscape. For that reason SGX is
looking to expand the product shelf with new and
SGX offers a most attractive average best bid-ask
innovative ETFs, cross list using the benefits of ASEAN
spread of less than 6 bps.
CIS and grow our offering with more leverage and
The average monthly traded
inverse ETFs. To further promote trading, SGX has
various ETF incentives available.
value for SPDR Gold ETF
over 2015 was US $ 28.5
Clearing on SGX ETF block trades are free
million. Gold prices have
SGX has waived clearing fees for exchange traded
funds block trades for 3 years, ending 31 December
been up 20% since hitting
6-year low in Dec 2015.
2017. All clients save 3.25 bps on transaction costs,
A complementary gold futures contract is also available
which are the standard clearing fees. There are no
on SGX derivatives platform, the Singapore Kilobar Gold
trading access fees for block trades. The objective
Contract. This contract traded an average of US $13 million
of this initiative is to encourage reporting of over-the-
per month in 2015.
counter ETF transactions to the exchange. This, in
turn, creates greater transparency and better price
Margin Efficiency
discovery of ETF activities for investors in the securities
SGX derivatives clearing members are allowed to accept
marketplace. It also helps clients reduce transaction
SGX listed securities (including SGX-listed ETFs) as
costs and counter-party risks.
collaterals from clients. This means that clients can
pledge their positions in SGX ETFs as margins with
Combination of futures and ETFs
their clearing members (should their setup allow), thereby
SGX futures offering provides access to a wide span
reducing capital requirements in the arbitrage positions
of regional Asian markets to global participants like
that they take in the corresponding futures legs.
Uniquely Singapore listings
STI ETF: 2 STI ETFs (Nikko AM Singapore STI ETF (G3B) and SPDR Straits Times ETF (ES3)) are liquid instruments tracking the
Singapore market
MSCI India: iShares MSCI India ETF (I98) was first listed in 2006 at a time when the Indian stock market was performing
strongly and today continues to provide investors a good form of access into the Indian market.
Gold ETF: SPDR Gold Trust or GLD (O87) is the first gold-backed exchange-traded fund listed in Asia and SGX offers the most
competitive spreads in the region.
DBXT Asia ex Japan: SGX is the only listing venue for DBXT MSCI AC Asia Ex Japan Index ETF (IH1) in Asia.
Inverse S&P 500: The first inverse ETF tradable in Asia is the DBXT S&P 500 Inverse Daily ETF (HD6).
Market | product updates
ETF in Asia Pacific: a success story
Market Maker schemes
Market makers looking to become active in SGX listed
ETFs are offered several incentives like clearing fee rebates
and operational efficiencies to improve market quality.
Supported by Local Regulator
As part of SGX’s efforts to further investors’ understanding
of ETFs, SGX is continuously organizing ETF investor
education events and SGX Academy seminars on a
monthly basis. Even the MAS, the local regulator, have
stepped up their efforts in their “Save and Invest”
campaign emphasizing the benefits of well diversified
long term investments.
This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action
would be contrary to applicable laws or regulations or would subject SGX to any registration or licensing requirement. This document is not an offer or solicitation to buy or
sell, nor financial advice or recommendation for any investment product. This document has been published for general circulation only. It does not address the specific
investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment
product before investing or adopting any investment strategies. Investment products are subject to significant investment risks, including the possible loss of the principal
amount invested. Past performance of investment products is not indicative of their future performance. While SGX and its affiliates have taken reasonable care to ensure the
accuracy and completeness of the information provided, they will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other
economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Neither SGX nor any of its
affiliates shall be liable for the content of information provided by third parties. SGX and its affiliates may deal in investment products in the usual course of their business,
and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this document
is subject to change without notice.
Product innovation in Hong Kong
In Asia, we have witnessed strong growth in Exchange
A Shares
Traded Funds (ETFs) both in terms of assets and
We are all awaiting further announcements from MSCI on
turnover. The development of ETFs in Asia is in its
its expected inclusion of A Shares in its global benchmarks.
infancy, with the growth in the last five years driven by
Recently, three ETFs have listed on HKEX (Stock Codes:
early adopters. This is evident in Hong Kong, where
3162, 3149, 3156) tracking the MSCI China A International
ETFs have grown as a proportion of HKEX’s cash
Index, representing the opportunity set that would be
product turnover, rising from 3.5% in 2010 to 8.4% in
included in MSCI’s global benchmarks. These ETFs can
20152. To continue to grow at accelerated rates, broader
be useful in managing the transition of A Shares into a
investor adoption is needed, requiring a focus on:
portfolio without the difficulty of obtaining an (R)QFII
1. Distribution and regulatory reform;
N Shares
2.Improving the market structure supporting ETF
Recently, we’ve had a number of discussions with
trading; and
3.Product innovation, the focus of this article.
clients looking for exposure to the Chinese companies
Product innovation is often construed as developing
listed in the US, or N Shares (Alibaba, Baidu, etc.). Our
a new investment strategy (such as smart beta),
market includes 3161, an ETF that provides exposure to
but innovation is also about developing products that
26 N Shares and is the only ETF of its kind.
clients need to meet their investment objectives while
maximising the risk/return equation.
1 Cash products largely consist of equities, ETFs, warrants and CBBCs.
2 Source: HKEX
Market | product updates
ETF in Asia Pacific: a success story
Better potential return outcomes
in Hong Kong later this year4. The introduction of L&I
We’re often surprised by how many Asian investors
Products will be a welcome addition to Hong Kong’s
prefer to get their Asia ex-Japan exposure using a US-
product offering, as they’re expected to increase retail
listed ETF, most commonly AAXJ. By continuously doing
investors’ ETF participation, benefiting the whole industry.
so, investors pay higher expense ratios and receive
Our goal is to position Hong Kong as Asia’s regional
less dividends after tax . Alternatively, investors could
ETF hub and we believe that product innovation is a
invest in 3010 or 2805 on HKEX and in doing so reduce
central piece to achieving that goal.
their holding costs and likely increase their total return.
Leverage and Inverse Products
Brian Roberts
On 5 February 2016, Hong Kong’s Securities and Futures
Head of ETFs
Commission (SFC) released a regulatory framework for
Senior Vice President
Leveraged and Inverse Products (L&I Products), paving
Client and Marketing Services Department
the way for these exchange traded products to be listed
Hong Kong Exchanges and Clearing Limited
The information contained in the article contributed by Hong Kong Exchanges and Clearing Limited (“HKEX”) is for general informational purposes only and does not constitute
an offer, solicitation or recommendation to buy or sell any securities or to provide any investment advice or service of any kind. HKEX and/or its subsidiaries endeavour to
ensure the accuracy and reliability of the information provided, but do not guarantee its accuracy and reliability and accept no liability (whether in tort or contract or otherwise)
for any loss or damage arising from any inaccuracy or omission or from any decision, action or non-action based on or in reliance upon information contained in that article.
Japanese ETF market grows rapidly through foreign
Japan Exchange Group – the parent company of the
Tokyo Stock Exchange (TSE) – specified expansion of the
Japanese ETF and ETN market as a core strategy in its
medium-term management plan for FY2013-FY2015,
and last year this space witnessed a dramatic increase
in both size and liquidity to build on the momentum
achieved in 2014.
TSE ETF/ETN Market in Asia5
Japan now has the largest and most liquid ETF/ETN
market in Asia6, with 224 ETFs and ETNs listed on the
TSE as of the end of 2015 (up from 190 in 2014), and
total trading value and daily average trading value climbing
in 2015 to JPY 63 trillion and JPY 253.7 billion, respectively.
Last year was the first time the market breached the
JPY 200 billion daily average trading value barrier since
launch. Total assets under management7 also surged
more than 52% from December 2014 to December
2015, jumping from JPY 1.1 trillion to JPY 1.6 trillion.
Unless a tax treaty is in place, non-U.S. investors are subject to 30% withholding on their dividend distributions when investing in US-listed ETFs.
L&I Products are commonly known as Leveraged & Inverse ETFs in overseas markets.
Data sourced from World Federation of Exchange (WFE) as of December 2015.
Compared with Korea Exchange, Hong Kong Exchanges and Clearing, Singapore Exchange, Australian Securities Exchange, Shanghai Stock Exchange, Shenzhen Stock Exchange,
and Taiwan Stock Exchange.
7 Total assets under management of domestic ETFs created based on the Investment Trust and Investment Corporation Act.
Market | product updates
ETF in Asia Pacific: a success story
Monthly ADV (from Oct, 2012 to Sep, 2015
(JPY bn.)
Dec 15
Oct 12
Aug 15
Jun 15
Apr 15
Feb 15
Dec 14
Oct 14
Aug 14
Jun 14
Apr 14
Feb 14
Dec 13
Oct 13
Aug 13
Jun 13
Apr 13
Feb 13
Dec 12
Oct 12
(Source: Tokyo Stock Exchange)
Leveraged/Inverse and Related Crude Oil
Encouraging Participation by Foreign Market
Similar to 2014, leveraged and inverse issues were the
Market makers based overseas are beginning to
main drivers of this growth, averaging JPY 212.5 billion
actively provide liquidity to the Japanese ETF/ETN
in trading value a day in 2015 and accounting for 80%
market. They make it more usable for other investors
of the entire ETF/ETN sector of the market. The trading
by reducing the difference between the theoretical
value of leveraged ETFs tracking the Nikkei 225 has
price and market price of the instruments as well as
been very high since launch, and the trading value of
narrowing the bid-ask spread. The TSE is also encouraging
Nikkei 225 and TOPIX inverse ETFs soared when the
greater ETF information disclosure to facilitate fair price
market tumbled in August and September of 2015 and
formation, such as publishing the indicative NAV and
January of this year. This illustrates increased investor
PCF files for a wide variety of ETFs.
demand for these types of inverse ETFs.
Higher Domestic Investment
Moreover, the steep drop in crude oil prices in 2015
The TSE has been promoting the Japanese ETF market to
also spurred interest in oil-related ETFs and ETNs, with
domestic retail investors through seminars and other events,
average daily trading value climbing to JPY 3.9 billion
which has helped boost the popularity of ETF and ETNs
– 36 times the amount seen in 2014.
amongst this market segment. Currently retail investors
account for about 37% of trading in the ETF market.
Diversity in Asset Classes
In 2015, 10 ETFs tracking European and other foreign
The exchange has also been meeting regularly with
equity indices were listed, in addition to a total of
domestic financial entities and institutional investors to
9 new leveraged and inverse ETFs based on the JPX
keep them up to date on ETF-related accounting issues
Nikkei 400 index launched in the beginning of 2014.
and liquidity profiles. Buying by Japanese public and
quasi-public institutions has increased as well, with the
In addition, as a result of heightening interest in Smart
Bank of Japan continuously adding to its ETF holdings
Beta indexes, various ETFs and ETNs tracking indexes
as part of its quantitative and qualitative monetary
such as the iMSCI Japan High Dividend Index and
easing policy. Institutional investors are also increasingly
Nomura Japan Equity High Dividend 70 dividend index
recognizing the merits of ETFs in terms of transparency,
(price return index) were listed in 2015.
liquidity, and convenience as a tool for index-based
Market | product updates
ETF in Asia Pacific: a success story
Trading Volume of ETFs by Investor Type in 2015
Domestic Institutional
(JPY bn.)
400 Securities company
Prop account
150 Japanese retail
Overseas investors
Dec 15
Oct 12
Aug 15
Jun 15
Apr 15
Feb 15
Dec 14
Oct 14
Aug 14
Jun 14
Apr 14
Feb 14
Dec 13
Oct 13
Aug 13
Jun 13
Apr 13
Feb 13
Dec 12
Oct 12
3% 5%
(Source: Tokyo Stock Exchange)
These points illustrate the remarkable growth of the
JPX Market Business Development
Japanese ETF and ETN market, and expectations are
[email protected]
high for an even larger and more liquid market with a
greater diversity of investors going forward.
This document was created for the sole purpose of providing an outline explanation for ETFs and ETNs. It is not intended for solicitation for investment, nor a disclosure
document pursuant to the Financial Instruments and Exchange Act.
Because ETFs and ETNs invest in securities whose prices fluctuate, the market price or base value may decrease due to shifts in the underlying index or foreign exchange
market, fluctuations in the price of constituent securities, bankruptcy or deterioration in the financial conditions of constituent securities of issuers, or other market causes.
Losses may arise from these factors. As such, invested capital is not guaranteed. Additionally, in cases of margin trading, losses may occur in excess of the deposited margin.
When trading ETFs and ETNs, please fully read the documents distributed before concluding a contract with a financial instruments business operator, etc. Trading should be
conducted on one’s own judgment and responsibility, with sufficient understanding of the product’s attributes, trading mechanism, existence of risk, sales commissions, Total
Expense Ratio, etc.
Following such date, there may be changes to the details of this document due to rule revisions and other factors without prior notification. Additionally, the information
contained within this document has been prepared with the utmost care. However, the completeness of such information is not guaranteed. Tokyo Stock Exchange, Inc.
assumes no responsibility or liability for costs, etc. arising from the use of this document and the information it contains.
Tokyo Stock Exchange, Inc. retains all rights related to this document and does not permit the reproduction or reprinting of this document in any circumstances without prior
Market | product updates
ABN AMRO Clearing awarded on SGX Annual Awards Night
ABN AMRO Clearing awarded
on SGX Annual Awards Night
On 17 February during the SGX annual Awards Night ABN AMRO Clearing received the following awards;
Top SGX-DT NLT Member 2015 (Options) First
Top SGX-DT Member 2015
Top SGX-ETF performance 2015
“These three awards continue our tradition of being
the Top ranked SGX derivatives clearer in SGX and
further validates our firm as the pinnacle of the
industry for clearing DT in SGX”, says Stephane
Eglizeau, CEO of ABN AMRO Clearing in Asia Pacific.
“In giving the awards, SGX equally recognises our
clients’ appreciation for the service quality we
deliver. We relish these awards that reflect our top
position as a clearer in listed derivatives. At the
same time these awards are also putting pressure on
our teams to maintain and further improve the high
service levels experienced by our clients.”
We thank our clients that have made this possible and look forward to further growing their business on SGX and
other exchanges worldwide.
Stay up to date with ABN AMRO Insights
Did you know that ABN AMRO creates news and
Set up your newsletter here. Select the topics and the
insights about the economy, financial markets,
desired frequency and be informed of the latest
commodities and sectors with ABN AMRO Insights?
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ABN AMRO follows, analyzes and forecasts the
or unsubscribe at any time.
economy and market developments and publishes a
range of notes and short comments on the key issues.
Go to Insights to subscribe.
ABN AMRO and ABN AMRO Clearing go into blockchain technology together | Two times a charm
ABN AMRO and ABN AMRO Clearing go into
blockchain technology together
ABN AMRO is one of the parties investing in Digital Asset Holdings (DAH), a US-based blockchain
technology company. This investment provides ABN AMRO with direct access to this new technology,
enabling the bank to learn and, together with other financial players, develop new applications using
this technology.
Go to press release issued by DAH.
Two times a charm
ABN AMRO Clearing Chicago awarded Best FCM client service at the CTA Intelligence US Services
Awards 2016 for the 2nd year in a row.
ABN AMRO Clearing keeps on investing
ABN AMRO Clearing keeps
on investing
What new products went live Q4 2015 and Q1 2016? Below you find an overview of all
exchanges/products across the globe that are added to the ABN AMRO Clearing service
offering and can be cleared in your account with us.
Asia Pacific
 20yr AGB Future
 Deliverable Swap Future
 Mini AP (SPI)
 Total Return Single Stock Option
 Nickel Mini Futures
 Tin Mini Futures
 Lead Mini Futures
 KOSPI 200 Mini Futures
 KOSPI 200 Mini Options
 JPX400
 NK Weekly Options
 SGX MSCI Malaysia Index Futures
 SGX Iron Ore CFR China (58% FE
Fines) Futures
 Capesize Time Charter Average (5TC)
 Additional FX futures on EUR/CNH,
 SGX Platts Iron Ore CFR China (Lump
Premium) Index Futures contracts
 AP for BlackRock iShares:
TSE: AP for the following EFTs  Blackrock
 I98 SP
 iShares TOPIX ETF (In-Kind)
 iShares Japan REIT ETF (In-Kind)
 iShares MSCI Japan Minimum Volatility (In-Kind)
 Daiwa
 MAXIS S&P Tokai ETF (In-Kind)
 MAXIS Topix Risk Control 5% ETF (Cash)
 MAXIS Topix Risk Control 10% ETF (Cash)
Market | product updates
Nikkei 225 Leveraged Index (Cash)
Nikkei 225 Double Inverse Index (Cash)
TOPIX Leveraged 2x Index (Cash)
TOPIX Double Inverse Index (Cash)
Daiwa JPX NK400 Leverage Index (Cash)
Daiwa JPX NK400 Inverse Index (Cash)
Daiwa JPX NK400 Double Inverse Index (Cash)
ABN AMRO Clearing keeps on investing
 Nikko
 Listed Index Fund MSCI Japan High Dividend
 Nomura
 NEXT FUNDS JPX NK400 Leverage Index (Cash)
 NEXT FUNDS JPX NK400 Inverse Index (Cash)
 NEXT FUNDS JPX NK400 Double Inverse (Cash)
 Rakuten
 Rakuten NK225 ETF Nikkei 225 Leveraged
Low Volatility (In-Kind)
Index (Cash)
 Rakuten NK225 Double Inverse Index (Cash)
 Simplex
 SMAM Nikkei 225 ETF (In-Kind)
 SMAM REIT Index ETF (In-Kind)
EU Natural gas future
EU Cocoa future
Cash settled power futures
European Allowance future
 Financial futures on Dutch and
Belgium power
 Power options on Italian, Spanish,
Nordic and French power base futures
 Freight futures and options
 15 minute Austrian power contracts
 Variance futures
 Mini DAX future
 Steel rebar and steel scrap futures
London Stock Exchange
 BIST 30 Turkish index future and
Nasdaq OMX
 Iron ore and shredded scrap steel
Exchange for physicals
Residential Wood Pellets future
AtomX flexible contracts
Single stock futures and single stock
dividend futures
option contracts
future contracts
German Electricity base futures
Nordic Electricity base futures
German wind index future
Hot rolled coil and Coking coal future
Market | product updates
JPX N400 Bull 2x Leverage (Cash)
JPX400 Bear Inverse (Cash)
JPX NK400 Bear 2x Double Inverse (Cash)
JASDEC Top20 (In-Kind)
Mothers Core (In-Kind)
ABN AMRO Clearing keeps on investing
 PSV Italian natural gas future
 French and German locational gas
spot contracts
 Options
 Equities
ISE Mercury
 Equity options
Dubai Merchantile
 Oil contracts
For more information on the launched products, please contact your Relationship Manager
Market | product updates
News from the financial & securities industry
Market Infrastructures update:
March 2016
European Central Bank
The new Focus Sessions will deepen the dialogue
across the financial sector and broaden the range of
Status of TARGET2 Securities (T2S) project
topics discussed. They will go beyond T2S and the post-
The pre-migration phase for Wave 2 started on
trade world to address current market integration
28 December. The implementation of Wave 2,
topics more generally. For a flavour of what’s to come,
during which Interbolsa (the Portuguese CSD) and
take a look at the full programme for the day? The
the National Bank of Belgium SSS will be connected
names of industry speakers will be announced in the
with the T2S platform, is scheduled for 28 March.
coming weeks.
To secure a place, simply send an email to
Indicative migration timetable
[email protected] by 6 April 2016.
September 2016
(Wave 3)
February 2017
(Wave 4)
February 2017
(Final wave)
Euroclear ESES
VP Securities
VP Lux
Baltic CSDs
ECB market consultation
The Eurosystem issued a market consultation on the
future of Europe’s financial market infrastructure, i.e.
vision 2020 on Target 2 and to some extent T2S. The
consultation relates to the go-live of T2S, the postponed
T2 migration to ISO20022 and the Eurosystem’s future
service offering. The consultation offers Eurosystem
participants an opportunity to influence and help design
Once the Steering Level has been approved, the new
its future capabilities and service offering.
migration timetable will need to be endorsed by the
Governing Council (scheduled for early 2016). Here is
the link to the latest version of the T2S FAQ document.
Deadline for responding to the ECB: 4 April.
A single point of access for all T2S-related information
The consultation paper is available here
from each CSD is available on the following website.
Upcoming T2S Advisory Group meetings:
Trading venues
5-6 July 2016
29-30 November 2016
Euronext (EN)
Euronext announced on 26 January that it would be
T2S website
launching a new sugar commodities futures contract in
the autumn of 2016, subject to regulatory approval.
ECB to launch Focus Sessions
Aimed at all the actors in the European Union sugar
Following the success of the T2S Info Sessions, and
ecosystem, the contract will allow the industry to hedge
based on the constructive feedback received from its
its positions against price fluctuations and anticipate
stakeholders, the ECB announced the first in a series of
future price movements, at the time when sugar
Focus Sessions on 8 April, hosted by Banco de España.
quotas are set to expire in the European market.
Market | product updates
News from the financial & securities industry
On 25 February, the first buy and sell orders for a
The LSEG announced on 24 February that the Singapore
crowd-funded security, issued by the MyMicroInvest
Exchange (SGX) would be going live with Millennium
crowd-funding platform on behalf of a Belgian company
PostTrade™ platform, to support SGX’s Central Depository
called Domobios, were placed on the Euronext Expert
Pte Limited’s (CDP) business. This will initially enhance
Market (Public Auction), an electronic trading platform for
SGX’s securities clearing and connectivity capabilities
non-listed securities. On Tuesday, March 1st, the first
and provide a solid technology platform to replace
secondary transaction in a crowd-funding instrument
CDP’s settlement and depository systems.
on a transparent and secure European trading platform
took place as a result of matching outstanding orders.
The latest news is available online at:
The latest news is available online at:
Nasdaq OMX Group ( NOG)
Nasdaq OMX Group announced that 2015 was a record
Deutsche Börse and London Stock Exchange
year for new listings (97) at Nasdaq’s Nordic Exchanges,
The management boards of Deutsche Börse and the
i.e. Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq
London Stock Exchange Group (LSEG) confirmed on
Iceland and Nasdaq Stockholm.
23 February that they were involved in detailed discussions
about a potential merger of equals. The merger would
The latest news is available online at:
be structured as an all-share merger of equals under a
new holding company. The management boards of
Deutsche Börse and the LSEG believe that a merger
TOM (The Order Machine)
would represent a compelling opportunity for both
companies to strengthen each other in an industrydefining combination, creating a leading European-
MiFID II/Best Execution Legal opinion with regard
based global markets infrastructure group. There is no
to routing to multiple trading venues
certainty that any transaction will occur. Any transaction
An important aim and consequence of the MiFID
would be subject to regulatory approval, the approval of
regime for investment firms has been the introduction
Deutsche Börse shareholders and the LSEG shareholder,
of competition, resulting in the establishment of
as well as other customary conditions.
multiple equity and derivatives exchanges. Banks and
investment firms need to consider how they will
Under the UK City Code on Takeovers and Mergers,
manage the multitude of execution venue-choices in
either the new holding company or Deutsche Börse are
their duty of care towards clients for the MiFID II
required to do one of the following by no later than
enhanced Best Execution requirements.
5.00 p.m. on 22 March (unless this deadline is extended
with the consent of the UK Takeover Panel):
TOM (The Order Machine) plays an important role in
(i) announce a firm intention to make an offer for the
this era of multiple exchanges and aims to contribute to
the understanding and implementation of the MiFID II
LSEG in accordance with the Code; or
(ii) announce that they do not intend to make an offer
framework. As part of this effort TOM has previously
and that they will not make an offer for the LSEG
published a third-party, quantitative, report analyzing
for a period of six months.
liquidity across exchanges in Dutch equity options.
Intercontinental Exchange Inc. and CME Group Inc. are
TOM (The Order Machine) now publishes information of
considering making bids for the LSEG, potentially gate-
a qualitative nature: a legal opinion by global law firm
crashing the British company’s proposed merger with
Norton Rose Fulbright on the application of Best Execution
Deutsche Börse.
rules in the context of routing client orders. The opinion
discusses to what extent there is a requirement to route
The latest news is available online at:
to multiple exchanges. It also describes to what extent
the use of an automated order router is advised in order
to comply with these requirements.
Market | product updates
News from the financial & securities industry
Central counterparties (CCPs)
additional Central Counterparty (CCP) for clearing
The list of central counterparties (CCPs) authorised to
offer services and perform activities in the European
Clearing services are an optional choice for interested
Union in accordance with the European Market
participants. The member test phase with the new central
Infrastructure Regulation (EMIR) is available online at:
counterparty began on 8 February and the planned
production launch date is 29 March. This date is subject
to final approval by the relevant regulatory authorities.
Confirmation is expected by mid-March 2016.
LCHClearnet Group (LCG)
On 16 February, LCH.Clearnet Ltd announced a further
The latest news is available online at:
extension of EquityClear, its European equities clearing
service. From 22 February, users of UBS MTF will be
European Central Securities
Depositories (CSDs)
able to benefit from clearing by LCH.Clearnet. The
addition of the multilateral trading facility will build on
the recent move to offer clearing services for Nasdaq
Nordic’s cash equity markets in Denmark, Finland and
Sweden, and Spanish equities on pan-European MTFs.
The account segregation practices at European CSDs
are analysed in a report which is available at:
The latest news is available online at:
LCH.Clearnet Ltd Recognised Currency Holidays
2016 - Update
The ESMA published the final draft report on Regulatory
Please be advised that LCH.Clearnet Ltd (LCH.Clearnet)
Technical Standards regarding Settlement Discipline as
has updated the Recognised Currency Holidays 2016
part of the Central Securities Depository Regulation (CSDR)
detailed in LCH Circular No 3686.
on 1 February. This draft is under review by the European
Commission. The proposal is for there to be a two-year
The update relates only to CZK, specifically:
phasing-in period following its official publication.
March 25th 2016 has been added as a currency
holiday for CZK.
The report is available at:
Please click on the link below for the table of LCH.
Clearnet Ltd recognised currency holidays for 2016.
LCH.Clearnet Ltd recognised currency holidays for 2016
Eurex Clearing AG
EU regulatory news
Eurex Clearing was approved by the Commodity Futures
European Market Infrastructures Regulation
Trading Commission as a registered Derivatives Clearing
in force since 16 August 2012
Organisation on 2 February. The CFTC issued the
corresponding Order of Registration on 1 February 2016.
EMIR clearing obligation start dates set for EUR and
USD interest rate swaps
The latest news is available online at:
The European Parliament and Council have approved the
final report by the European Commission on a CCP clearing
obligation under the European Market Infrastructure
On 29 January, the SIX Swiss Exchange issued an update
Regulation (EMIR) for certain G4 currency (i.e. EUR,
on the news that EuroCCP would be commencing as an
GBP, JPY and USD) interest-rate derivatives.
Market | product updates
News from the financial & securities industry
The classes subject to the clearing obligation (single
Frontloading (i.e. requirement to backload into a CCP
currency only) are basis swaps, fixed-to-floating
before effective date above any bilateral transactions)
interest-rate swaps (IRS), forward rate agreements
will take effect from:
February 21, 2016 for Category 1 counterparties; and
(FRA) and overnight index swaps (OIS).
May 21, 2016 for Category 2 counterparties.
The clearing obligation rules were published in the EU’s
Official Journal on 1 December and will take effect on:
There is no front-loading requirement for Category 3 or
The clearing obligation rules have been published in the
4 counterparties.
EU Official Journal and will take effect on:
June 21, 2016 for Category 1 counterparties (i.e.
Website: http://eur-lex.europa.eu/legal-content/EN/TXT/
Clearing members);
Dec 21 2016, for Category 2 counterparties (i.e.
Non-clearing member, Financial Counterparties with
The latest news is available at:
more than €8bn gross notional non-cleared otc
EC website: http://ec.europa.eu/internal_market/
June 21, 2017, for Category 3 counterparties (i.e.
Non-clearing member, Financial counterparties with
less than €8bn gross notional non-cleared otc
ESMA website
derivatives); and
21 Dec, 2018, for Category 4 counterparties. (i.e.
Non-clearing member, Non-Financial Counterparties
above the clearing thresholds, so called NFC+);
Market | product updates
News from the financial & securities industry
Status of MiFID/R II
Delay in entry into force of MiFID II and consequences for MAR and CSDR
On 10 February, the European Commission proposed a one-year extension to the date of entry into
force of MiFID II. The new date is 3 January 2018. The proposed extension will have to be formally ratified
by the European Parliament and Council. Their endorsements are not likely to be problematic and should
follow in accordance with the simplified procedure.
Changing the date of applicability of MiFID II does, however, have consequences for the applicability of
other legislation, in particular Regulation (EU) 596/2014 (MAR) and Regulation (EU) 909/2014 (CSDR).
The market abuse framework (MAR) will apply to certain definitions and terms in MiFID II. As MAR is
set to enter into force on 3 July 2016, it already contains a provision to ensure that the MiFID I terms
and rules will apply before the originally planned date of entry into force of MiFID II.
MAR also refers to terms that will be introduced by MiFID II, such as organised trading facilities (OTFs),
small and medium-sized enterprise (SME) growth markets, emission allowances and auctioned products
based thereon. MAR states that its provisions will not apply to these until the originally planned date of
entry into force of MiFID II. The wording of the MAR will therefore need to be adjusted so that the
provisions referring to OTFs, SME growth markets, emission allowances and auctioned products based
thereon do not apply until the new date of entry into force of MiFID II.
The consequences for the Central Securities Depositaries Regulation (CSDR) are twofold. First, the change
affects the application of the rules on settlement discipline to multilateral trading facilities (MTFs)
applying for registration as SME growth markets. Second, in order to have a clear and coherent
legislative framework for trading and settlement, CSDR relies on many of the terms and definitions in
In order to provide legal certainty during the period between the previous date of entry into force and
the new date of entry into force, it needs to be made clear that the rules in MiFID I remain in force until
the new date of entry into force of MiFID II.
ESMA website
Status of Securities Financing Transactions
Regulation (SFTR)
Level 2 measures means that most of its requirements
The SFTR was adopted in November and published in
The information to be reported will be specified in
the EU’s Official Journal on 23 December. It entered into
regulatory technical standards (RTS) that ESMA must
force on 12 January of this year. However, a combination
submit to the European Commission for approval by
of staggered effective dates and the need to wait for
13 January 2017 and that are therefore likely to come
will not become effective until after 13 July.
into force in the second quarter of 2017.
Market | product updates
News from the financial & securities industry
When will the reporting obligation apply?
Under Article 33, the reporting obligation will apply:
12 months after the entry into force of the RTS for
EU and non-EU investment firms and credit
institutions (AAB);
15 months after the entry into force of the RTS for
EU and non-EU CCPs and central securities
18 months after the entry into force of the RTS for
EU and non-EU insurance undertakings, AIFMs,
UCITS and IORPs; and
21 months after the entry into force of the RTS for
non-financial counterparties.
Under Article 15 of the SFTR, the right of a taker of
collateral to reuse it is conditional on:
the collateral-provider being notified in writing by the
collateral-taker of the risks and consequences
the collateral-provider giving its prior written (or
equivalent) consent to use the collateral under a
security collateral arrangement or its prior written (or
equivalent) consent to the transfer of title to the
collateral arrangement;
the reuse being in accordance with the terms
specified in the collateral arrangement; and
the financial instruments received under the
collateral arrangement having been transferred
directly from the account of the providing
counterparty, provided that this counterparty is
established within the EU and its security account is
maintained in the EU.
Article 15 will apply from 13 July 2016 to all collateral
arrangements, both existing and future. Where the
collateral arrangement provides for two-way collateral,
the requirements apply to each of the two parties to
the collateral arrangement.
Market | product updates
Equivalence Decision for US CCP’s adopted by European Commission
Equivalence Decision for US CCP’s
adopted by European Commission
The European Commisson adopted the EU-US equivalence decision, clearing the way for US clearinghouses
to seek recognition in the European Union. This decision will ensure that both EU and US CCPs operate
to the same high standards and at a comparable level of cost to their participants. It also alleviates the
regulatory burden for US and EU CCPs, allowing compliance with only one set of rules. This will encourage
market certainty and cross-border activity, avoiding fragmentation of markets and liquidity.
EU Commissioner Jonathan Hill said: “This is an
important step forward for global regulatory convergence
and implementing our agreement with the CFTC. It
means that US CCPs, once recognized by ESMA, can
continue to provide services to EU companies. We
look forward to the CFTC’s forthcoming decision on
substituted compliance which will allow European
CCPs to do business in the United States more easily.”
CCPs registered with the CFTC will now be able to
obtain recognition in the EU. Market participants will
be able to use them to clear standardized over-thecounter derivative trades as required by EU legislation,
while the CCPs will remain subject solely to the regulation
and supervision of their home jurisdictions. CCPs that
have been recognized under the EMIR process will
also obtain qualifying CCP (QCCP) status across the
European Union under the Capital Requirements
Regulation (CRR). This means that EU banks’
exposures to these CCPs will be subject to a lower
risk weight in calculating their regulatory capital.
The Commission’s press release can be found here
Source: FIA
US Regulatory Updates
US Regulatory Updates
Below follows a selection of key regulatory developments produced specially for the clients of
ABN AMRO Clearing in Chicago. We hope that you will find this a valuable tool for keeping
track of the regulatory and industry changes that may affect your business.
CFTC Proposes New Regulations on Automated
Trading (Reg. AT)
US futures markets. Proposed REG AT would apply to
all market participants using algorithmic trading systems,
so-called AT Persons, who are generally defined as any
Why was it introduced?
entity that employs a trading methodology that has the
On November 24, 2015, the Commodity Futures
capability of sending orders directly to a US electronic
Trading Commission (CFTC) introduced a Proposed
futures trading platform without manual intervention
Rule on Regulation Automated Trading on designated
and includes Futures Commission Merchants (FCMs),
contract markets (DCM), better known as REG AT.
their clients, and certain other market participants.
The CFTC is considering ways to adapt its regulatory
AT Persons, if not already registered in another capacity,
framework to better align with today’s electronic
must register with the CFTC as a “floor trader.”
trading marketplace.
The key proposed requirements include:
1. deployment of pre-trade risk controls;
2. implementation of standards for development,
What is it?
REG AT, as proposed, seeks to codify into formal regulation
existing industry best practices, which include a number
of pre-trade risk controls, transparency measures, reporting
requirements, and other safeguards for algorithmic
testing and monitoring of algorithms;
3. submission of annual compliance reports to the
exchange; and
4. maintenance of books and records.
order origination and electronic trade execution on the
Market | product updates
US Regulatory Updates
Some of the requirements can be compared to the
anagement and will examine one or more of the
DEA requirements under MiFID II in Europe and the
following topics: governance, risk assessment,
Securities and Exchange Commission’s (SEC’s) Market
technical controls, incident response, vendor
Access Rule, but crucial differences remain.
management, data loss prevention and staff training.
2. Technology Management - FINRA has identified
How does the regulation affect AACC and its clients?
systemic shortfalls in firms’ management of their
AACC is a clearing firm on all major US futures
technology systems. In particular, FINRA has concerns
exchanges including the four CME Group exchanges
about firms’ proper change management processes
and ICE Futures US, and facilitates the automated
and procedures given the market disrupting risks
execution of customer transactions on such exchanges.
associated with erroneous system and applications
Accordingly, it will be in scope of the proposed rule.
changes to a firm’s production environment.
The proposed rule intends to codify existing market
3. Anti-Money Laundering (AML) - FINRA will assess
best practices, but definitions of algorithmic trading
the adequacy of firms’ monitoring for suspicious
and AT persons are currently stated in a very broad
activity, including surveillance of money movements
manner. Additionally, given the expansive definitions in
and trading activity. Furthermore, FINRA will focus on
the proposed rule, non-US entities who facilitate access
the adequacy of firms’ monitoring of high-risk
to US markets via automated DEA may also be within
customer accounts and transactions.
the scope of the proposed rule.
4. Market Access - In 2016, FINRA will begin issuing
For more information see the CFTC website.
report cards to those member firms identified in the
agency’s cross-market equity manipulation
FINRA & the SEC Release Their Annual
Examination Priorities letters
surveillance program. The first report cards will focus
on the manipulative activity commonly referred to as
“layering” and “spoofing.”
5. E
xchange Traded Funds (ETFs) - FINRA will review
What to Expect in 2016
In January 2016, both FINRA and the SEC released
broker-dealers’ role as Authorized Participants (APs) in
their Annual Examination Priorities letters. Compliance
the creation and redemption process. Of particular
officials, and the financial industry as a whole, anxiously
regulatory concern are the counterparty credit risks,
await the release of these letters to gauge what issues
on an intraday or overnight basis for APs, associated
U.S. regulators will focus on in their respective 2016
with the ETF creation and redemption process.
examination cycles.
Click here to review the 2016 FINRA Examination
Priorities Letter.
The overriding theme of the 2016 FINRA Examination
FINRA & the SEC Release Their Annual
Examination Priorities letters continued...
Priorities letter is the need for member firms to create
and formalize a “culture of compliance” within their
organizations. During their examination cycle, FINRA will
review how member firms have formalized and instituted
What to Expect in 2016
processes and procedures to ensure that all employees
of a firm, from the senior executives all the way down
the corporate ladder to entry-level employees, adhere to
The SEC Examination Priorities for 2016 is
a corporate culture where compliance with industry rules
focused around
and regulations is at the very core of each employee’s
three (3) areas of concern:
job responsibilities and actions. Other areas of focus
1. Retail Investors
addressed in the 2016 FINRA Examination Priorities letter
2. Assessing Market-Wide Risks
3. Recidivist Registered Representatives and their
1. Cybersecurity - FINRA remains focused on firms’
cybersecurity preparedness. FINRA will review
member firms’ approaches to cybersecurity risk
Market | product updates
US Regulatory Updates
A number of the Commission’s examination initiatives
This sounds daunting, but none of this is impossible.”
center around the same areas of concern identified in
Raskin’s point reiterates the need for more frequent
FINRA ’s annual letter. These include:
internal cybersecurity training for employees and the
1. Cybersecurity - The Commission seeks to build off
continuous testing of cyber security defenses.
of its earlier review of broker-dealers’ and investment
advisors’ cybersecurity compliance and controls. In
In addition, Raskin recommended that corporate
2016, the SEC will seek to test and assess the
executives integrate the following three points within
adequacy of various entities’ implementation of
their organization’s cyber security systems and
various cybersecurity controls and procedures.
corporate culture:
1. M
ake cyber risk part of the firm’s risk management
2. Exchange Traded Funds (ETFs) - The SEC will
continue its review of the entire ETF creation and
framework and ensure that cybersecurity processes
redemption process. In addition, the Commission
and procedures are embedded within the firm’s
will examine underlying regulatory concerns related
governance, controls, and risk management
to excessive portfolio concentration and also the
2. E
ngage in “basic cyber hygiene.” By this, Raskin
primary and secondary market trading risks
recommended that firms’ review and scrub the
associated with ETFs.
essential systems and controls at the very
3. Regulation Systems Compliance and Integrity
(SCI) - Given the highly automated nature of the
foundation of their cybersecurity defenses. She
financial markets, SEC examinations will focus on
noted that nearly 80% of known cyber intrusions
SCI entities’ primary and secondary data centers,
would have been prevented had this basic cyber
geographic diversity of fundamental computing
hygiene been completed prior to the incidents.
infrastructure, and whether security operations are
3. Have an evolving response and recovery playbook for
cyber intrusions. Raskin recommends that this
tailored accurately for the firm’s risk exposure.
playbook dictate continuous internal testing, all the
For additional information on the SEC Examination
way up to the board level, to ensure that it accurately
Priorities Letter click here.
reflects the firm’s ever changing response to cyber
U.S. Treasury Official’s Comments Regarding
For additional information on the Deputy Secretary’s
On November 17, 2015, U.S. Deputy Treasury Secretary,
speech, click here.
Sarah Bloom Raskin spoke before the Clearing House
Annual Conference. While her speech focused primarily
on the risks and rewards associated with technology and
the globalization in banking and payments, Raskin also
addressed the cybersecurity concerns inherent within the
“Much like water is drawn to cracks in a
intertwined global financial markets. She stated, “Much
foundation, a weakness in any point of entry
like water is drawn to cracks in a foundation, a weakness
or link in the financial sector’s vast, complex
in any point of entry or link in the financial sector’s vast,
interconnected system exposes individual
complex interconnected system exposes individual
financial institutions as well as threatens
financial institutions as well as threatens the United
the United States’ financial stability and our
States’ financial stability and our country’s economic
country’s economic security.”
Successful cybersecurity defenses, Raskin argued, rely
upon a fundamental change in human behavior. She
reminded the financial professionals that “virtually every
process you engage in needs to be reviewed and updated,
enterprise-wide, from a cyber-resiliency perspective.
Market | product updates
Ms. Sarah Bloom Raskin
U.S. Deputy
Treasury Secretary
US Regulatory Updates | Amendment Dutch Giro Securities Act
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entities whose links are provided herein. No part of this brochure may be duplicated or may be re-distributed without the prior consent of AACC. The material herein is gathered
from and is based on information that AACC considers reliable, but AACC does not represent that it is accurate, complete or current and it should not be relied on as such. This
document and any view or opinion expressed herein is for informational purposes only and is not, nor should it be construed as a recommendation, an offer or solicitation, either
express or implied, to buy or sell any security or to participate in any trading strategy or to induce any other parties to buy or sell any security or to participate in any trading
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protected by copyright, trademark rights and/or any other intellectual property rights. AACC is a broker/dealer and futures commission merchant primarily regulated by the SEC,
CFTC, CBOE, FINRA (www.finra.org), NFA and the CME Group. AACC does not provide tax, accounting, or legal advice and all readers should consult their own regulatory or
financial advisors before acting on any of the information contained herein. This is not a research report prepared by AACC or any affiliate. AACC is a member of SIPC, which protects
securities customers up to $500,000 (including $250,000 for claims for cash). Futures and options products carry a high degree of risk and are not suitable for all investors.
Visit our website for more information, including financial and other disclosures at: https://www.abnamroclearing.com/en/what-we-do/customer-disclosures/americas/index.html
Amendment Dutch Giro
Securities Act
As of 1 April 2016, the Dutch Giro Securities Act (“Wet giraal Effectenverkeer”) will be amended.
Under the Markets in Financial Instruments Directive
(Directive 2004/39/EG, MiFID) an investment firm such
as ABN AMRO Clearing Bank N.V. (AACB) is held to
make adequate arrangements so as to safeguard
clients’ ownership rights, especially in the event of its
insolvency. Under the current Dutch insolvency law
(“Faillissementswet”), there is a risk that in case of
bankruptcy of AACB derivative positions held with a
central counterparty (CCP) on behalf of its clients may
not be segregated from the bankrupt estate (“boedel”).
Furthermore, under the European Market Infrastructure
Regulation (Regulation (EU) 648/2012, EMIR)) a CCP is
in case of a default of a clearing member (such as
AACB) held to contractually commit itself to transfer
the positions held by the defaulting clearing member
(for the account of its clients) to another clearing
member. This process is called “portability”. Under the
current Dutch insolvency law it is uncertain whether
Giro Securities Act. Where in providing its services
portability would succeed.
AACB acts as an intermediary, derivative positions held
on your behalf as well as related collateral shall in the
Per 1 April 2016, the amended Dutch Giro Securities
event of AACB’s bankruptcy in principle not form part of
Act will arrange for the segregation of derivative positions
the bankrupt estate. This means that in case of AACB’s
in the event of bankruptcy (“faillissement”) of an
bankruptcy such derivative positions may be ported to a
intermediary (such as AACB). The segregation will
back-up clearing member or, when porting is not
relate to positions held by the intermediary on behalf
possible, liquidated. In case of liquidation the proceeds
of its clients and will include collateral provided in
of such liquidation will in principle not become part of
connection with such derivative positions. AACB will,
the bankrupt estate. You are advised to consult with
unless explicitly agreed otherwise, act as an intermediary
your (external) advisors on the impact the new Dutch
(“tussenpersoon”) as defined in the amended Dutch
Giro Securities Act may have on your business.
Market | product updates
Roundtable U.S. v. Coscia trial | ABN AMRO Clearing in the news
Roundtable U.S. v. Coscia trial
On December 16, 2015 ABN AMRO Clearing Chicago (AACC) hosted a roundtable discussion on
the U.S. v. Coscia trial and verdict and its industry impacts. Michael Coscia’s trial was the first
use of an anti-spoofing law after the 2010 Dodd-Frank Act made it illegal to manipulate prices
by placing orders without intending to trade on them.
Two of the three panelists formerly worked for the U.S.
US firms active in European financial markets. Specific
Attorney either in the Securities Fraud Division or Special
focus was on the licensing requirement (both as a
Crimes and Prosecutions Section. Approximately 35 clients
member of an exchange or when using Direct Market
attended the session. The information was extremely
Access) and on the position reporting obligations for
well received.
commodity contracts.
On March 10th AACC hosted a discussion on the impact
AACC is committed to bringing valuable, timely, relevant
of MiFID ii on U.S. trading firms operation in Europe in
industry expertise and knowledge to our clearing
conjunction with Norton Rose Fulbright. Four NRF partners,
partners. Our plan is to host 2-3 of these events each
recognized experts in the regulatory domain, were leading
year surrounding “hot” industry topics and trends. We
the discussion and sharing insights with our clients and
want to bring our global knowledge to our local clients.
prospects on the impact of this European regulation on
ABN AMRO Clearing in the news
ABN AMRO Clearing strives to stay on top of developments in this constant changing environment and
to share its knowledge and insights with industry participants. This link will guide you to an article in
which Robbert Booij (Managing Director, ABN AMRO Clearing UK & ABN AMRO UK Country Executive)
participates. The panel reflects on the state of the industry and looks back on recent developments,
recognizing the challenges that lie ahead but also identifying opportunities.
Events overview
Events overview
Below an overview of events where ABN AMRO Clearing participated or will participate and has
representatives attending.
Asia Pacific
AAC Representatives
6 April
8th Annual Japan ETF Conference
Chika Nakamura
Richard Clairmont
12 - 13 April
FOW Derivatives World Asia
Hong Kong
Paul Pealling
Ryan Leung
AAC Representatives
10 March
FOW Trading Amsterdam
ABN AMRO Clearing was Gold sponsor of this event
19-20 April
ICDA Blockchain conference
Ewout Huizingh, Project Manager, ABN AMRO
Clearing will speak at the panel ‘How is blockchain
being managed from the perspective of banks,
CCPs and exchanges. Who are the winners and
AAC Representatives
10 March
MiFID II Client Event in collaboration with
Norton Rose Fulbright
13-15 March
NGFA 2016 annual convention
San Diego
Craig Matthews
15-18 March
Boca 2016
Ron Breault, Mike Nowak, Adrian Rubin,
Jan Bart de Boer, James Egan, Monica Loh and
Wilco Bakker
11-13 May
Options Industry Conference
New York
Tom Brennan and Ron Breault
14 May
Autism Speaks Walk
ABN AMRO Clearing is platinum sponsor of the
Autism Speaks Walk
What’s Next?
is a quarterly publication of ABN AMRO Clearing
Jan Bart de Boer
Tim Brennan
Mariya Bressers Dinkova
Brian Duff
Laura de Haan
Willem Joolen
Daniel Lim
Karen McFadden
Eva Maria Molendijk
Pauline Schouten
Geert Vanderbeke
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This document (the “Newsletter”) has been prepared by ABN AMRO Clearing Bank N.V. (“AACB”) and is solely
intended to provide general information about the subject matter. The information in the Newsletter is strictly
proprietary, unless otherwise stated and is being supplied to you solely for your information. The Newsletter is
informative in nature and does not constitute legal, regulatory or other advice nor does it express any recommendations
and may not be used for such purposes. Everyone using this Newsletter should acquaint themselves with and
adhere to the applicable rules, regulations and legislation. No reliance may be placed for any purposes whatsoever
on the information, opinions, forecasts and assumptions contained in the Newsletter or on its completeness,
accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of AACB, or any
of its directors, officers, affiliates or employees as to the accuracy or completeness of the information contained in
this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such information.
Nothing contained herein shall form the basis of any contract or commitment whatsoever. US Products are cleared
by ABN AMRO Clearing Chicago LLC, Member: FINRA/NFA/SIPC