ny to regulate credit default swaps September 23, 2008
Posted by Bradley in : Uncategorized , comments closedThe Office of the Governor of New York announced yesterday that New York will be regulating credit default swaps which are insurance products (i.e. where the protection buyer owns the underlying asset) from the beginning of next year:
So called “naked swaps”are not insurance and cannot be regulated by the State..
The Circular Letter to which the press release refers is dated September 12.
The move raises the question whether (from a regulatory perspective) it really makes sense to have different treatment of a transaction where the distinguishing criterion is whether it is used as insurance or for speculation.
harmonising short sales rules September 22, 2008
Posted by Bradley in : Uncategorized , comments closedThere’s a new SEC announcement (dated yesterday) on technical amendments to the current short selling rules:
The technical amendments keep in place the exception contained in the original order for short selling related directly to bona fide market making in derivatives in the securities of any Included Financial Firm. However, this exception now requires that, for new positions, a market maker may not sell short if the market maker knows a customer or counterparty is increasing an economic net short position in the shares of the Included Financial Firm.
The technical amendments thus incorporate concepts included in the limitations on increasing net short positions imposed by the U.K. Financial Services Authority (FSA) in its response to short selling. The provisions are not identical because unlike the FSA, the Commission does not have statutory authority over swap contracts and other non-security over-the-counter derivatives.
The technical amendments also provide criteria by which the listing exchanges will select the individual financial institutions with securities covered by the Order. The categories include banks, savings associations, broker-dealers, investment advisers, and insurance companies, whether domestic or foreign, and the owners of any of these entities. Issuers can opt out by notifying the exchange to exclude their securities from the list.
The CESR document noted earlier shows some convergence among market regulators, but this announcement of substantial conformity with the approach of the FSA is quite striking, given that the SEC used to hold itself very much apart from non-US regulators who didn’t know how to do securities regulation. Other regulators are also in the game. See, for example, ASIC’s new rules and guide, and Ontario’s temporary order.
cesr announcement on short selling regulation September 22, 2008
Posted by Bradley in : Uncategorized , comments closedCESR today announced measures taken by various EU securities regulators on short selling. The Euronext regulators are among the most aggressive.
more regulation of short selling September 21, 2008
Posted by Bradley in : Uncategorized , comments closedThe SEC published the following announcement today:
The U.S. Securities and Exchange Commission today approved amendments to its emergency order of September 18 (Release No. 58591) requiring that certain institutional money managers report their new short sales of certain publicly traded securities.
The new rules come into force just after midnight on Monday 22 September.
cesr on the commission's proposals on cras September 19, 2008
Posted by Bradley in : Uncategorized , comments closedCESR’s response to the Commissions proposals on how to deal with the regulation of CRAs tracks pretty well the responses of industry groups I have noted (here and here): In particular, CESR says that the consultation period was too short, and criticises the lack of co-ordination with US regulators and IOSCO:
Credit ratings are essentially an international matter, affecting investors all over the world. Hence, there is a strong need for an internationally harmonised set of requirements. The imposition of stricter requirements on a unilateral basis would seriously jeopardise the significance of the ratings, leading to European vs. International ratings. The efforts to harmonise that have been reached at a global level would also be undermined. Therefore the Committee recommends that before imposing different or additional requirements, efforts should be made to reach agreement with the authorities of other major users of credit ratings. Due process and consultation would then be part of the regulatory procedure.
regulators running scared September 18, 2008
Posted by Bradley in : Uncategorized , comments closedExtraordinary times produce extraordinary regulatory actions. The FSA announced today that:
The Board of the Financial Services Authority (FSA) today (Thursday 18 September) agreed to introduce new provisions to the Code of Market Conduct to prohibit the active creation or increase of net short positions in publicly quoted financial companies from midnight tonight.
The rules will be reviewed after 30 days and will persist until mid-January. The announcement states that detailed changes to the Code of Market Conduct are to be published before the market opens tomorrow. Thus it seems that the regulation is designed to operate (from midnight) before its details are made public (before the market opens tomorrow). The control will apply to short selling with respect to (a list of) financial companies rather than with respect to issuers in general. And it is justified by reference to the need to avoid disorderly markets.
This action is similar to that taken by the SEC in July, although there the order was dated a few days before it took effect (although only published in the Federal register on the date of effectiveness). The SEC yesterday announced its own new emergency rules which took effect at midnight but which are set to expire on October 1 unless extended.
pathways to employment in international law, oct. 21 September 17, 2008
Posted by Bradley in : Uncategorized , comments closedUpcoming Event: The Career Development Office Invites You to Attend Pathways to Employment in International Law
Presented by the American Bar Association and the Florida Bar International Law Sections
This program brings law students together with experienced practitioners to explore opportunities for employment in international law. A distinguished panel will share their experiences to help you:
– Learn about International Internship Opportunities
– Network with legal experts from around the world
– Understand other legal systems and cultures
– Become active in international organizations and societies
– Develop legal and interpersonal skills
Each Pathways panel consists of Section leaders from diverse backgrounds who give advice and guidance on gaining practical experience and improving legal and networking skills, as well as sharing their own paths to careers in International Law.
Details
When: Tuesday, October 21, 2008 at 12:30 p.m.
Where: Student Lounge
RSVP: If you plan to attend, please stop by the CDO and sign up for the panel at the reception desk. Please RSVP by Friday, October 10, 2008.
Reception to Immediately Follow the Program. Refreshments Will Be Served.
aig rescue September 16, 2008
Posted by Bradley in : Uncategorized , comments closedSome firms really are too big to fail. But after years of debate about the Washington consensus, it’s striking to see a US based insurance company acquired by the US Government. The Fed announced a loan of up to $85 billion to AIG:
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.
fsa international regulatory outlook September 12, 2008
Posted by Bradley in : Uncategorized , comments closedThe FSA published its latest International Regulatory Outlook yesterday. Since April this year the IRO has a new format. The original idea, as described by John Tiner was:
to highlight the range of regulatory issues (by far the majority in the UK’s case) that originate in EU or global fora and to draw attention to the implications of these for regulation in the UK. The impact of such developments will be felt in retail and wholesale markets and by consumers and firms alike. It is important that there is widespread understanding of regulatory developments among the various stakeholders involved to enable them to input their views at an early stage and to plan for implementation….
The FSA is absolutely committed to evidence-based policy making in the UK. We are working in close cooperation with our partners in the Bank of England and H.M. Treasury to promote such principles more broadly within the EU and, in general, to secure proportionate, effective and well thought through financial services regulation here at home. If we are to achieve these aims we need to be able to rely on informed advice and guidance from the regulated community and consumers of financial services and this document is intended to assist in that.
At the end of 2006 the FSA understood that the IROs had been well-received. But in April 2008, the IRO underwent a transition from explaining that a lot of what the FSA does is really driven by developments in Europe (and encouraging UK-based market participants to try to affect what happens in Europe) to an emphasis on presenting the FSA’s strategy with respect to current issues. The aim of encouraging stakeholders to plan for regulatory change remains. The presentation has also changed: the IROs are now shorter documents (from around 60 pages to 18), and the current issue has pictures of (unidentified) buildings, which I suppose are European – the first looks like the Duomo in Florence, but I’m not sure what that has to do with the topic addressed on the page where the picture appears, which is “Evolution or revolution in European financial services regulation?” Topics covered in the current issue are structural issues in transnational financial regulation, including the idea of establishing “colleges” of regulators, and credit rating agencies.
sifma on cras and the eu commission September 8, 2008
Posted by Bradley in : Uncategorized , comments closedSIFMA today (the letter is dated 5 September (the final date for responses), although the press release carries today’s date) joins EACT in critiquing the Commission’s proposals for the regulation of cras. Like EACT, SIFMA is very critical of the consultation timetable:
Given the difficulties posed by this framework, it is disappointing that pressure to regulate should cut short a thorough consultation. Precipitate regulatory action produced by extraneous pressure often produces economic distortions, market inefficiencies, and anti-competitive outcomes. For this reason, few disagree that stakeholders should be consulted with sufficient lead time to take full advantage of their expertise, and to ensure that unforeseen, unintended, or undesirable consequences are identified and mitigated. In this case, the financial services industry has been asked to comment on an extensive regulatory apparatus within four weeks — half the time traditionally allotted. It is worth noting that the US Securities and Exchange Commission (SEC) split its CRA reform proposals into two parts and allowed non-congruent 60 day comment periods. To be sure, CRAs have been the subject of several years of regulatory consultation since the Enron collapse, but that dialogue is of little relevance in the present circumstances. None of the previous consultations envisioned regulation on the scale now proposed, nor gave any indication that such measures were contemplated. We wish, therefore, to share our discomfort with the reduction of a bedrock principle of the EU regulatory process to a near formality.
SIFMA also endorses principles rather than “rigid rules”. And says there’s insufficient attention to the self-regulatory possibilities and to ongoing work in other jurisdictions.