Derivs - Credit

Many market commentators have commented that 2017 will be the year of political risk. Uncertainty around Brexit, Donald Trump’s inaugural year as US president and a series of elections in continental Europe make conditions ripe for bouts of volatility.

In an age of irony, financial markets are hitting their peak. Measures of volatility, across almost any asset suggest squeezed trading ranges and pricing exactitude just as the most volatile US president in living memory settles into his new job. Something has to give.

Credit and equity markets are “entirely unprepared” for volatility in the coming month, say traders, with any big surprises likely to wrong-foot swathes of market participants.

London based clearing house LCH made further inroads into the US this week, with the Commodity Futures Trading Commission (CFTC) giving LCH.Clearnet and its clearing members permission to portfolio margin customer positions.

UK prime minister’s speeches have rarely been market-moving events, despite what some of the more breathless commentators in the broadcast media would have you think. But perhaps this has changed since the Brexit referendum in June, even if the spin doctors manage the message in advance.

The Depository Trust & Clearing Corporation (DTCC) has appointed a head of compliance for its European Global Trade Repository (GTR) business.

The Association of National Numbering Agencies (ANNA) has issued a consultation paper on the fees that will be payable after the introduction of ISIN numbers for over-the-counter derivatives.

Use of blockchain technology in the derivatives market progressed beyond the proof of concept (POC) phase this week, with the Depository Trust & Clearing Corporation (DTCC) moving to take distributed ledger into the heart of its operation.

John Maynard Keynes said we live in a world of irreducible uncertainty, while neoclassical economists assume that perfect information is available and people have rational expectations. The events of the past decade suggest that the former school of thought has more credence, though “freshwater” economists would no doubt disagree.

Anshu Jain, former co-chief executive of Deutsche Bank, is joining Cantor Fitzgerald as president.

In 2016, blockchain went from a buzzword to a ‘must have’ in financial markets, as seemingly every bank and exchange invested in projects and proofs-of-concept. But with so many asset classes having been promised big gains, 2017 begins with a dose of realism about the limits of the technology — and the challenges it poses for regulators. Dan Alderson reports.

The upending of global financial markets in the second half of 2016, driven by shocks from the UK’s Brexit vote and US presidential election, has caused a breakdown in previously dominant cross-asset correlations and a sharp resizing of event risk in 2017. Dan Alderson reports on a wave of structured product innovation aimed at navigating this new and more volatile universe.