DerivSource have put together a panel of experts sharing their thoughts on what 2020 will bring. They provide their ideas on the trends and market developments in areas of post-trade, regulatory compliance and collateral management that they believe will impact their firms and the industry as a whole.
See below for one of the experts and click the link here to read the full article: https://derivsource.com/2020/01/06/2020-at-a-glance-trends-industry-developments-that-will-shape-2020-regulation-collateralmanagement-libor-frtb-sftr-umr-derivatives/
‘LIBOR Transition – Only 2 Years to Go
Craig Bisson, Partner, Financial Services, Simmons & Simmons LLP
LIBOR transition will be the major issue for global financial markets through 2020 and beyond. With only two years until LIBOR ceases, there is a huge amount left for the industry to solve and some firms are still at the foothills of meeting the challenge.
There are three key aspects here: exposure in your legacy book, active trading of the RfRs and mitigating conduct risk. Technology will be required to trawl through the mountain of documents with (L)IBOR references. Our legal engineers at Simmons Wavelength have developed software which helps clients machine read tens of thousands of documents for IBOR sensitivity in a fraction of the time it would take a human. The regulators expect firms to be trading in the new rates to build liquidity and test systems.
Conversely, a strong justification will be needed for any material increase in LIBOR exposure. On the conduct side, firms should ensure that their risk framework provides for the identification and management of conduct risks, including conflicts of interest and market abuse.
As well as helping firms with project planning, training and exposure assessments, we are helping them develop their client comms and bespoke risk warnings for products. I would expect this activity to increase as firms scale-up their efforts in the New Year. There is a lot left to do!’
This article was written by DerivSource Editor on 6th January 2020 for DerivSource.