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"All financial market participants need to be incentivised to manage risks associated with clearing properly, and regulators must take care not to put too much of the burden on one actor only - in this case, CCPs. The FSB will issue a further consultation on this topic next year."

This 'lost payments' problem was the problem we set out to solve when we built the Corda Settler. And I was reminded about this when I overheard some colleagues discussing it the other day. One of them wondered why we don't include the recipient of a payment in the set of parties that must agree that a payment has actually been made. Isn't that kinda a bit of an oversight?!

"Only a lawyer could wholeheartedly believe a complex business problem can be solved by making contracts more convoluted. But that is what has been happening in the US market for corporate credit derivatives."

Regulation, technology, and process innovation are reshaping the market landscape. While regulatory reform precipitated these changes, technology, operating models, risk management, and efficiency are the real drivers. The trading business is shifting to newer and more adroit trading firms bridging traditional asset management liquidity pools with private and hedge fund capital.

Clearing/margining make markets more tightly coupled: the need to meet margin calls within hours increases the potential stress on the funding markets. Unlike in the pre-Frankendodd days, there is no "fuck you" option when your counterparty calls for margin. You don't pay, you are in default. This tight coupling makes the market more vulnerable to operational failings.

CME this month filed rule changes with the CFTC that will give it the right to impose variation margin gains haircutting (VMGH) as a recovery tool for its rates clearing segment. The clearing house operator is also looking to introduce partial tear-ups for troublesome contracts, for the purposes of recovering rather than winding down the CCP.

Vodafone is no longer part of the Libra consortium. Vodafone will dedicate resources previously intended for Libra to its well-established and successful digital payment service M-Pesa, which the company plans to expand beyond the six African nations currently served.

The 300 firms caught in the fifth wave of non-cleared margin rules in September 2020 have an avoidance tactic at their disposal in the form of a €50 million exchange threshold, but the relief requires 'diligent' monitoring of counterparty exposure amounts.

Legislation designed to switch financial contracts referencing US dollar Libor to a replacement benchmark without exposing users to litigation could be challenged in the courts, legal experts say.

What makes government bonds a safe asset? This column shows that the low political and institutional risk of issuing countries and the relative size of the debt market foster a safe asset status, with the latter factor - size - reflecting the special role of the US in providing a large, deep and liquid market for government bonds. Inertia - whether the bond behaved as a safe asset in the past - is also important. Notably, the drivers of safe asset status are heterogeneous within advanced and emerging markets, with external sustainability in particular being relevant for the latter group of countries.

We consider a special variant of a smart derivative contract, ie, a financial product, which contains an embedded algorithm to handle margining and failure-to-pay in a fully deterministic way. The contract itself then serves as a micro-counterpart. This smart contract allows us to effectively remove counterparty-related risks, such as inefficiencies in payment netting, determination and failure-to-pay event processing.fin

The Financial Stability Board published the Stage 1 report of its project to develop a roadmap to enhance cross-border payments. It provides an assessment of existing arrangements and challenges for global cross-border payments.

With some procedures still involving physical delivery of signed paper documents and notices to office addresses, the current environment of office closures and home working has highlighted the benefits of reducing the number of physical documents in the system. Faced with the practical difficulty of signing and delivering these documents during the coronavirus crisis, it has emphasized the value of automation, and created a strong rationale for digitization of legal documents, online negotiation and execution of agreements, and use of e-signatures.

"If you ever wondered about the difference between "cash settlement" and "physical delivery" in the world of derivatives, 2020 was a crash course on the matter. Yes, this was the year of negative oil prices, and many will remember those painfully. If Y2K was about fixing a trivial shortcut in date formats, you can bet software developers and risk managers alike were never quite ready for negative oil prices in their systems and scenarios."

State Street launched a new Peer-to-Peer Repo program for the buy-side that they say enables competitive financing costs across a broader range of collateral types and yield enhancement opportunities compared to traditional repo markets. State Street guarantees the payment obligations of cash borrowers to cash lenders within the program following a default, thus facilitating bilateral trading by counterparties with varying credit and capital strength. Program participants trade with one another pursuant to a common master repurchase agreement, negotiating trade terms with approved counterparties within the program's broader requirements guidelines.

"ISDA has published its latest annual margin survey, which shows a substantial increase in the amount of initial margin (IM) and variation margin (VM) collected by the 20 largest market participants for their non-cleared derivatives trades last year."

The New Money Review published a nice summary of a podcast that we recorded last week on central bank digital currencies and the benefits and risks of new digital economy.

"There is now an opportunity for the industry to collaborate with global regulators to promote common standards and a uniform approach to risk data reporting and processing. This whitepaper proposes an approach based on ISDA's Common Risk Interchange Format (CRIF) and the Common Domain Model (CDM), which will reduce the operational complexity and costs associated with the proliferation of standards aimed at capturing portfolio risk data."

CFTC data shows a sharp increase in NDF clearing since July this year. September 2019 was a record month for the notional of NDFs cleared. BIS data shows that NDF markets doubled in size between April 2016 and April 2019. Is Phase 4 of the Uncleared Margin Rules accelerating the uptake of NDF clearing?

JPMorgan has developed a new blockchain-based solution for derivatives designed to speed up cash and collateral transfers. The tool was developed in partnership with California-based fintech firm Baton Systems and aims to enable the real-time movement of transfers to multiple clearinghouses.