3 Financial Collateral Transactions and their Standardization

2020 ◽  
Keyword(s):  
International Law ◽  
Financial Market ◽  
Legal Certainty ◽  
Global Marketplace ◽  
Industry Association ◽  
Market Participants ◽  
Standard Template ◽  
Lex Mercatoria ◽  
Repurchase Agreements ◽  
Financial Transactions

This chapter examines collateral transactions. Being the backbone of secured funding with financial market counterparties, collateral underpins a variety of financial transactions within the global marketplace, such as repurchase agreements (repos), securities lending, and derivatives transactions-often collectively referred to as 'collateralised finance transactions' or simply 'collateral transactions'. In order to legally underpin a collateral transaction, parties to the transaction generally enter into the applicable master agreement, which will be a standard template document created and maintained by the relevant industry association. These include the Global Master Repurchase Agreement for repos; the Global Master Securities Lending Agreement for securities lending transactions; and the International Swaps and Derivative Association Credit Support Annex under the ISDA Master Agreement for derivatives transactions. The master agreements are standardised contracts in effect setting out the rights and obligations of the parties to relevant transactions. These contracts provide market participants with substantial standardization, efficiency, predictability, legal certainty, and flexibility in respect of legal and commercial aspects of transactions. In essence, these contracts are so widely used and with so little derogations that they function as lex mercatoria or the international law that applies to certain transactions between certain market participants.

The Capital Market Authority Effectiveness in the Regulation of Financial Markets perspectives from the financial sector actors

2012 ◽  
Vol 02 (11) ◽  
pp. 15-24
Author(s):  
Charles Kombo Okioga
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Capital Markets ◽  
Capital Market ◽  
Financial Regulation ◽  
International Standards ◽  
Market Regulation ◽  
Financial Market Regulation ◽  
Market Participants ◽  
New Business

Capital Market Authority in Kenya is in a development phase in order to be effective in the regulation of the financial markets. The market participants and the regulators are increasingly adopting international standards in order to make the capital markets in sync with those of developed markets. New products are being introduced and new business lines are being established. The Capital Markets Authority (Regulator) is constantly reviewing existing regulations and recommending changes to regulate the market properly. Business lines and activities are being harmonized by market participants to provide a one stop solution in order to meet the financial and securities services needs of the investors. The convergence of business lines and activities of market intermediaries gives rise to the diversity of a firm’s business operations to meet multiplicity of regulations that its activities are subject to. The methodology used in this study was designed to examine the relationship between capital markets Authority effective regulation and the performance of the financial markets. The study used correlation design, the study population consisted of 30 employees in financial institutions regulated by Capital Markets Authority and 80 investors. The study found out that effective financial market regulation has a significant relationship with the financial market performance indicated by (r=0.571, p<0.01) and (r=0.716, p≤0.01, the study recommended a further research on the factors that hinder effective financial regulation by the Capital Markets Authority.

scholarly journals FORMATION OF THE REGULATION OF THE NATIONAL ECONOMY’S FINANCIAL SECTOR

2021 ◽  
Author(s):  
Roman Sharavara
Keyword(s):  
Financial Market ◽  
Financial Services ◽  
Technological Development ◽  
Financial Sector ◽  
Cash Flows ◽  
Financial Supervision ◽  
National Regulation ◽  
Market Participants ◽  
Modern Economic ◽  
National Economies

An analysis of the applied forms of cross-sectoral approach to the organization of supervision and regulation of the financial sector of different types of national economies, including the Ukrainian one, is presented. Particular attention is paid to the role of the central bank in improving the coordination of regulators of the national financial market. It is determined that effective financial supervision, in the modern sense, should combine the performance of three key functions: macroprudential supervision, microprudential supervision and business integrity supervision. With technological development, the integration of financial sector segments and the emergence of complex financial products, the segmental core of regulation has been lost. One of the main current problems is to identify the risks posed by integrated financial instruments, financial corporations take them on, and also track the ways in which they spread. Institutional and sectoral models of financial supervision are analyzed. A common feature of institutional and functional approaches is the growing need to improve the coordination of national financial regulators and comprehensively increase its efficiency. The expediency of creating a macro-regulator in the conditions of modern economic systems is substantiated. The possibility of consolidated supervision is revealed, which eliminates interdepartmental conflict of interests, better control of transactions and cash flows. Peculiarities of macroregulators functioning in Great Britain, Australia, and the Netherlands have been studied. Developing a unified approach can increase the speed of response to identified threats and its adequacy, as well as reduce regulatory arbitrage by supervised organizations. The mega-regulator is able to provide due attention to the control of the integrity of business by financial market participants, protection of interests and awareness of market participants and consumers of financial services in comparison with the functional and institutional models. The priority system of national regulation of the financial sector for the Ukrainian economy is determined.

The role of Financial Market Infrastructures in Financial Stability

2016 ◽  
pp. 20-40
Author(s):  
Serafin Martinez-Jaramillo ◽  
Jose Luis Molina-Borboa ◽  
Bernardo Bravo-Benitez
Keyword(s):  
Risk Assessment ◽  
Financial Market ◽  
Financial Stability ◽  
Financial System ◽  
General Overview ◽  
Proper Functioning ◽  
Financial Transactions ◽  
Adequate Supervision

Financial Market Infrastructures (FMIs) are essential for the well-functioning of the financial system, as they play a central role in facilitating clearance and settlement of financial transactions such as payments, securities, and derivatives contracts. Nowadays, it is widely acknowledged that the proper functioning of systemically important FMIs is also vital to maintain financial stability; their failure for solvency reasons or operational disruptions could almost certainly lead to systemic instability. As a consequence, the adequate supervision of FMIs is inherent to the function of preserving financial stability. The aim of this chapter is to provide a general overview of the different FMIs; discuss their role in financial stability and to give an overview of the efforts made by some financial authorities towards the supervision, risk assessment and reinforcement of FMIs.

Using Financial Instruments

2019 ◽  
pp. 37-46
Author(s):  
Alan N. Rechtschaffen
Keyword(s):  
Financial Market ◽  
Capital Markets ◽  
Federal Reserve ◽  
Financial Instruments ◽  
Case Scenario ◽  
Worst Case ◽  
Financial Instrument ◽  
Market Participants ◽  
Managing Risk ◽  
The Stability

Capital markets provide enterprises with the opportunity to access capital to maintain their level of business activity. Therefore, ensuring the stability of the capital markets and preventing systemic failure are paramount concerns of the Federal Reserve and other financial market regulators. Access to capital markets is facilitated through the use of financial instruments that allow risk to be negotiated among market participants. When using financial instruments to achieve goals, a corporation must be aware of several considerations: the value of the asset underlying the financial instrument, duties or obligations the corporation owes to the other party to the contract, the implications and “worst case scenario” of the performance of the financial instrument, the risk of the transaction, and how the specific transaction can achieve the corporation's goals. This chapter discusses goal-oriented investing, achieving investment goals, and managing risk.

scholarly journals How to regulate bitcoin? Decentralized regulation for a decentralized cryptocurrency

2019 ◽  
Vol 27 (3) ◽  
pp. 266-291 ◽  
Author(s):  
Hossein Nabilou
Keyword(s):  
Distributed System ◽  
Financial Market ◽  
Financial Regulation ◽  
Service Providers ◽  
Use Cases ◽  
Policy Recommendation ◽  
Distributed Network ◽  
Market Participants ◽  
Regulatory Architecture ◽  
Regulatory Strategy

Abstract Bitcoin is a distributed system. The dilemma it poses to the legal systems is that it is hardly possible to regulate a distributed network in a centralized fashion, as decentralized cryptocurrencies are antithetical to the existing centralized structure of monetary and financial regulation. This article proposes a more nuanced policy recommendation for regulatory intervention in the cryptocurrency ecosystem, which relies on a decentralized regulatory architecture built upon the existing regulatory infrastructure and makes use of the existing and emerging middlemen. It argues that instead of regulating the technology or the cryptocurrencies at the code or protocol layer, the regulation should target their use-cases. Such a regulatory strategy can be implemented through directing the edicts of regulation towards the middlemen and can be enforced by the existing financial market participants and traditional gatekeepers such as banks, payment service providers and exchanges, as well as large and centralized node operators and miners.

Part II The Financial Crisis of 2007–2011, 6 Market and Regulatory Failure

2018 ◽  
Author(s):  
Mccormick Roger ◽  
Stears Chris
Keyword(s):  
Risk Management ◽  
Financial Crisis ◽  
Credit Risk ◽  
Financial Market ◽  
Credit Rating ◽  
Third Party ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Market Participants ◽  
Regulatory Failure

This chapter first discusses the origins of the financial crisis, highlighting practice of ‘packaging and selling’ credit risk by financial market participants that led up to the crisis. It argues that although, in retrospect, many aspects of that practice look very bad indeed, the idea that banks might originate a credit exposure and then transfer the credit risk attached to it to a third party was, before the financial crisis, considered to be part and parcel of sound risk management. The discussion then turns to credit-rating agencies. Analysis of the financial crisis and ‘what went wrong’ has shown that rating agencies were too generous with their rating of many of the structured products that contributed to the collapse.

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