Finally, a sea change in the ability of entrepreneurs to access vast amounts of untapped investment capital. On July 10, 2013, the SEC published the final rules for the Jumpstart Our Businesses Startups Act (the “JOBS Act”), which was formally signed into law April of 2012. The new rules go into effect September 23, 2013. The purpose for the JOBS Act was to spur job creation by making it easier for start-up entities to access investment capital. The legislation revamps the 1933 and 1934 Securities Act requirements which placed restrictions on advertising newly issued and traded securities. The new SEC rules remove the ban on the advertising of private offerings to the general public. Entrepreneurs and start-up entities will now have access to more modern means of soliciting investment opportunities and advertising to a broader swath of potential investors.
U.S. regulators have made significant strides towards regulating derivatives trading through the Dodd–Frank Wall Street Reform and Consumer Protection Act. There is growing concern that progress in derivatives regulation could be undermined if European and Asian markets fail to follow suit and implement similar requirements. This could cause trade migration to foreign markets as parties “cherry pick” favorable jurisdictions. The lax enforcement and loose regulations of these foreign jurisdictions could cause a territorial migration of a substantial portion of the $630 trillion global derivatives market.
Several large global banks are impacted and faced with compliance choices. The Commodity Futures Trading Commission (CFTC), led by Chairman Gary Gensler, has negotiated with European Union and Asian regulators seeking to have these markets follow tough U.S. rules. These regulators have resisted U.S. efforts as an incursion against their sovereign right to implement their own regulations. This had become a sticking point with the U.S. whose goal is to issue a set of uniform regulations ensuring that all derivatives trades will be subject to the same level of transparency currently in place in the United States.
Posted in Financial Reform, Jay Taylor
Tagged Asian Market, CFTC, Derivatives, Dodd-Frank, Dodd-Frank Financial Reform, Dodd–Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank’), European Market Infrastructure Regulation, European Union, Financial Regulation, Global Derivatives, Global Financial Regulation, Global Market, New York City, United States, Wall Street
Managing Director, Jay Taylor recently contributed an article to the Euromoney Derivatives Handbook. The Euromoney Derivatives Handbook is an in-depth guide to the global derivatives market. It provides analysis of the changes that have occurred, or are set to happen.
Below is an excerpt from the article. Click here to read the article in its entirety.
by Jay Taylor, Esq.
Financial innovation is the creation of new financial products, sometimes inspired by the launch of new regulatory mandates. Regulations are often perceived as working against a free market, yet markets continue to expand under their weight. Continue reading
Posted in Jay Taylor, Risk Management
Tagged Commodity Futures Trading Commission, Dodd-Frank, Dodd–Frank Wall Street Reform and Consumer Protection Act, Dodd–Frank Wall Street Reform and Consumer Protection Act (‘Dodd-Frank’), Euromoney Derivatives Handbook, European Market Infrastructure Regulation, European Market Infrastructure Regulation (EMIR), Global Derivatives Market, Jay Taylor, New York City, Wall Street
Derivatives (or swaps) trading was traditionally OTC (over-the-counter) between counterparties. One counterparty was generally a bank or other financial institution. A financial institution could sell a derivative for one price while a rival institution might offer the same swap for a different price. Polling multiple institutions in the market for pricing could be time consuming, leaving market participants unsure of a standard price. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) sought to change that by creating Swap Data Repositories (SDRs) designed to bring about a new market transparency and price discovery by providing a central facility for swap data reporting and recordkeeping. Under Dodd-Frank, all swaps, whether cleared or uncleared, are required to be reported to registered SDRs. All swaps traded through registered clearing houses, as required by Dodd-Frank, will report swaps data directly to a registered SDR. Any entity that seeks to perform the functions of a SDR by any means or instrumentality of interstate commerce, must apply to the CFTC to be registered as a SDR. Continue reading
Newly proposed trade documentation is now common in the swaps industry as new regulations are promulgated and market participants and industry groups seek to promote new efficiencies. The latest innovation, an agreement called the “Market Agreed Coupon” or “MAC”, stems from the joint efforts of ISDA and SIFMA’s Asset Management Group. Early this week, the groups announced the joint development of a template for voluntary use in documenting standardized interest rate swap (“IRS”) terms. The proposed “MAC Swap” template would be subject to voluntary use by the parties and would include basic terms such as coupon rates, start dates, end dates and other standardized conventions for fast and easy documentation of IRS. According to SIFMA, “The use of MAC Swaps is meant to be voluntary and only to compliment “par” fixed rate swaps and futures and bespoke, customized swaps.”
Posted in Financial Reform, Jay Taylor, Risk Management
Tagged Dodd–Frank Wall Street Reform and Consumer Protection Act, Interest rate swap, ISDA, MAC Swap, MAC Swaps Documentation, Market Agreed Coupon (MAC), SIFMA, Standardization, Trade Documentation, Wall Street
Recent years have seen massive upheaval and instability in global financial markets. Although now encumbered by new regulations and laws, the markets are finally showing signs of a modest recovery. Deal flow is slowly increasing as investors gain more comfort with risk. Nevertheless, financial institutions and investors remain extra vigilant when entering into transactions. Careful legal analysis by experienced legal practitioners is more vital than ever. Complex transactions, made even more complex by under-developed and over-burdening regulations, now require greater scrutiny for risk management and compliance purposes.