In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 20 Jul 2018
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Americas: blindsided

If the first week of July was a slow news month, this past week was anything but. President Trump hit the road with highly protested trips to London and Finland, exacerbating issues at home with his relations with Russian counterpart Vladimir Putin.

Back in Washington, the US House of Representatives passed a bipartisan collection of 32 capital markets bills, known collectively as the Jobs Act 3.0. Although the Act seems to have appeared out of nowhere, the majority of its contents are separate bills that have already passed through the House in other guises, while some have already been enacted by law makers and regulators, including the Securities and Exchange Commission. Highlights include provisions to allow easier capital raising for angel investors and venture capital funds.

The Senate also confirmed existing vice chair for supervision at the Federal Reserve Randal Quarles to a full term on its governing board for the next 14 years. Quarles’ boss, chairman Jerome Powell, warned that the economy is doing well this week but said that if the ongoing tariff war continued that could deteriorate rapidly.

British clearing company LTH also confirmed this week that the first over-the-counter swaps of the new secured overnight financing rate - the most likely replacement for Libor in the US - have been finalised.

Asia Pacific: full steam ahead  

The Shanghai and Shenzhen stock exchanges announced that the Stock Connect scheme with Hong Kong would not apply to companies with different voting right structures. The move has prevented mainland Chinese investors from trading in Xiaomi’s shares listed in Hong Kong. The consumer electronics giant is the first company with a weighted voting right structure listing in Hong Kong – the territory introduced new listing rules in June. The Stock Exchange of Hong Kong is working closely with its counterparts in Shanghai and Shenzhen, and all have agreed to set up a joint working group to formulate specific programmes and supplementary rules to include trading of weighted voting rights companies in the Stock Connect as soon as possible.

The Monetary Authority of Singapore (MAS) is consulting on revisions to misconduct reporting requirements and proposals to mandate reference checks for representatives. The proposed revisions aim to ensure that the representatives hired by financial institutions are fit and proper. MAS will require financial institutions to conduct due diligence checks on representatives and lodge a report if they become aware of any misconduct. The consultation closes on August 6 2018.

EMEA: change is in the air

The so-called two and 20 model, so often considered to be the standard fee charging model for private equity firms is dying, as the industry consolidates and favours mega funds. In the future, it is expected that there will be even greater fee flexibility to mitigate risk and encourage investment. Oliver Ontiveros, partner at Warwick Capital, said it is a matter of how competitive private equity houses want to be. "Investors don’t look favourably on firms that focus on operational fees as a profit centre and pension funds are a lot more demanding than in past years," he said.

The Basel Committee is investigating whether investment in cryptocurrencies should increase banks’ capital requirements in a decision that could greatly affect the price volatility of cryptocurrencies and institutional interest in the emerging asset class. The regulator is hoping to bolster the rules so that banks are protected against short-term market volatility and losses amid fears that the erratic price changes could threaten bank stability if significant capital is invested.

Coinbase plans to be a regulated broker-dealer which would eventually be capable of offering blockchain-based securities after its acquisition of Venovate, Keystone Capital and Digital Wealth. This also opens up the possibility of the cryptocurrency exchange working with regulators to tokenise existing types of securities. Coinbase told IFLR that the approval of the acquisition is part of their goal to offer more assets in the US and underscores their aim to be the most trusted brand in the space.

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