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Americas: last of the summer wine
As the summer draws to a close and the post-Labor day rush
beckons, things have already begun to heat up across the
Americas. The week started with a bang on Monday when President
Trump announced that the US and Mexico had reached a bilateral
trade agreement in place of the existing North American Free
Trade Agreement (Nafta). For the early part of the week a lack
of response from Canada made it appear that the new deal would
exclude the northernmost of the trio, but on Wednesday it
looked as if Canada would join the party.
All eyes will be on the three as the supposed Friday
The SEC announced on Monday that it will delay the
implementation of the consolidated audit trail, a reporting
plan that will enable regulators to better oversee the
securities markets on a consolidated basis, allowing them to
protect markets and investors. Brett Redfearn, director at the
SEC’s division of trading and markets, made a
statement that national securities exchanges have not made
sufficient progress to achieve the initial deadline.
In other US regulatory news, Richard Clarida, a Colombia
economics professor, was confirmed as the new Federal Reserve
vice chairman, and the Senate confirmed Republican Dawn Stump
and Democrat Dan Berkovitz as commissioners at the Commodity
Futures Trading Commission.
Looking South, Argentina made an unexpected slip into
freefall this week by requesting an additional $50 billion from
the International Monetary Fund. President Macri’s
government made the request following a major slump in the
country’s economy, a significant devaluation of
its currency, the peso, and increasing fear that the country
may not be able to repay its mounting debt.
EMEA: lasting effects
The Internal Revenue Service (IRS) has joined tax
authorities from the UK, Canada, the Netherlands and Australia
to create the Joint Chiefs of Global Tax Enforcement, a
sign regulators are getting serious about cryptocurrencies.
But an additional layer of regulation could create confusion.
While taxation rules for US investors are relatively
straightforward, the main question is how non-US investors will
be taxed. For non-US investors, it largely depends on whether
the activity is considered a trade or a business, and whether
that business is connected to the US in some way. But just how
connected it has to be to be taxed by the IRS is unclear.
US cryptocurrency laws are deterring some blockchain
companies away from the US and to more crypto-friendly
jurisdictions such as Switzerland for instance. Will Munsil,
ecosystem designer and strategy architect at Sweetbridge, said
they have excluded several countries including the US and
Canada due to sweeping securities laws and expensive use case
demonstrations. Licenced financial products and services have
to work with partners and navigate expensive procedures to
demonstrate use cases. Sweetbridge is nearing approvals in
Europe and is going to have some functionalities in the US.
The EU said it expects a 'substantial effort’
from Italy on its budget law set to be released in September.
Following the election of Five-Star Movement and League, those
in Brussels have become concerned that Italy could prove to be
a destabilising power both financially and politically. The
coalition has tried to reassure ministers that it does not want
to leave the eurozone and its economic plan is sustainable,
despite huge spending increases for a country with fast rising
debt levels. Commissioner Pierre Moscovici said he hopes Italy
controls its public debt and reaffirmed that the three percent
GDP deficit limit was not a target but a roof.
Asia Pacific: last but certainly not least
Hong Kong’s Securities and Futures Commission
is consulting on proposed guidelines on risk management
practices for securities margin financing (SMF). Key proposals
include requiring SMF brokers to put in place prudent controls
to prevent excessive leverage and over-concentration both in
terms of securities collateral and individual margin clients.
Brokers would also be required to set and enforce specific
policies for margin calls and conduct stress tests at least
monthly. In addition, the proposed guidelines set out clearer
guidance for haircuts for securities acceptable as collateral.
The consultation ends on October 18 2018.
The Bank of Thailand is working on a central bank digital
currency project called Inthanon. The country’s
central bank is partnering with eight banks to build a
proof-of-concept prototype for domestic funds transfers within
Thailand’s interbanking system using
R3’s Corda platform. The first phase of the
project is expected to be completed in the first quarter of
The China Banking and Insurance Regulatory Commission has
announced that limits on foreign ownership of Chinese banks
have been removed and that overseas financial institutions will
be treated the same as local companies. The plans are in line
with the central government's plan to remove all caps on
foreign ownership of Chinese banks by 2021.
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