News & Opinion

On Thursday 28 April, Thomas Murray hosted a half-day event in Luxembourg entitled Post-trade risk roundtable: How to effectively identify, monitor and manage post-trade risk. The event sought to explore the regulatory hurdles faced by those involved with the funds industry, and how firms can mitigate risks in their post-trade networks.

The way that collateral is being used, and indeed needed, in financial markets has altered significantly since the financial crises. With the central role handed to CCPs in markets, the majority of trades now need to be collateralised in one way or another.

One of the main stated aims of T2S (TARGET2Securities) was to reduce settlement costs across Europe. This is something that has, so far, not been achieved as the volumes simply do not exist on the system to achieve a reduction in the cost of settlement through T2S. The ECB is in full cost recovery mode at the moment, so economies of scale are vital – the more that goes into T2S, the more that will be gained from it.

ESMA (the European Securities and Markets Authority) last week published the results of a Europe-wide CCP (central counterparty clearinghouse) stress test that aimed to identify how resilient the region’s CCPs would be in times of stressed market conditions.

Luxembourg, the world’s leading UCITS centre and distribution hub, has over $2.5 trillion in assets under management in UCITS investment funds. It was the first jurisdiction to adopt the first iteration of UCITS in 1985, which attracted a large number of non-EU investors to Luxembourg to use the Principality as their gateway to European investments. Where Swiss and American investors led the way, international investors have followed from Asia and Latin America, all looking to distribute and invest in, UCITS fund vehicles.

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