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The Second Coming

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Libra is back, and this time it might prove to be the right product for the right time. In this new age of ‘Covid-19’, a digital currency led by the right conglomerate might be a force for good.

When Facebook unveiled its Libra project in spring last year, the world stood up and took notice. However probably not in the way, they were expecting. The digital currency initiative immediately run into trouble. Governments and industry objected to it strongly. Legislation and regulation was brought in to stop this game changing project in its tracks. The hype around Libra proved to be Fools Gold!

FinTech Connect made reference to this last year in our article ‘The Good The Bad and The Libra’ last summer coming to the conclusion that this was digital currencies first steps to going ‘Full Jagger’, but there were clear roadblocks in the way. In other words, it had the potential to be a game changer but was not quite there yet.

So now we are deep down into 2020, what has happened?

The empire has struck back. Last week, out of nowhere, a tweet was released, announcing
‘We have initiated the formal payment system licensing process with @FINMA_media and updated our white paper to reflect key design changes to the Libra payment system’. (More here).

This is a clearly slightly watered down version of the original. A Coke Lite version repurposed to overcome regulators original concerns. This is reference at the start of the white paper (which is worth a full read). This states,

‘Four key changes have been made to address regulatory concerns that deserve specific attention, each of which is addressed briefly below and then in more depth in the updated white paper:

  • Offering single-currency stablecoins in addition to the multi-currency coin.
  • Enhancing the safety of the Libra payment system with a robust compliance framework.
  • orgoing the future transition to a permissionless system while maintaining its key economic properties.
  • Building strong protections into the design of the Libra Reserve.’

What do the changes look like?

Facebook says that it will be “enhancing the safety of the Libra payment system with a robust compliance framework” and “building strong protections into the design of the Libra Reserve.” Again emphasising the point that Libra 2.0 is a friendlier less troublesome proposition.

The big departure from Libra 1.0 is that there is no longer a commitment to a single token model. In last year’s proposals, the Libra network had planned to operate with the Libra Token a single coin that would be tied to a basket of digital currencies.

Now, Libra has done an about turn, laying out plans to launch a series of digital coins. These include a number of stablecoins, each of them tied on a one-to-one basis to different kinds of fiat currencies. In non-technical language a GBP Libra token, a USD Libra token, a EUR Libra token….

There are also plans mentioned in this white paper to build another coin based on a ‘digital composite’ of a number of these tokens. This token could be used to facilitate cross-border transactions and in countries that do not have, a Libra stablecoin tied to their fiat currency.
We asked Libra for some feedback around the new launch. A representative from the Libra Foundation kindly answered them:

1. How can Libra be used in the fight against Covid-19? How can Libra be used as a force for good?

‘We understand it is a difficult environment right now for millions of people around the world and believe that expanding financial inclusion is even more critical in this current climate. It is as important as ever that financial systems are resilient, fast, inclusive, and upgradeable. By enhancing traditional financial systems to become more interoperable and inclusive, we hope to help enable others to leverage our efforts to build innovative but also safe and compliant financial applications that can serve everyone.

2. Are you looking for any partners new association members in the UK market?
We continue to see broad interest in joining the Libra Association and look forward to sharing news of new Members.

3. What are the key design changes you have made to Libra payment system?

Please see the cover letter of Libra’s new white paper for an overview of the key design updates.

Exciting times ahead. Lets see how this story develops and whether the unrivalled potential of the Libra project is allowed, this time to fly.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.fintechconnect.com/paytech/articles/the-second-coming

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Zip Co raises $400 million for international expansion

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Zip Co (ASX: Z1P) has priced $400 million of senior convertible notes to fund expansion into new regions on the back of major growth in the US.

Co-founder and COO Peter Gray says the move will keep shareholders happy, with the notes set to mature in 2028.

“We are very pleased with the strong global demand for this offering,” says Gray.

“This transaction further diversifies Zip’s sources of capital and allows us to pursue our global growth aspirations while reducing potential dilution of existing shareholders. Another fantastic outcome for Zip and its shareholders.”

The $400 million in convertible notes mirrors the approach recently taken by buy-now pay-later (BNPL) competitor Afterpay (ASX: APT).

However, Zip’s latest raise doesn’t come close to the whopping $1.5 billion secured by Afterpay’s settlement of convertible notes due in 2026.

The offering is being marketed to eligible investors and the notes are set to be listed on the official list of the Singapore Securities Trading exchange. Settlement is expected on or about 23 April 2021.

To read more, please click on the link below…

Source: Zip Co raises $400 million for international expansion

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://australianfintech.com.au/zip-co-raises-400-million-for-international-expansion/

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FinSS and Salt Edge partner for CDR Compliance solution in Australia

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Australia is at the forefront of giving consumers greater control over their data via Customer Data Right (CDR). With phase two of the regulatory adoption quickly approaching, Australian data holders are welcoming a new CDR Compliance solution on the market. The technology solutions expert FinSS Global joined forces with Salt Edge, a leader in developing open banking compliance products, to enable local data holders to meet all the strict CDR requirements within less than 2 months.

As the Australian Government is committed to enforcing the regulatory adoption by the market, with the financial sector being the first one, institutions are now racing to become CDR compliant in 2021. That’s why FinSS Global and Salt Edge are aiming to help banks, credit unions, building societies, EMIs, neobanks, and other financial institutions follow strict regulations while protecting customers’ data and privacy under open banking.

The CDR Compliance solution has a holistic approach and is made up of components and configuration items such as an API for sharing consumer data together with a sandbox for ADRs’ testing, a Consent Management API to assure end-customers’ full visibility and control over their granted contents, a dashboard for the data holder to have full control and access to insightful statistics, an ADR Developer Portal for seamless integration and interaction with bank’s channel, a Multi-factor authentication solution for end-customers’ security, ADR verification, and much more.

The solution is based on a SaaS model which makes it easily deployable and also reduces the amount of technical implication and skills required from data holders. Salt Edge handles all the maintenance, regular updates according to new changes in the CDS requirements, and even assists with passing the Conformance Test Suite (CTS).

Open banking represents just the first phase of Australia’s strategy in making the sharing of any kind of customer data easier. That’s why the CDR Compliance solution is flexible and can be tailored so that it fits any industry or business case requirements including the addition of payment initiation possibilities.

Dallas Newton, CEO and Co-Founder at FinSS Global, said, “We partnered with Salt Edge in 2020 because we believed their experience with PSD2 in the UK and Europe and some of their solutions could be of significant benefit to the smaller Australia Financial Institutions looking for help in their CDR Compliance journey and participation in the emerging CDR Ecosystem. This resulted in us working closely with Salt Edge to adapt their SaaS-based PSD2 “Compliance in a Box” solution for the small to medium banking domain in Australia and our launch of the CDR Compliance Solution. We are excited to be working with Salt Edge and reach our target market, and we look forward to leveraging a functional, secure, cost-effective, hosted solution to rapidly have data holders join the CDR Ecosystem.

Lisa Gutu, Head of Business at Salt Edge, commented, “While helping out businesses across the globe to set their strategy in leveraging open banking, we understood that all of it might often seem like a regulatory and technological burden for institutions. That’s why together with FinSS Global, we’re committed to guiding Australian financial institutions towards a seamless CDR compliance journey.”

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://australianfintech.com.au/finss-and-salt-edge-partner-for-cdr-compliance-solution-in-australia/

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What happened to reduce RFR trading?

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  • March 2021 saw 8.8% of all derivatives risk traded versus an RFR.
  • This reduced from the previous levels around 10%.
  • The pre-cessation announcements last month do not appear to have accelerated RFR Adoption.
  • There was an increase in the amount of IBOR-related activity last month.
  • Overall for Q1 2021, the total amount of RFR activity was about the same as Q1 2020.
  • We also take a look at CCP conversion plans, Open Interest and Client activity.

The latest ISDA-Clarus RFR Adoption Indicator has just been published for March 2021. It saw a decrease to 8.8%, somewhat lower than the ~10% level that it has hovered around for the past 3 months.

  • The overall Adoption Indicator was at 8.8%, lower than the 10.0-10.6% readings of the prior three months.
  • There were declines in the adoption of RFRs in each of the six currencies that we monitor.
  • USD SOFR trading declined to 4.7% from 5.1% of the total.
  • GBP SONIA trading declined from 45.8% to 44.9%. At least this has remained at relatively high levels.
  • CHF and JPY (SARON and TONA RFRs) saw just 6.4% and 2.4% of overall Rates risk traded as RFRs.

LIBOR Risk Traded

With the pre-cessation announcement last month, this blog expected a speeding-up of RFR Adoption to show in the data. Instead, we saw an increase in LIBOR and other indices traded. March 2021 saw the largest DV01 and largest notional traded in ‘IBOR type products since last March:

DV01 of IBOR-linked products:

And notional of IBOR-linked products:

It is worth noting that March 2021 is an This blog looks at IMM dates in detail.” class=”glossaryLink ” target=”_blank”>IMM month, therefore associated with the rolling of contracts from March to June (or further out). When we look at other IMM months in our time-series, we do not typically associate these with an increase in the amount of IBOR-linked activity (despite the roll) or with a decrease in RFR activity.

RFR Risk Traded

All of this increase in IBOR products was set against a decrease in DV01 traded of RFR-linked products last month:

At least the total amount of RFR risk in Q1 2021 was almost the same as Q1 2020 (within 2%).

For RFR-specific markets, we saw:

  • A near-record amount of SOFR DV01 transacted at $954m. This was up by 6% compared to last month and only bettered by the “big bang” month of October 2020.
  • A record amount of futures (ETD) RFR risk traded. It was over $1bn DV01 for the second month running (across all currencies).

LIBOR Open Interest

Recall that the RFR Adoption Indicator monitors new trading activity in the month. You can read about the full Indicator construction in the white paper here. Therefore it is worth checking how open interest at CCPs has developed recently in IBOR-linked products. With a quarter-end included, we are used to seeing a reduction in notional outstanding:

Showing;

  • Oh dear, notional outstanding of IBOR-linked products now stands at roughly $160 TRILLION.
  • This is higher than year end 2020, and roughly the same as the $161-163Trn we saw in the same weeks last year.

There was part of me that hoped the increase in IBOR-linked activity we saw last month was due to risk-offsetting trades in LIBOR, that would result in reduced open interest once compression had taken effect.

Unfortunately, the data does not back this up. It looks like much of the IBOR activity was new trade activity, not risk-reducing activity related to legacy positions.

Where is the Client RFR risk?

Looking at the Open Interest in OIS we have seen a reduction in Client-related open interest in OIS across the six currencies:

And across all of the RFRs, there has been a reduction in Open Interest in Swaps whilst Open Interest in Futures has stayed constant:

CCP Conversion Plans

LCH has recently announced that any outstanding LIBOR trades (excluding USD) will be converted later this year to vanilla RFR trades (plus historic spreads as calibrated by ISDA). This means that the trades will not use the ISDA Fallbacks.

From their most recent circular, the applicable dates for RFR conversion of existing LIBOR trades are:

  • 3rd December for CHF and JPY.
  • 17th December for GBP.

Interestingly;

  • Conversion will not be free. I assume to encourage market participants to voluntarily convert ahead of time, there will be a fee applied. The fees have not yet been made public.
  • From 30th September, there will also be a monthly fee of £5 per contract applied to all outstanding CHF, GBP and JPY LIBOR contracts.

Full details are here. CME have also just published a proposal today, that includes the very same dates.

I do not know how significant the fees will be at LCH or whether other CCPs will also charge.

However, given the data for March, is there an argument to be made that bilateral LIBOR risk will find its way into clearing to access these conversion services? A back-to-back LIBOR in bilateral space versus LIBOR in clearing would at least move the LIBOR conversion into vanilla RFR products. However, we will also see changes in IM etc associated with this.

One to keep an eye on in the data…..

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Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.clarusft.com/what-happened-to-reduce-rfr-trading/?utm_source=rss&utm_medium=rss&utm_campaign=what-happened-to-reduce-rfr-trading

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Local trading app Superhero says it’s no Robinhood clone

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Millennial-focused share trading platform Superhero says it’s not a clone of the popular but controversial US app Robinhood, insisting it is subject to far more stringent regulation than its overseas peer.

Superhero, which launched in September last year, has secured $25 million in funding from billionaire Alex Waislitz’s Thorney Investment Group, Phil King’s Regal Funds Management, Afterpay co-founder Nick Molnar, Zip co-founder Larry Diamond and Finder co-founder Fred Schebesta.

The latest funding round values the fledgling startup at more than $100 million and Superhero, just like Robinhood, is tapping into the surge in retail investors into the market, which fuelled the GameStop short selling frenzy in the United States.

Robinhood played a key part in helping Reddit posters buy GameStop stock, driving up its price, but then controversially moved to restrict their purchase to contain market volatility. With the episode highlighting the power trading apps can exert in distorting the financial markets, Superhero’s co-founder and chief executive John Winters said while the platform was built to remove barriers to sharemarket investing it wasn’t looking to be a clone of Robinhood.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://australianfintech.com.au/local-trading-app-superhero-says-its-no-robinhood-clone/

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