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Industry roundup: 12 November

US market structure proves resilient during COVID spikes

Amid this year’s historic surge in trading volume and volatility, a report from Greenwich Associates shows that US capital markets responded as they are expected to - by efficiently bringing buyers and sellers together. That accomplishment is a testament to the resiliency of a market structure that shined during perhaps its biggest test.

Over the past several months, Greenwich Associates examined dozens of data sets and conducted proprietary research to quantify the impact of the COVID-19 pandemic and to assess how markets and market structure performed. The result is the issuance of 'US Capital Markets Performance During COVID', a series of four reports covering 1) equities and options, 2) fixed income (US interest rates and credit), 3) global interest-rate derivatives, and 4) foreign exchange.

The initial report in the series, 'US Capital Markets During COVID: Equities', quantifies the sheer magnitude of the COVID-19 crisis in US equities and options. In the first half of 2020, US markets experienced staggering levels of trading volume and volatility, including the second-highest US equities volume day on record, the highest VIX in history and a surge to 662 million OCC cleared options contracts in March 2020 - a 50% spike from March 2019 volume.

At the height of the volume and volatility, the market structure demonstrated its resiliency. The sharp downside corrections in March triggered safeguards such as market-wide circuit breakers, the Limit Up-Limit Down mechanism and the alternative uptick rule - in some cases repeatedly.

Equally as important was the efficient functioning of market data systems. These data feeds are the lifeblood of US equity trading. Detailed analysis shows that the securities information processors (SIPs), which much of the public uses for their trading, handled the elevated volumes and volatility of 1H 2020 admirably, maintaining remarkably tight performance bands even during the heights of market volume and volatility.

 

Nacha announces first live transactions on the Phixius platform

Nacha has announced that Phixius, a platform that facilitates the trusted exchange of payment information is live and has completed its first information exchange transactions between participants.  

Phixius, developed and operated by Nacha, uses technology, standardised APIs and rules to enable interoperability for the secure exchange of payment-related information within a trusted network of connected credentialed service providers (CSPs). CSPs connect to Phixius to improve automation and reduce payments fraud in areas such as onboarding customer information, invoice requirements, payor authorisation and enhancing services for their customers.

The platform provides interoperability between vetted participants who connect directly to the platform in order to more securely exchange data rather than storing it in a central repository, such as in the cloud. Transactions occur via standardised open APIs developed by Afinis Interoperability Standards and ISO20022.

 

Global Supply Chain Finance Forum issues payables finance guidance 

The Global Supply Chain Finance Forum (GSCFF), an initiative comprising the International Chamber of Commerce (ICC) Finance for Development Banking Commission, BAFT (Bankers Association for Finance and Trade), the Euro Banking Association (EBA), Factors Chain International (FCI) and the International Trade and Forfaiting Association (ITFA), has released a new guidance document on payables finance, to aid financial institutions, accounting firms, rating agencies and regulators in gaining clarity and consistency on the various terms and techniques. 

While uptake and feedback on the 2016 Standard Definitions for Techniques of Supply Chain Finance has been positive, much work is still required to further align terminology across the complex ecosystem of stakeholders involved in international supply chains.
As part of this drive for clarity, the second Market Practices in Supply Chain Finance publication focuses on payables finance – a technique and form of receivables purchase, flexibly applied, in which sellers of goods and services sell individual or multiple receivables (represented by outstanding invoices) to a finance provider at a discount. In turn, the guidance document takes a wider look at this important technique and provides a comprehensive overview on how payables finance can be used in practice.

“When all parties use similar techniques and terminology, it makes for a streamlined and efficient process,” said Christian Hausherr, European product head of Supply Chain Finance at Deutsche Bank and Chair of the GSCFF. “Our hope is that this report will lead to an industry-wide, uniform adoption of the payables finance technique.” 

The GSCFF says it will continue issuing additional guidance and whitepapers related to supply chain finance as needed. 

 

Finance & Treasury Association signs fintech partnership with Earlytrade

Ethical B2B marketplace fintech, Earlytrade, has secured an exclusive four-year deal with Australia's Finance & Treasury Association (FTA) making it the first-ever non-bank principal partner for the group’s annual event.

The closed event, which brings together senior finance executives and thought-leaders from over 300 of Australia’s top companies, has been historically run through partnerships with Australia’s big four banks.

Earlytrade Co-founder and CEO, Guy Saxelby said the agreement was a combination of good timing, opportunism and clear strategy: “It represents the growing recognition and influence of fintechs in the corporate and finance sectors. More sectors and opportunities that were previously only available to major financial institutions are opening up to emerging players, as the credibility and size of the sector grows.” 

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