Limboland in Argentina?: Fund managers and global custodians relying on Citibank as their local agent bank in Argentina remain in limbo as to whether or even how Citi will be able to exit the subcustody business in that country.
As of press time, FinOps Report was unable to verify whether Citi would still be shutting down or selling off its entire subcustody business in Argentina and just how extensive an operation would be affected. Citi, which serves as a subcustodian for Argentine debt and equities, announced on March 17 it would leave the subcustody business in Argentina, but never specified what business functions it would shed.
Numerous media outlets indicate it is only the bond custody business, but spokesman for the bank declined to elaborate last Friday. Several global custodians contacted by FinOps Report also would not speculate on the grounds they have not been informed by Citi, which has won numerous industry accolades for its securities services in Argentina and Latin America.
The uncertainty over Citi’s subcustodian operations in Argentina have surfaced over the past few weeks as the bank is caught in a legal quagmire over coupon payments to holders of the country’s sovereign debt. Argentina’s securities regulator CNV last Friday suspended the bank from conducting “capital market operations,” saying that Citibank violated local laws affecting the payment of interest on Argentina’s restructured sovereign bonds.
The US bank, which acts as a custodian and paying agent for some of the restructured Argentine debt, says it is stuck in the catch-22 position of flouting either Argentine law or US court rulings governing a dispute between the country and a group of New York based hedge fund managers. Those managers have insisted on full payment of government bonds defaulted in 2001, even if other investors agreed to a substantial writedown. On March 22, New York Judge Thomas Griesa ruled he would not restrict Citi from making payments related to dollar-denominated restructured bonds due on March 31 and June 30.
The controversial decision came after Citi reached a private agreement with the hedge funds allowing it to go ahead with the interest payments on March 31 and June 30 and to exit its custody business. The judge affirmed the agreement and ruled that Citi could proceed with plans to exit the Argentine custody business.
International securities depositories Euroclear and Clearstream have also suspended processing any payments on the affected Argentine bonds to individual members of their respective depositories.
Get on Board: Financial firms which are reporting their swap trades for the first time under Australian law had better sign up to use the Depository Trust & Clearing Corp.’s Global Trade Repository (GTR) service “immediately,” warn DTCC officials.
The US market infrastructure says that first-time reporters should allow the maximum time for trade repository on-boarding, connectivity and testing so they can be ready to report their trades beginning April 13. That date marks the third phase of Australian regulations requiring the reporting of swap transactions to a recognized trade repository. DTCC’s GTR is the only one with that distinction so far in Australia.
The Australian Securities and Investments Commission (ASIC) says that as of April 13 institutions with gross notional OTC positions of between AU$5 billion and AU$50 billion will be required to report their trades to GTR. As of October 12, the requirement will be extended to institutions with less than AU$5 billion in OTC positions and will apply to other asset classes such as equity derivatives, foreign exchange derivatives and commodities.
So far, says the DTCC, 18 of Australia’s “leading” financial market institutions are using the service for ASIC-reportable open DTCC positions across five swap asset classes. The first two phases of reporting requirements involved Australian-based entities registered with the Commodity Futures Trading Commission and financial entities with over AU$50 billion in open swap positions. DTCC would not disclose the names of the 18 financial institutions, but ANZ Banking, Commonwealth Bank of Australia, Macquarie Bank, National Australia Bank and Westpac Banking are reportedly among the lot.
Australia expects both counterparties in swap trades to report on their deals, but the task can be relegated to a third-party. DTCC is supporting its trade repository in Australia from Singapore where it also operates as a licensed trade repository.
Faster IDs: Fund managers, banks and broker-dealers participating in new offerings will now have faster access to identification numbers for newly-issued US corporate equities and debt, thanks to an agreement between CUSIP Global Services and Ipreo, a provider of deal execution systems for new issuances.
Originators using Ipreo’s book-building system will be able to automatically submit their request for identification codes for US equities and bonds through Ipreo’s platform. CUSIP Global Services, the US national numbering agency, will create the IDs and send them back to the Ipreo system to be disseminated to buy and sell-side participants. The ID package will include both nine-digit alphanumeric CUSIPs and twelve-digit alphanumeric International Securities Identification Numbers (ISIN).
Another benefit: One seamless data flow which reduces potential errors involved with manually rekeying identifiers. The initiative, to go live within a few months, expands on a previous relationship between the two firms for US municipal bonds.