To Modernize Regulatory Framework For Derivatives Use, Here Is The Vote Of SEC

More On SEC Regulations 

After passing a vote to either change or amend existing rules, the US Securities and Exchange Commission (SEC) is set to enhance the regulatory framework for derivatives use by registered investment companies. Operators must undertake to implement a written derivatives risk management program as part of the new framework covering mutual funds, exchange-traded funds, and closed-end funds. 

A Modern Approach To Derivatives Regulation

Making certain loans or investments subject to conditions tailored to these transactions, the rule changes, which open the doors for more leveraged ETFs, that will also permit a fund to enter into thereby what reverses the repurchase agreements as well as similar financing transactions and also unfunded commitments to make certain loans or investments. 

Addressing investor protection concerns and reflecting developments over the past decades, the Commission says the new rule and rule amendments will provide a modernised, comprehensive approach to the regulation of these funds derivatives use. 

SEC Chairman Jay Clayton, further on states, following the announcement of the vote passage, meanwhile, talks about the importance of derivatives to funds. 

He explains: 

The regulatory approach for derivatives use has been inconsistent and outdated whereas derivatives have come to play an important role in many funds in portfolio strategy and risk management. 

It will also provide both meaningful protections for investors and regularity certainty for funds and their advisers, as consequently, Clayton says the action was taken by the SEC that will not only help funds to achieve their objectives. Inconsistent with set limits, the enhanced framework is expected to stop derivatives use. Clayton further explains: 

Allowing virtually all funds to continue to serve their investors using the most efficient instruments is importantly the new comprehensive limits on risk prohibiting derivatives use that is inconsistent with those of the leverage limits thereby imposed by the only Investment Company Act.

For their impressive work, he thanks the staff. 

Investor Protection A Key Priority For The SEC

To engage in transactions that involve potential future payment obligations, including obligation under derivatives such as forwards, futures, swaps, and written options was according to the SEC, the Investment Company Act limiting the ability of registered funds and business development companies. 

If they comply with certain conditions designed to protect investors, the new rule permits funds to enter into these transactions. 

That uses derivatives in a limited way, meanwhile, the SEC says a streamlined set of requirements applying for funds. 

60 days after publication in the Federal Register, the rule and related rule and form amendments will become effective. To comply with the rule and related reporting requirements, the Commission has provided for an eighteen-month transition period for funds. 

The Only Cryptocurrencies Meeting UN Goal, Shows World Bank Study As Remittance Costs Lower In Q3 

While sub-Sahara Africa is the most expensive with an average cost of 8.47%, the latest study by the World Bank shows that it costs 4.98% on average to remit funds to the South Asia making it the only least expensive of the regions. When using service providers such as banks that charge an average of 10.89%, the quarterly study also finds that it is costlier to remit funds. 

Marginal Decline

Monitoring remittance costs across all regions are the World Bank’s aptly named Remittance Prices Worldwide (RPW) report. The Global Average remitting cost dropped from 9.67% seen Q1 of 2009 to the latest 6.75% as data from the report shows. During this period, this represents a 2.92% decline. 

Another average total cost is introduced to track the average price of digital remittances in the RPW database as meanwhile, the global financial institution says that in addition to tracking the Global Average. The study then finds it in following this cost metric: 

While the global average for non-digital remittances was 7.24%, in Q3 2020 the global average for digital remittances was recorded at 5.29 percent. Decreasing gradually across all sending corridors since 2008 was furthermore the report data showing the remitting cost. 

Cryptocurrencies seem to be cheaper and faster-remitting methods, meanwhile despite their absence in the World Bank’s RPW. 

Cryptocurrencies A Cheaper Option

When compared to the cost of sending funds via Money Transfer Organisation to illustrate on the Bitcoin Network transacting costs for coins like bitcoin cash and dash remain insignificant. The average fee when sending or paying $100 with bitcoin cash was less than one cent for instance, during Q3 of 2020. As well as for Ripple’s XRP token, the same was true for Dash as well. It may cost 10% or more to send funds between two Southern African countries, yet on the other hand. 

More than traditional remitting corridors, remitting funds via bitcoin and Ethereum is also faster. Transaction fees on the Bitcoin and Ethereum networks averaged $ 1.51 and $0.70 respectively, as the data from Bitinfocharts shows at the start of Q3 2020 on July 1. Still going on average $5 or below for much of Q3. It was observed that the fees on the two networks have thereafter fluctuated mostly wildly. Translating to 5% if the amount being sent is $100, is an average fee of $5 per transaction. 

Lastly, Achieving UN SDG 10.C With Cryptocurrencies

Appearing to have achieved one of the UN’s Sustainable Development Goals already is with transacting costs that are a tiny fraction of a percent as cryptocurrencies like bitcoin cash and XRP which as the World Bank and also others are refusing to recognise. 

Moving on it is known that the UN and also others are then committing to reducing to a “less than 3 percent the transaction costs of these migrant remittances and eliminating the remittance corridors with costs to be higher than 5 percent” under the world body’s SDGs 10.c. 

More migrants are already using cryptocurrencies because they are a much cheaper and more convenient option as the UN is targeting to achieve this goal by 2030 yet.