CHIPS Black Friday Record: $2.63tn Daily Volume Sets New High

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A record USD2.63 trillion in payments flowed through CHIPS, the world's largest private clearing system, on Black Friday as foreign banks rushed to process transactions delayed by the U.S. Thanksgiving holiday. The network, which handles 95% of international dollar transfers, cleared over 1 million payments in a single day, boosted by month-end volumes and increased traffic following its April upgrade to a new global messaging standard.

So what? The surge signals the growing complexity of managing global dollar flows amid rising cross-border trade and investment. With CHIPS processing over USD2 trillion daily, any disruption to this vital financial plumbing could ripple through supply chains and financial markets worldwide, highlighting both the dollar's dominance and the system's critical role in the global economy.

Source: The Clearing House

Fresh off setting record high CHIPS volumes, The Clearing House will raise the individual real-time payment transaction limit to USD10 million. The increased limit supports growth on the network in areas including real estate, supply chain payments, and business-to-business transactions that require larger transaction amounts.

So what? This tenfold increase in transaction limits (from USD1M to USD10M) represents a significant maturation of real-time payments in the US financial system. By allowing much larger instant transfers, this change could accelerate the shift away from traditional wire transfers, especially in commercial real estate and large B2B transactions where same-day settlement and after-hours capabilities are increasingly important.

Source: Press Release

The 2024 Basel AML Index shows mixed progress in global efforts to combat financial crime, with countries scoring higher on technical compliance but achieving only 28% effectiveness in practical implementation. The report's assessment of 164 jurisdictions reveals investigation and prosecution of money laundering remains challenging at 20% effectiveness, while the inclusion of fraud indicators has led to increased risk scores for major financial centers.

So what? With global AML compliance spending reaching USD206 billion in 2023, the data suggests opportunities to enhance the effectiveness of existing frameworks while maintaining strong technical standards. The report aims to help inform evidence-based policy decisions by providing detailed metrics across multiple domains, from regulatory systems to broader governance indicators.

Source: Basel Institute on Governance Report

U.S. securities clearinghouses must separate house and customer margin accounts by March 2025, preventing broker-dealers from netting customer positions against their own proprietary trades, Securities and Exchange Commission Chair Gary Gensler said in a statement last week.

So what? This change represents a significant shift in how Wall Street firms manage their Treasury market operations. Previously, broker-dealers could reduce their margin requirements by offsetting their own trades against their customers' positions, effectively giving them a financial advantage. By eliminating this practice, the SEC aims to create a more level playing field for smaller firms to compete in the Treasury market, while simultaneously improving customer protection in case of broker-dealer defaults. This is part of a broader push by regulators to reform the Treasury market following several instances of market stress, including the March 2020 market turbulence.

Source: SEC Statement

CME Group will launch CME Term €STR Reference Rates in multiple tenors using data from its €STR futures and over-the-counter swap markets, responding to client demand for a more robust term rate in the growing €STR ecosystem, the exchange operator said on Tuesday.

So what? The introduction of these term rates marks a significant milestone in Europe's transition away from EONIA (which was discontinued in 2022) and complements the existing overnight €STR rate. By leveraging its success with SOFR term rates in the U.S. market, where CME has become the benchmark administrator for over USD7 trillion in loans, CME is positioning itself as a key player in the European interest rate reform landscape. This move could accelerate the adoption of €STR-based products in lending and fixed income markets, particularly as market participants seek more forward-looking rate alternatives in the post-LIBOR era.

Source: CME Group

ICBC Financial Services faced a ransomware attack in November 2023 that disrupted its ability to maintain and update books and records, leading to a four-month period where the firm failed to keep current records and send required securities notifications to customers, the U.S. Securities and Exchange Commission said in an enforcement action on Monday.

So what? This case marks a significant shift in how the SEC approaches cybersecurity incidents at major financial institutions. By focusing on recordkeeping violations rather than the cybersecurity breach itself, the regulator is establishing a clear precedent that firms cannot use cyber attacks as an excuse for failing to maintain proper books and records - a fundamental requirement under securities laws. The SEC's decision to waive financial penalties in light of ICBC's cooperation and remediation efforts also signals to other firms that proactive response and transparency following a cyber incident could lead to better enforcement outcomes, even as regulators increase their scrutiny of financial firms' cybersecurity preparedness.

Source: SEC Administrative Proceeding | SEC Order

U.S. financial technology firm Clear Street has launched operations in the United Kingdom after receiving Financial Conduct Authority approval and becoming one of only eight Category 1 members of the London Metal Exchange, appointing Jacinda Fahey as CEO of UK and Europe to lead its expansion beyond North America, the company said on Tuesday.

So what? Clear Street's expansion marks a significant development in the modernization of traditional financial infrastructure, particularly in metals trading where the LME's Ring has historically been dominated by a small group of established players. The move comes at a crucial time as the UK seeks to reinforce its position as a global financial hub post-Brexit, while also highlighting the growing trend of U.S. fintech firms using London as a springboard for European expansion. With Ed Tilly, former Cboe Global Markets chief, at the helm as CEO-elect, Clear Street's entry into the UK market signals increasing competition in the institutional brokerage space where legacy systems are being challenged by cloud-native solutions.

Source: Clear Street

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🚀 Digital Asset News

The U.S. Commodity Futures Trading Commission secured record-breaking monetary sanctions in digital asset cases during fiscal year 2024, including USD12.7 billion from FTX and Alameda Research and USD2.85 billion from Binance and its executives, while also pursuing cases against Voyager's former CEO, romance scammers, and Ponzi schemes in the crypto space, the agency said on Wednesday.

So what? These enforcement actions demonstrate the CFTC's growing influence in crypto regulation, particularly in derivatives markets, despite ongoing debates about jurisdictional boundaries with the SEC. The massive penalties against industry giants FTX and Binance, combined with actions against smaller players, signal that the agency is taking a comprehensive approach to crypto enforcement - from systemic market structure violations to retail fraud. With big changes coming to the US regulatory landscape in 2025, we will monitor how digital asset enforcement changes under a Trump presidency.

Source: CFTC Press Release

The European Central Bank is working on creating a digital version of the euro. The two-year planning phase started in November 2023, with goals including writing the rules for how it would work and picking the tech companies to build it. The ECB won't make a final decision about actually launching it until late 2025, and they'll need EU lawmakers to approve it first.

So what? This is a big deal because right now, most Europeans rely on American companies like Visa, Mastercard, and Apple Pay when they pay for things digitally. By creating its own digital currency, Europe wants more control over how its citizens pay for things. While the plan makes sense for Europe's independence, the big question is whether people will want to switch from payment apps they already use and trust to this new government-backed system, with all the privacy and freedom implications of that.

Source: ECB Report