Secondary US loan trading volumes totaled $160.1 billion during the second quarter – a 9% rise over first quarter – and the third consecutive quarter of increased trade activity. To put the $160.1 billion in better perspective, it was just the third time in the market’s history where quarterly volumes breached the $160 barrier.
In early June, we learned that the European Parliament’s Committee on Economic and Monetary Affair’s (ECON) proposed amendments to the EU’s “STS” securitization rules were, shall we say, problematic. In a nutshell, the amendments had the potential to increase risk retention to 20% and to effectively prevent US CLO managers from issuing European CLOs and from accessing the European CLO investor base.
Three weeks after Brexit rattled the world, CLOs are back and are adjusting. Secondary spreads have tightened, primary issuance has returned and UK CLO managers are contemplating how to do risk retention compliant deals if they are no longer “European” managers.
On July 12, 2016, The LSTA announced a brief postponement of the targeted July 18th start date of the proposed new delayed compensation regime. While much progress has been made in developing this ambitious proposal to significantly shorten secondary loan settlement times, the LSTA Board's Liquidity Committee has decided to push out the start date to ensure that we deliver an effective and workable solution.
With just two weeks to go before the deadline, the Board of Governors of the Federal Reserve (“FRB”) this afternoon released an order extending the conformance period for the Volcker Rule to July 21, 2017. Although widely expected, had the FRB not acted, banks would have been forced to sell within the next two weeks any non-conforming CLO liabilities they held.