A: Good morning, and welcome to the Morning Update! Your daily digest of markets, macro, regulation and the fund industry, built for the people who run the operating side of an investment firm. It's Wednesday, the seventh of October, twenty twenty six. I'm Emma.
B: And I'm George! Emma, what a start to the day. Wall Street has done it again, with the S&P five hundred and the Nasdaq both closing at fresh records, even though the bond market is still sitting on multi decade highs in yield!
A: Big one, George. And there's a genuine regulatory update this morning. The deadline for the Financial Conduct Authority's big fund reporting consultation, known as FRAME, has moved. It's now the twenty second of October. Yesterday's episode had an earlier date, so if you noted it down, please change it!
B: Plus, the European Commission has just told Europe's supervisors to hold back on a pile of detailed financial rules until at least October next year. That's a real simplification signal, and we'll get to what it means for your compliance calendar.
A: And tonight at seven o'clock UK time, the Federal Reserve publishes the minutes of its September meeting, the one where it raised rates for the first time since twenty twenty three. So it's markets first, then macro and central banks, then regulation. After that, funds and industry, and finally the three things a COO should do something about today, plus your diary for the week.
B: Right, Emma, let's get into it!
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B: Markets, and we start in New York, where Tuesday was another record setting session.
A: Let's give the numbers, George. The S&P five hundred rose about zero point six percent to close at seven thousand, eight hundred and nineteen, roughly, a new record. The Dow Jones gained about zero point five percent to just over fifty one thousand, five hundred. And the Nasdaq Composite added around zero point four five percent, to a record close just under twenty seven thousand, six hundred.
B: What's the story behind it, Emma?
A: Tech again, with chip names like Nvidia and AMD leading, plus a boost from a nuclear power deal between Constellation Energy and Alphabet, Google's parent. The AI trade is hungry for electricity, and that's a very concrete example of it!
B: Now to bonds, which are the other half of this picture. The ten year Treasury yield slipped about three basis points, to around five point two eight percent. A basis point, for newer listeners, is one hundredth of a percentage point.
A: And the others, George? The two year was about four point eight percent, and the thirty year around five point six five percent, though those come from a single source, so treat them as approximate.
B: Fair. The point is that borrowing costs for the American government are still very high, and yet equity investors don't seem bothered. That's striking, isn't it, Emma?
A: It really is. Tech earnings are carrying the market, and expectations for another Fed rate rise this month have faded. We'll come back to that in a moment.
B: Over to Europe, where the mood was good as well. On one report, the pan European Stoxx six hundred and the FTSE one hundred each rose by roughly three quarters of a percent on Tuesday, the third gain in a row, led by healthcare shares. Levels differ between sources, so we won't quote them.
A: Now gilts. The ten year gilt yield was around five point four percent on Tuesday, just below the highest level since two thousand and seven. The thirty year touched six percent last week, for the first time since nineteen ninety eight.
B: And remember, the Chancellor's budget is on the twenty eighth of October, just three weeks away. Every extra bit of yield makes the Chancellor's arithmetic harder.
A: Gold, George. Spot gold was around four thousand, one hundred and sixty dollars an ounce on Tuesday afternoon, slightly higher on the day.
B: Oil, though, is the genuinely messy one. Brent was close to one hundred dollars a barrel earlier in the week, but today's reports conflict about how far it has fallen or rebounded. Prices are swinging on every headline about the Strait of Hormuz and whether Washington and Tehran are really talking. Washington says yes, Tehran says no!
A: So we won't give you a settlement figure. We couldn't verify clean closing levels for Asia overnight, the euro, the yen or credit spreads either, so we've left them out rather than guess. Sterling was around one dollar thirty two cents on Monday, down by about zero point four percent on the day.
B: Which brings us to the so what for operations, Emma.
A: Here it is, George. Equities at records, bond yields at extremes, oil moving on rumours. In that environment, margin calls, collateral and valuation can all move on the same day. So operations teams should check how fast they can see exposures during the day, not just at the close.
B: And a human point. Who is on call when a headline hits at three in the morning? Know that before it happens. Right, macro and central banks!
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A: Macro now, George, and the story is still energy, inflation and central banks trying to work out how far to lean against it.
B: Let's start with the big event today. At two o'clock in New York, seven in the evening in London, the Fed publishes the minutes of its September meeting. Remember, the Fed raised its policy rate by a quarter point to a range of three point seven five to four percent. First increase since twenty twenty three!
A: And the committee's own projections pointed to one more rise this year. But, George, softer jobs and inflation data since then have cut the market odds of an October rise from about seventy percent to roughly twenty. So there's a tension.
B: Exactly. If the minutes sound very hawkish, markets might shrug and say "that was before the weak data". If they sound relaxed, it could be a surprise. Either way, the chair, Kevin Warsh, will be judged on how he squares them. The next decision is on the twenty eighth of October.
A: Over to the Bank of England. Remember, Bank Rate is three point seven five percent, and at the September meeting three members voted for a rise. Yesterday we covered the signals from Deputy Governor Dave Ramsden and Governor Andrew Bailey, and nothing has changed on that overnight.
B: What has changed is how markets price it, Emma. One account has them pricing around thirty basis points of tightening by the end of this year, and roughly ninety by the end of next year. As ever, market pricing is an indication, not a promise.
A: Why does that matter to a COO? Floating rate borrowing, fund level credit lines, and any fee or distribution assumptions built on a particular rate path. Run the numbers on a rise on the fifth of November, not just on a hold.
B: And the budget. The Chancellor's Autumn Budget is on the twenty eighth of October. Bond investors are watching for anything that looks unfunded, and with ten year gilt yields near five point four, there is little room for error.
A: For operations, remember that budget measures often land with very short timetables. Anything on pensions, savings, stamp duty, or funds and investment products can mean systems changes and client communications within weeks. So have a named person watching the budget day announcements.
B: In the euro area, the European Central Bank releases the accounts of its last meeting on Thursday. They'll show how divided policymakers were about the next step. The next ECB decision is on the twenty ninth of October.
A: Meanwhile, euro area inflation figures we covered yesterday, with energy as the main driver. No need to repeat them, but it does keep the pressure on the ECB.
B: Now geopolitics, Emma, because it ties everything together.
A: It does, George. The Strait of Hormuz story is still the single biggest swing factor for oil, inflation, bond yields and rate decisions. Washington talks of progress, Tehran denies any negotiations, and there are reports of strikes and mines in the area. A real deal would lower oil, ease yields and reduce rate rise bets. A collapse in talks would do the reverse.
B: So even if you never touch a barrel of oil, this story shapes your funding costs, your client flows and your valuations!
A: Practical point, George. Do your treasury and risk teams have a written plan for the end of October, with the Fed and the budget on the same day, and the ECB the day after?
B: And named owners. A plan with no owner is a wish list! Good, let's turn to regulation.
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A: Regulation, and we've got a few moving parts this morning, George.
B: Start with the correction, Emma. The Financial Conduct Authority's consultation on fund reporting for asset management entities, FRAME, which is paper CP twenty six twenty six, now closes on the twenty second of October. The regulator extended it back in August. Yesterday we said it had closed on the twenty second of September, and that was wrong, so apologies for that.
A: That actually helps, George. The alternative fund managers consultation, CP twenty six twenty eight, still closes on the fourteenth of October, just a week away. The remuneration paper closed in September.
B: And these three papers together are the package the FCA says could save asset managers about one hundred and twenty eight million pounds a year.
A: So what does a COO do? On FRAME, you now have an extra month, so use it. Map the data you report today, who produces it, and which systems feed it, so you can tell the regulator where the new framework would be easier, and where it would be harder. That means involving operations, compliance, finance and technology in the same room.
B: And on the alternative fund managers paper, decide this week whether you respond directly or through a trade body, and what the proposals would change in reporting, risk management, delegation and depositary oversight.
A: Next, a speech. On Monday the FCA published remarks from Jon Relleen, its director of infrastructure and exchanges, at a capital markets reform summit. His message was that the regulator has completed major elements of a multi year programme to make UK public and private markets work better for growth.
B: Which is good news for firms that deal in listings, trading venues and private market access, Emma. For an asset manager, the practical question is whether new market structure rules change how you trade, report and settle. Ask your heads of trading and compliance if anything in that programme touches you.
A: Now to Brussels. On the sixth of October, the European Commission told the European supervisory authorities, and the anti money laundering authority, that it will not adopt non essential detailed rules, known as Level Two acts, before the first of October twenty twenty seven.
B: That's a big message on simplification, isn't it, Emma?
A: It is, George. Level Two rules are the technical standards that actually tell firms how to comply, and they generate most of the implementation cost. If you have an EU fund range, Dublin or Luxembourg operations, or an EU management company, this means some projects might slip. But be careful. Level One laws that already exist still apply, and anything the Commission calls essential will still go ahead. So don't stand down projects without checking each one.
B: Practical tip, Emma. Go through your EU regulatory project list, mark which items depend on Level Two rules, and ask your legal team which are essential. Then re-plan, rather than cancel.
A: Across the Atlantic, the Securities and Exchange Commission has voted to propose changes that would open up alternatives, including private credit, to more retail investors. That includes modernising interval funds, so they can schedule repurchases to match the liquidity of their portfolios, and new disclosure on performance based compensation.
B: And that links straight to the theme in London. Liquidity, valuation and the match between what a fund promises investors and what it can deliver. Remember, the UK fund liquidity rules in policy statement twenty six seventeen start on the first of February twenty twenty seven.
A: Quickly, the other long dated dates from recent days. UK settlement moves to a one day cycle, T plus one, on the eleventh of October twenty twenty seven. Form PF in the United States is delayed to the first of July twenty twenty seven. And the crypto regime for UK firms starts on the twenty fifth of October twenty twenty seven.
B: A year is not long for a settlement change, Emma. Use these months for dry runs, and find out which custodians, transfer agents and fund administrators are ready.
A: We didn't find any significant new publication overnight from the Prudential Regulation Authority, His Majesty's Treasury, the European Securities and Markets Authority, or the Commodity Futures Trading Commission, so we'll flag that and move on rather than stretch.
B: Sensible. So the regulatory action list this morning, Emma?
A: One, FRAME, with a new deadline. Two, the alternative fund managers paper, in a week. Three, the EU rulebook re-plan. And a standing question, George, for every operations head: could we, today, list our funds, their dealing terms and liquidity tools, and who can pull each lever?
B: Because if a regulator or a client rings during market stress, speed and clarity are the whole game. Right, let's go to funds and industry!
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B: Funds and industry now, Emma, and there are a few good stories this morning.
A: Let's start in London, George. Capel Asset Management launched on Monday, an alternatives and multi asset boutique focused on defined outcome strategies, following a management buyout from Downing. It launches with two funds.
B: A reminder that spin outs like this are everywhere right now. And for a new firm, the operational build is huge, Emma. Authorisation, depositary, administrator, transfer agent, risk systems, compliance monitoring and a full suite of policies, all before the first investor money arrives.
A: And for the firm that was left behind, there's the other side, which is separation. Shared systems, shared staff, shared contracts, and transitional service agreements. If your firm ever sells a business, that's the part that takes the time!
B: Now to private credit, where the story is transparency. Apollo has extended daily pricing to a range of its direct lending, asset backed finance, multi credit and opportunistic credit vehicles. It's part of a business of around eight hundred and fifty billion dollars in credit. And asset level pricing is expected to be available to investors from the thirtieth of October.
A: That's striking, isn't it, George? Daily prices for assets that don't trade daily. It raises the bar for everyone. If a big competitor shows daily marks, clients and regulators will start asking why you can't.
B: Absolutely. So for operations teams, think about valuation frequency, data feeds, who signs off the marks, and how you challenge a price when there is no market. Those are operational questions, not just finance ones.
A: In the United States, BlackRock has filed to add exchange traded share classes to five active mutual funds, with nearly fifty five billion dollars in combined assets. The ETF share class trades on an exchange, but invests in the same portfolio as the mutual fund.
B: And that matters for Europe too, because the structure shows where the industry is heading, which is more ETF wrappers on existing strategies. If your firm is planning an ETF launch or a conversion, the work is operational. Share class set up, market maker agreements, pricing and net asset value feeds, creation and redemption processes, and custody and fund accounting.
A: And it's World Investor Week this week, the tenth edition of the global campaign run by the international securities regulators' body, IOSCO. It's worth a glance, George, because regulators often time messages about retail investor protection around it.
B: Good point. If your firm has a retail facing product, check whether your communications, your websites and your complaints data would stand up if a regulator or journalist came looking this week.
A: We couldn't verify any fresh fund closures, gating events, senior hires or enforcement actions this morning, so we've left them out.
B: One more theme, Emma. Semi liquid funds. With yields where they are, redemption requests in funds that hold illiquid assets tend to rise. A gate limits how much can be withdrawn at once, to protect the remaining investors.
A: So test it, George. Who decides to gate? What data do they need? How fast can you notify investors and distributors? And is that all written down? Those answers matter more than any policy document.
B: One more angle on Apollo, Emma. Daily pricing is also a data question. If clients start expecting daily marks, then your administrator, your valuation agent and your reporting team all need to deliver on that rhythm, every day, including holidays and quarter ends!
A: Exactly, George. Ask your administrator what service levels they could offer, what it would cost, and what controls they'd put around it. Better to ask now than when a client asks you!
B: Which takes us to the part where we pull it together!
A: Three things a COO should do something about today.
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B: Number one, Emma. Check how you would see and fund a big move this week. Equities are at records, the ten year Treasury is above five percent, the thirty year gilt has touched six, and oil is moving on every Hormuz headline. Check margin, cash buffers and redemption scenarios, and confirm who is on call.
A: Number two, re-plan your regulatory calendar. The FRAME deadline is now the twenty second of October. The alternative fund managers paper closes on the fourteenth. And review your EU projects against the Commission's pause on non essential Level Two rules.
B: Number three, get ready for rate and budget day. The Fed and the Chancellor on the twenty eighth of October, the ECB on the twenty ninth, the Bank of England on the fifth of November. Named decision makers for each, and a plan for a rate rise in London.
A: Now the diary for the week, George. Today, Wednesday the seventh of October, the minutes of the Fed's September meeting, at seven o'clock this evening, UK time. Thursday the eighth, the European Central Bank's accounts of its last meeting.
B: Friday the ninth, Chinese inflation data, Canadian jobs figures, and American consumer sentiment. And World Investor Week runs until the eleventh.
A: Looking a little further out, the fourteenth of October for American consumer prices and for the alternative fund managers consultation. Then the twenty second for FRAME, the twenty eighth for the budget and the Fed, the twenty ninth for the ECB, and the fifth of November for the Bank of England.
B: Big weeks ahead, Emma!
A: That's it for today's Morning Update. This summary is for information only and is not investment advice. Please check the primary sources before acting on anything you've heard.
B: Thanks for listening, and have a brilliant Wednesday! We'll be back tomorrow morning.