Happy Holidays from All of Us at 8of9!

What better way to kick off the holiday season than coming together as a team? This past week we were able to celebrate this phenomenal time of year with some of our families and friends! Our very own Aaron Heisler, surprised us with a gauntlet of holiday contests. From mini basketball to regulatory trivia to eating competitions, we were challenged mentally and physically! 

Take a look at some of the fun! 

Happy Holidays from the entire 8of9 team! 

Brexit: the UK’s Temporary Permission Regime

With the UK’s departure from the European Union (EU) set to March 29, 2019, the financial services industries in both the EU and the UK expect to be vastly changed by Brexit.

There are two possibilities for how the UK will exit the EU:

  1. The UK leaves the EU with an implementation period.
  2. The UK leaves the EU without an implementation period, in which case the Temporary Permission Regime (TPR) will go into effect.

Implementation Period: With an implementation period, the UK has until December 31, 2020, to fully transition out of the EU. This allows the continuation of passporting, allowing financial firms in any EU member state to sell services in all other member states, which is a right that majority of EU/UK financial firms have utilized. After the UK’s departure, passporting will no longer be a viable option for EU firms that operate in the UK or vice versa. An implementation will extend the ability to passport until the end of 2020, allowing financial firms time to seek alternate authorizations between the EU and the UK.

TPR: Without an implementation period, EU firms that operate in the UK and UK firms that operate in the EU would lose passporting rights on the exit day of March 29th, 2019. To prevent disruption to EU firms operating in the UK, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have proposed the Temporary Permission Regime (TPR). TPR is expected to last no longer than three years after the exit day. This plan allows for EU firms to seek the appropriate authorization and/or recognition needed by UK regulators to continue operation.

How they differ: The implementation period and the Temporary Permission Regime differ in that the implementation period was agreed to by both EU and UK governments. During the implementation period, the UK would be permitted to act as a member state, without voting rights in the EU body. TPR will only come into effect if the UK leaves the EU without an implementation period. It was created by UK regulators to deter problems created by the UK leaving the EU without a withdrawal agreement.

In the event that TPR or an implementation period doesn’t go into effect, Brexit-related regulatory issues may arise:

  1. There are trillions of pounds in existing derivatives and insurance contracts.

For derivatives to be cleared, firms are required to use a recognized venue. When the UK departs from the EU, it is likely that London would no longer be recognized as a venue to clear derivatives. This could potentially cause banks to breach existing regulations. Firms have already voiced concerns on this issue that due to the sheer volume of their positions, it would be impossible to move to an approved EU venue by the exit day. UK regulators have responded that they are prepared to issue temporary licenses to EU firms and EU regulators will likely respond in kind. However, some member states, such as France, do not have the authority to issue temporary licenses.

  1. UK firms cannot continuously trade securities with the EU unless permission is granted by the European Commission (EC).

The UK is required to demonstrate to the EC that UK financial and securities regulations are equivalent to those enforced by the EU. The commission in Brussels has issued a statement that the financial industry needs to be prepared for a variety of Brexit outcomes and should have contingency plans prepared.


Overview of the 2018 U.S. Resolution Stay Rule & Protocol

For an in-depth overview of the FSOC's QFC Recordkeeping and Reporting Rules, take a look at our explainer presentation here.

Why are these regulations necessary?

The U.S. Resolution Stay Rule and the U.S. Resolution Stay Protocol are regulatory reforms introduced post financial crisis.  They were part of the initiative to improve financial stability in the event that a U.S. global systemically important bank (G-SIB) entered resolution or filed for bankruptcy.

Before the collapse of Lehman Brothers, Lehman’s parent company acted as a guarantor on its subsidiaries’ financial contracts. When the parent filed for bankruptcy, counterparties on those existing financial contracts were permitted to exercise their rights to terminate their agreements.  These “cross-default rights” terminated contracts and resulted in great losses. Subsidiaries attempted to quickly meet contractual obligations by selling assets to produce cash and selling collateral that secured the now-terminated contracts.  This compromised the viability and stability of Lehman and its subsidiaries, creating a ripple effect throughout the global economy.

Currently, many financial contracts at G-SIBs contain similar cross-default clauses, allowing counterparties to exercise their default rights if a G-SIB or its subsidiaries file for bankruptcy or require resolution.  To mitigate risk and ensure that the global financial system is not thrown into chaos once again, international and domestic regulatory bodies introduced the U.S. Resolution Stay Rule and Protocol.


Who is affected by the new regulations?

The Rule and the Protocol apply to the following entities (referred to as “Covered Entities”):

  • The 17 U.S. G-SIBs and their subsidiaries (U.S. and non-U.S.)
  • The U.S. subsidiaries, branches, and agencies of the 18 non-U.S. G-SIBs


Which regulators are involved?

  • U.S. Resolution Stay Protocol (“the Protocol”): ISDA (International Swaps & Derivatives Association)
  • U.S. Resolution Stay Rule (“the Rule”): The Federal Reserve, FDIC (Federal Deposit Insurance Corporation), Office of the Comptroller of Currency (OCC)

It is important to note that there is a distinction between the “Rule” and the “Protocol.”


What is the difference between the Protocol and the Rule?

In 2015, the original ISDA Protocol came into effect as a suggestion by regulators. Covered Entities agreed to comply with the new resolution protocols, however, buy-side entities were not able to come to agreeable terms with regulators.  After years of negotiation, the 2018 version of the ISDA Protocol included terms that affected buy-side entities, Covered Entities must have their buy-side counterparties agree to new resolution protocols.


The Rule, when implemented, is the governing regulation which G-SIBs must comply with as it relates to their existing and new financial contracts.  The Protocol refers to the actions that are required of G-SIBs in amending existing contracts.


What type of financial contracts are subject to the new regulations?

Covered Qualified Financial Contracts (QFCs) are agreements pertaining to derivatives, securities lending, and short-term funding transactions.  A QFC is within the scope of the Rule and Protocol if it meets any of the following criteria:

  • It contains one or more “default rights” that may be exercised against a Covered Entity. Default rights include:
    • Direct default rights: right to terminate the QFC or exercise other default rights based on its direct counterparty becoming subject to an insolvency proceeding
    • Cross-default rights: right to terminate the QFC or exercise other default rights based on a parent or other affiliate of the direct counterparty becoming subject to an insolvency proceeding
  • It explicitly restricts the transfer of the contract from a Covered Entity
  • It was entered into on or after January 1, 2019, by a Covered Entity


What are the deadlines for compliance?

  • January 1, 2019: for covered QFCs between two Covered Entities
  • July 1, 2019: for covered QFCs, between a Covered Entity and a counterparty (excluding small financial institutions), entered into in order to apply the final U.S. margin rules applicable to swaps
  • January 1, 2020: for covered QFCs between a Covered Entity and any other counterparty (including small financial institutions)


What are the requirements of the new regulations?

Covered Entities must add two amendments to existing QFCs:

  1. Buy-side counterparties must “opt in” to certain resolution protocols that would be followed should the Covered Entity require resolution or file for bankruptcy. These resolution protocols contain requirements related to the exercise of default rights that buy-side counterparties must follow.
  2. Buy-side counterparties must be restricted from exercising cross-default rights to terminate contracts immediately, through a 48 hour stay.

International Blockchain & Bitcoin Regulations

Blockchain and Bitcoin Regulations Around the World

Virtual currency and distributed ledger technology (DLT) are disrupting many industries including finance, retail, entertainment and everything in between. These technologies enable financial transactions to be processed, contracts to be signed, and records to be securely stored without middle men – decreasing the role of lawyers, data storage providers, financial institutions, and others.  Because of this, governments and agencies around the world are attempting to regulate blockchain and virtual currency. Without uniformity of regulation, growth may be stunted, and innovation stifled. As blockchain and virtual currency have increased in popularity, so has the importance of consistent international regulations.

Approaches to regulating DLT and virtual currency vary immensely country by country. Laws and regulatory guidance in these areas range from nonexistent to stringent. A few countries have even gone as far as banning virtual currency completely. Others are considering creating a national virtual currency, potentially eliminating the need for cryptocurrency such as Bitcoin. Yet some countries have not legislated at all, continuing to study the possible risks and benefits of virtual currency use and blockchain in government. For a summary of international regulations, refer to the table below.

Please note that regulations in the European Union and United Arab Emirates may differ among member nations. EU regulatory actions are issued by the European Commission, European Parliament, the EBA and ESMA. This table displays existing law, guidance and pending legislation in the form of bills (which are marked appropriately).

To learn about blockchain and virtual currency regulations in the United States, check out our Overview of Blockchain & Bitcoin 50 State Law!


New to blockchain and/or virtual currency? Check out our free Blockchain Glossary to learn key terms.  


Topic of Regulatory Action
SwitzerlandChinaEUSouth KoreaCanadaIndiaUnited Arab Emirates (varies state by state)SingaporeMexicoUKDenmark Sweden
Legal status of virtual currency
Currency/Monetary Instrument; Legal TenderLegal TenderBannedLegal Tender No status designation Commodity BannedBanned; Commodity
Defined as not Legal Tender No status designationNo status designationDefined as neither Currency nor Monetary InstrumentDefined as neither Currency nor Monetary Instrument
Established DLT/virtual currency working group YesYesYes-YesYesYesNoNoNoYesNoNo
Created taxes for DLT/virtual currency businessesYesYes-NoYesYes--Yes (pending legislation)-YesYesYes
Permitting payment of state fees or taxes with virtual currency -Yes-----------
Required virtual currency businesses to meet registration or licensing standardsYesYes--YesYes-YesYes (pending legislation)YesYes--
Virtual currency is subject to Anti-Money Laundering and Counter Terrorist Financing LawsYesYes-YesYesYes--YesYesYesYes (pending legislation)-
Support of DLT initiatives--YesYesYes---Yes-YesYes-
Initial Coin Offerings (ICOs) are actively regulatedNoYesYes-Yes (pending legislation)--NoYes--YesNo
Exploring creation of national virtual currency--YesNo---Yes----Yes
Issued consumer warnings on the risks of virtual currency--YesYes--YesYesYesYes-YesYes

8of9's Client Appreciation Party!

8of9 was thrilled to invite clients to the new office for our Client Appreciation Party on Thursday, October 18, 2018. A huge thank you to everyone who attended. It was wonderful to see our supporters and friends – both old and new. As we continue providing regulatory consulting services and building RegTech products, we appreciate the support and loyalty you’ve shown us throughout the years. We love and appreciate you all so much!  

Our Values

Intelligence | Inspiration | Initiative | Innovation | Integrity | Inclusion

The 6I's above represent our goals as a company and as a team. At 8of9, we strive for excellence within the FinTech/RegTech space and regulatory consulting industry by sticking to these six values. This is the foundation of our company:

Intelligence. Our team isn’t just intellectually capable, but also intellectually curious. We have a genuine desire to educate ourselves and others on the rapidly changing regulatory space. By attending training seminars, speaking on panels alongside other industry leaders, teaching classes on blockchain regulations or speaking in on industry group calls, we ensure that we are up to date with the latest information in our industry. Taking the time to learn and teach our colleagues as well as our clients are a large part of what sets us apart.

Inspiration. Our team maintains the mentality that the glass is half full rather than half empty. At 8of9, we find it essential to go about our day with a positive attitude. We pride ourselves on finding simple solutions to complex regulatory issues, which isn’t always the easiest task. By bringing a can-do attitude to client projects, we inspire not only our team but those around us.

Initiative. We are problem solvers! We are committed to coming up with creative solutions for regulatory issues and attempt to recognize problems before they even arise. Taking initiative comes as second nature to us. In the field of financial regulations, 8of9 is always ready and eager to tackle new challenges.

Innovation. We believe in a world where compliance should create fewer headaches. Through our products and the way in which we deliver consulting services, we bring future focused thinking to the regulatory community. This fall, we’re excited to launch an informational product, “Overview of Cryptocurrency & DLT 50 State Law.” This is the most comprehensive overview available of blockchain and Bitcoin-related regulations in all 50 states. Our products serve the purpose of creating a more effective financial services industry.

Integrity. The culture at 8of9 values integrity, hard work, and perseverance, which goes hand in hand with delivering value to our clients. We focus on what is right rather than who is right. Instead of focusing on getting credit, we focus on solving the problem at hand. We maintain our integrity through our ethical principles, respectful conduct and the way we treat every person we interact with.

Inclusion. Our sixth value is fostering inclusivity. We practice inclusion within large financial institutions by reaching across all departments and specialties, to ensure the best possible work is done with input from multiple perspectives. More importantly, we value having a diverse team with a variety of backgrounds and areas of expertise. Our culture allows for people with unique viewpoints to come to the table and communicate openly.

The Credit Risk Mitigation Framework in the EU

Developments in the Credit Risk Mitigation Framework in the European Union

The financial crisis of 2008 revealed shortcomings in the way financial institutions evaluated risk exposure. These shortcomings led to insufficient regulatory capital in times it was most needed. In the aftermath of the crisis, criticism was directed at poor risk management practices, specifically at the failure of internal model-based approaches to accurately measure risk. In response, regulators, specifically the Basel Committee on Banking Supervision, commenced reviews and revisions of internal model-based methodologies to reduce excessive variability of risk-weighted assets (“RWAs”) across institutions. While Basel III introduced changes to calculating risk-weighted assets for credit risk, using the Standardized approach and the Internal-Ratings Based (IRB) approach, rules regarding credit risk mitigation ("CRM") remained largely unchanged.

In 2013, the European Union (“EU”) introduced the Capital Requirements Regulation (“CRR”) which implements the Basel III framework in Europe and serves as a “Single Rulebook,” providing a set of harmonized prudential requirements for the EU banking sector. The CRR specifies the CRM techniques available to financial institutions and eligibility requirements for each technique. The regulation also mandates that the European Banking Authority (“EBA”) develops regulatory technical standards (“RTS”) on select issues in this area, including three mandates pertaining to the application of CRM. The mandates by the CRR, as well as the EBA’s own assessment of the need to conduct a review of the CRM framework, laid the groundwork for the EBA’s IRB Review program.

The IRB review program is in four phases:

  1. reviewing supervisory practices used by authorities in assessing an institution's compliance with IRB requirements,
  2. harmonizing the definition of default,
  3. providing more clarity on modelling approaches in the areas of risk parameter estimation and treatment of defaulted assets, and
  4. reviewing the credit risk mitigation framework. The March 2018 report on the CRM framework was a product of this final phase (see below).

While the report provided clarification on technical aspects of using CRM techniques, the EBA highlighted the necessity for regulators to undertake an analysis of the overall CRM framework to determine whether reform would be beneficial. The EBA’s report relied on feedback received from stakeholders; this feedback underlined the need for more clarity in the CRM framework. Regulators are continuously improving the consistency of RWAs across institutions, and these improvements will lead to future changes to the CRM framework.

Primer on the EBA’s Report Assessing the Current Credit Risk Mitigation Framework

Part I: Overview of the current design of the CRM framework in the CRR

There are several factors to consider in CRM rule implementation. CRM rules are implemented differently depending on:

  • whether the institution is using the Standardized Approach or the IRB Approach. The EBA’s review covered the use of CRM techniques under all approaches. The report maps relevant provisions to the corresponding credit risk approach;
  • whether an institution, under IRB, is permitted to use their own estimates of loss given default (LGD) and credit conversion factors (this is known as Advanced IRB, or A-IRB) versus supervisory inputs (this is known as Foundation IRB, or F-IRB). The EBA pointed out the limited guidance on the use of CRM for exposures under A-IRB and indicated it would start work on this topic in the future.

Part II: Data collected about the use of the CRM framework in the EU

The report includes a quantitative overview of the collateral types and CRM techniques used by institutions to calculate capital requirements for credit risk:

  • Findings show that the use of techniques varies significantly across jurisdictions, as the choice of technique varies by institution’s type of approach and business model.

Part III: Policy Issues related to CRM

  • The EBA recommends amendments to the CRR, with the aim of reducing variability in the application of CRM provisions.
  • The EBA presents arguments reinforcing its negative opinion of the development of RTS on recognition of conditional guarantees, on liquid assets and on master netting agreements. The EBA emphasizes that the mandates cover select aspects of the CRM framework that are not expected to have a significant impact on the regulatory capital and rating systems of financial institutions. According to the report, “pursuing work on these three mandates…would create the risk of disproportionate regulation given the limited benefit of such additional provisions.”
  • The EBA further recommends deleting the mandate for RTS on liquid assets. The CRR already covers the requirements for the liquidity of assets usable for CRM purposes and the stability of the value of these assets.
  • The EBA communicated it does not intend to deliver on these mandates until further notice.



Our New Home

Lime green walls covered with Star Wars decorations, the smell of Eataly's pastries wafting through the air, and magnificent views were some of the most memorable features of 8of9’s old office. 8of9 has been lucky enough to call 1115 Broadway home for the past six years. Just ten years ago, our headquarters was a P.O. box set up by founder and CEO, Mary Kopczynski. Since then, 8of9 has transformed into a successful regulatory consulting and RegTech firm in the heart of Manhattan. Numerous memories, demanding challenges, and rewarding triumphs have all taken place at our Broadway office. Yet, as we move forward, 8of9 is prepared to say goodbye to the place that has helped us grow for so long. We are delighted to announce our big move to 147 West 26th Street!

Our new office has a very unique personality while still making 8of9ers feel at home. New white walls wait to be covered with green accents, desktops wait to be used by new and returning employees and a seating area waits to be transformed into an office/nursery for Mary when she returns from maternity leave. Only a few blocks away from the Madison Square Park office, our new spacious work area has 8of9ers more enthusiastic than ever. The new office offers more room for hosting social events and collaborative areas for innovation and learning. Our move signifies 8of9’s continued success, our rapid expansion within the RegTech/FinTech industry, and our eagerness to tackle more. We’re excited for this new chapter and hope you’ll visit us soon!


SIFMA C&L, Blockchain and a New Product!

#BestSwag at the Conference: 8of9 at SIFMA C&L's Annual Seminar
We were delighted to see old friends and make new ones at our booth at SIFMA Compliance & Legal Society's annual conference in Orlando! 8of9 is notorious for having the best swag around, and this year's swag included beanies with built in Bluetooth speakers, symbolizing the clarity of our regulatory communications cutting through the market noise.




Our Blockchain Expertise Goes Live
We're sharing our expertise on emerging regulatory areas such as blockchain. Mary has begun teaching a course on blockchain regulatory issues through a partnership with the Blockchain Academy and Montclair State University. We're excited to educate practitioners, students and friends in this emerging field! Links for registration to come.

New Product Alert!
We are currently developing a feed of regulatory structured data to provide daily updates regarding changes to financial regulations. Stay tuned for more info on this innovative product in the near future!

Learn More About Regulations
Are you up to speed on trading non-centrally cleared derivatives under IOSCO? We've got you covered.




What a time to be alive!

Mary K & the 8of9 Team

9 Lessons from Our Moms

Moms really do know best. They helped us with our homework, cheered us on at little league games and bandaged our scraped knees. Above all else, our mothers imparted upon us tidbits of wisdom that helped shape who we are today. In appreciation of all the wonderful mothers around the world, we would like to share some of the most important lessons they’ve taught us here at 8of9. Here’s what we’ve learned:

  1. “Take big projects and break them down into smaller, more manageable tasks.”
  2. “My mother taught me manners and it has paid off in every relationship I have ever had.”
  3. “My mother taught me to be kind often without expecting payback - no excuses.”
  4. Fear is meaningless in the face of conviction, and never be late.”
  5. “You catch more flies with honey than vinegar. Having a good/friendly attitude gets you a long way.”
  6. “Be independent.”
  7. Taking your time to do things right the first time is always easier than having to do something twice.”
  8. “My mother taught me to keep track of my responsibilities and obligations by writing them in a calendar.”
  9. “The more friends and family you have, the sweeter success feels.  Tiny successes can feel huge when you have people to share them with.”