Progress made on cross-border derivatives, Massad says | Traders seek CDS protection from market turmoil | EU utilities might not be able to avoid clearing OTC derivatives
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October 17, 2014
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Progress made on cross-border derivatives, Massad says
Congressional Oversight Panel For TARP Final Hearing
Massad (Bloomberg via Getty Images)
Regulators are making progress on a coordinated system for regulating cross-border derivatives, Commodity Futures Trading Commission Chairman Timothy Massad says. Massad welcomes Europe's postponement of a deadline to require European banks to hold significantly more capital when clearing through U.S. clearinghouses. The requirement was scheduled to go into effect in mid-December. The Wall Street Journal (tiered subscription model) (10/16), International Financing Review (free content) (10/16)
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Traders seek CDS protection from market turmoil
Investors are starting to worry that the sovereign-debt crisis in Europe is back, making an overhaul of the credit default swaps market particularly timely. "We've gone from complacency to paranoia in matter of days," Spiro Sovereign Strategy Managing Director Nicholas Spiro said. "If this sell-off morphs into a much broader deterioration in market conditions in the periphery of the eurozone, then the switch hasn't come a moment too soon. We'll really see if the CDS market and the effectiveness of the hedge is going to work." Bloomberg (10/16)
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Industry News and Trends
EU utilities might not be able to avoid clearing OTC derivatives
Utilities in Europe have been working to sidestep clearing of over-the-counter derivatives, but margin requirements for noncleared derivatives might force the move, market participants say. "While most energy firms have managed to remain exempt from [European Market Infrastructure Regulation] clearing, it will be interesting to see whether they end up doing more clearing anyway," ETR Advisory Managing Director Aviv Handler said. "The chances are that they will, because the liquidity will slowly move to the cleared space." Risk.net (subscription required) (10/17)
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Eurex reportedly shelves plans for ruble derivatives
Western sanctions on Russia are said to be a contributing factor in Eurex's decision to not partner with the Moscow Exchange to offer derivatives tied to the ruble. The Wall Street Journal (tiered subscription model) (10/16)
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Analysis: Tech advances to change trading even more
Machines conduct most trading on exchanges. With advances in machine learning, Big Data and artificial intelligence, the world of investing is going to get only more complex to navigate and regulate. Risk.net (subscription required) (10/16)
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Regulatory Roundup
Fed adviser calls CCP-default management plan "fantasy"
A plan to deal with defaulting central counterparties is "fantasy," says John McPartland, a senior policy adviser at the Federal Reserve Bank of Chicago. McPartland says banks don't have resources to devote to the procedure, which calls for clearing members to temporarily transfer staff to assess the failing institution's portfolio, then set up an auction. Risk.net (subscription required) (10/16)
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Russia continues to work on derivatives-reporting rules
The Central Bank of Russia has adopted derivatives-reporting rules for domestic financial firms, but the regulator is looking to tweak them. "The practice and regulation of the reporting regime in Russia is still far from settled, and it will take more time for both the regulator and market to make the rules of the game clear," said Konstantin Kroll, a partner at law firm Jones Day. Risk.net (subscription required) (10/16)
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CFTC likely to give Japanese clearinghouse DCO status
The Commodity Futures Trading Commission is expected to grant Japan Securities Clearing operational status as Asia's second derivatives-clearing organization, says Ananda Radhakrishnan, outgoing director of the CFTC Division of Clearing and Risk. "This may also allow the CFTC to use Japan as a model to other [central counterparties] seeking U.S. recognition," said Michael Steinbeck-Reeves, managing consultant at Catalyst. Risk.net (subscription required) (10/17)
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IOSCO economist warns about heightened systemic risk
Investor appetite for yield and a resurgence of leverage are increasing risk-taking, jeopardizing the financial system, says Shane Worner, a senior economist at the International Organization of Securities Commissions. Central banks have flooded the market with liquidity, distorting market prices, Worner says. Risk.net (subscription required) (10/16)
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Bank reportedly discusses FX settlement with DOJ
UBS is negotiating a settlement with the U.S. Justice Department regarding allegations that the bank manipulated the foreign exchange market, sources say. UBS has declined to comment. Bloomberg Businessweek (10/16), Financial Times (tiered subscription model) (10/16)
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ISDA News and Events
ISDA Master Agreement and Credit Support Annex: Negotiation Strategies -- Oct. 29 in NYC
The ISDA Master Agreement and Credit Support Annex: Negotiation Strategies conference is a full-day program focused on essential aspects of Negotiating the Schedule to the 2002 ISDA Master Agreement and Negotiating Paragraph 13 to the 1994 ISDA Credit Support Annex. These two pieces are the first important items of documentation entered into between parties to swaps transactions, and there are significant legal issues to resolve. Panels of experts will address key issues that firms typically negotiate when executing these documents. Register: ISDA Master Agreement and Credit Support Annex: Negotiation Strategies on Oct. 29 in New York City
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2014 ISDA Annual Asia Conferences
ISDA Annual Asia Conferences
Experienced derivatives industry speakers give their perspectives on the changing derivatives landscape and updates in each region.
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Forgiveness is the fragrance that the violet sheds on the heel that has crushed it."
-- Mark Twain,
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