ISDA dailyLead

Reading this on a mobile device? Try our optimized mobile version here: http://r.smartbrief.com/resp/dDknCfbwocewbaiBaNJg

May 2, 2012

Forward

Archive

Advertise

Daily coverage for the global derivatives industry

Top Stories

O'Connor says at ISDA AGM that inclusion has become a priority
ISDA Chairman Stephen O'Connor said that as the swaps industry adapts to pending rules, the trade group is working to diversify and include a broader swath of market participants. "Diversity is evident" in ISDA's membership and in its "buy-side board representation," O'Connor said in opening remarks at the ISDA 27th Annual General Meeting. He also said reform is reducing systemic risk in the over-the-counter derivatives market, but some rules need more work before they are implemented. The Wall Street Journal/Dow Jones Newswires (5/1), Bloomberg Businessweek (5/1), Financial Times (tiered subscription model) (5/1)

ISDA: Clearinghouses will help decide whether CDS were triggered
Athanassios Diplas, co-chairman at ISDA, said at the group's Annual General Meeting that clearinghouses will help decide whether credit default swaps were triggered. Diplas' comment indicates the growing importance of clearinghouses in the over-the-counter derivatives market. Diplas also confirmed that the association is reviewing credit default swaps definitions. "CDS didn't cause the crisis, but we recognize that more can be done," he said. "So we are taking a very serious look at the credit definitions again." International Financing Review (free content) (5/1), Bloomberg Businessweek (5/1), The Wall Street Journal/Dow Jones Newswires (5/1)

Industry News and Trends

Most OTC derivatives are protected by collateral, ISDA says
ISDA said the percentage of over-the-counter derivatives trades protected by collateral increased from 80% last year to 84% this year. "As the survey clearly demonstrates, collateralization remains among the most widely used methods to mitigate counterparty credit risk in the OTC derivatives market," said CEO Robert Pickel. Bloomberg (5/1)

Hard to predict Dodd-Frank effect on energy firms, BP exec says
BP executive Alan Haywood said at ISDA's Annual General Meeting that it's too soon to say how energy firms with trading divisions will be affected by the Dodd-Frank Act. "I think we are at a critical juncture where the rules are being published, and in many ways it's too early to know how they will impact us," Haywood said. "The question is the impact on liquidity, usage of capital, costs and the ability of us to hedge our actual exposure, not the ones deemed standard." The Wall Street Journal/Dow Jones Newswires (5/1)

Bond clearinghouse reduces risks, DTCC says
Depository Trust & Clearing said a clearinghouse for agency mortgage bonds has started to reduce risks and costs as well as eliminate more outstanding trades. Financial Times (tiered subscription model) (5/1)

Banks examine client-fund protection, CFTC says
Major banks are examining protection for clients' funds that back derivatives trades after MF Global Holdings collapsed in 2011, said Gary Barnett of the Commodity Futures Trading Commission. Full segregation of funds might not be possible, but banks are looking into alternatives to improve protection, Barnett said at ISDA's Annual General Meeting. Reuters (5/1)

Sargent talks euro's survival and "immaculate bailout"
Nobel laureate Thomas Sargent participated in a panel discussion on global finance at the ISDA Annual General Meeting. Sargent addressed many topics, including ways governments can perform an "immaculate bailout" to avoid technical default on debt. "You wouldn't have needed a bailout of any of the banks in the U.S. or any other institutions or houses underwater if in 2008 the United States had had a sudden, 30% jump in the price level -- a one-time jump in the price level. ... It would have repaired a bunch of balance sheets, including all those homeowners who went underwater and all those financial institutions that were underwater because they had mortgages," Sargent said. SmartBrief/SmartBlog on Finance (5/1)

Other News

ISDA provides information on CDS Determinations Committees
FinancialCAD (Canada) (5/1)

ICE expands CDS-clearing unit
The Wall Street Journal/Dow Jones Newswires (5/1)

SwapClear sees 175% increase in buy-side cleared volume
AdvancedTrading.com (5/1)

Regulatory Roundup

CFTC looks into which swaps must be cleared, official says
Gary Barnett of the Commodity Futures Trading Commission said the agency might seek comments about which types of swaps should be guaranteed by clearinghouses as it aims to make a proposal within months. "We hope that in the next couple of months, we will move in that direction," Barnett said at ISDA's Annual General Meeting. Bloomberg (5/1)

Foreign regulators could get easier access to U.S. swaps data
The Commodity Futures Trading Commission might make it easier for foreign regulators to access swaps data from the U.S. The CFTC is considering waiving a requirement that non-U.S. regulators sign an indemnification agreement, as mandated by the Dodd-Frank Act. "The commission is working closely with international regulators on a collaborative approach regarding how data may be accessed by regulators," Chairman Gary Gensler said. Reuters (5/1)

Margining-requirement group will meet deadline, member says
The Group of 20 nations tasked regulators with developing global margin standards for uncleared trades. Sean Campbell, deputy associate director at the Federal Reserve and a member of the Working Group on Margining Requirements, said at the ISDA Annual General Meeting that he is confident a June deadline for issuing a consultation paper will be met. "We are working hard on that deadline, and I am sufficiently confident, as a member of that group, that we are going to meet the June deadline to submit a proposal to the committees for their review," he said. Risk.net (subscription required) (5/1)

Panelists question agency's ability to spot risk
Years after the start of the global financial crisis, many questions remain about the reason regulators failed to spot systemic risk. The U.S. responded by creating the Office of Financial Research, which is tasked with monitoring systemic risk and raising a red flag if such risk threatens to take down the system. However, panelists at ISDA's Annual General Meeting voiced concern about the office's ability to detect such risk and what will happen if a potential threat is discovered. Risk.net (subscription required) (5/1)

Exec warns about possible consequences of Volcker rule
Gerhard Seebacher, a senior banker at Bank of America Merrill Lynch, said the Volcker rule might keep banks from entering markets as it curbs risk taking. Seebacher told participants at ISDA's Annual General Meeting that the rule has a "potentially significant" effect. "What does it take to be a market maker?" he said. "In what markets do you need to be in? And will you be able to enter a certain kind of market late with a limited risk appetite?" International Financing Review (free content) (5/2)

Commentary: Questions abound about exposure-limit rule
Peter Eavis writes that there are questions surrounding proposed rules limiting banks' exposure -- through bonds, derivatives and loans -- to one another and other companies. The banking industry has voiced concern about the rules, saying calculation methods from regulators could result in an "extraordinary overstatement of exposures." Eavis suggests that banks "clarify the situation." The New York Times (tiered subscription model)/DealBook blog (5/1)

SmartQuote

Judgement is more than skill. It sets forth on intellectual seas beyond the shores of hard indisputable factual information."

--Kingman Brewster Jr.,
American educator and diplomat

ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc.

Subscriber Tools

Print friendly format | Web version | Search past news | Archive | Privacy policy

Advertise

Associate Publisher: Abiy Bekele 212-450-7919