Payout appears unlikely for holders of SNS Reaal CDS | CDS index rebalance is expected to highlight European landscape | Swaps-clearing mandate is expected to reduce bank profits
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March 12, 2013
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ESMA: Gradual implementation of derivatives rules is needed
European Securities and Markets Authority Chairman Steven Maijoor says derivatives rules need to be rolled out gradually, so implementation might extend into next year. He also notes a need for U.S. and European regulators to minimize cross-border issues but says there will still be differences. "We are trying to align as much as possible to avoid regulatory competition, regulatory gaps. ... This is still a difficult issue; there is some good progress, but there is still a gap," he said. Reuters (3/11)
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Payout appears unlikely for holders of SNS Reaal CDS
Investors who hold credit default swaps on SNS Reaal, a Dutch lender nationalized last month, are likely to face losses, despite a decision by ISDA's Determinations Committee for a payout. Some bondholders were wiped out by the nationalization, and options for compensating CDS holders are shrinking, experts say. The Wall Street Journal/Dow Jones Newswires (3/11), Financial Times (tiered subscription model)/FT Alphaville blog (3/11)
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Industry News and Trends
CDS index rebalance is expected to highlight European landscape
Markit Group is poised to adjust indexes for credit default swaps, likely highlighting the two-tired nature of Europe's corporate-bond market. The indexes will change March 20. The Wall Street Journal/Dow Jones Newswires (3/11)
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Swaps-clearing mandate is expected to reduce bank profits
Sanford C. Bernstein & Co. says the rules that began Monday requiring the central clearing of over-the-counter derivatives may reduce pretax margins by a third at bank trading units. JPMorgan Chase has said the regulations spawned by the Dodd-Frank Act will cost it $1 billion to $2 billion in revenue. At least three dealers say they're worried about being swamped by the surge in cleared trades. Bloomberg (3/11)
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Expanding oil refining in Asia stokes derivatives trading
China overtook the U.S. in December as the world's largest importer of crude oil. As a result, Asia is gaining clout in derivatives trading tied to oil and other refined products. And as the region ramps up its refining capacity, that clout is expected to continue. Risk.net (subscription required) (3/11)
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Thai firm sees increased demand for equity derivatives
Siam Commercial Bank Securities plans to issue 3 billion baht in over-the-counter options, 3 billion baht worth of equity-linked notes and 1 billion baht in derivatives warrants. "We believe the whole market will increase by two or three times with all the banks looking to focus more on equity-linked notes, OTC options and derivative warrants," Deputy Managing Director Kawin Sangvichien said. "Trade in derivative warrants this year is expected to rise to 100 billion baht, from 69 billion in 2012." Risk.net (subscription required) (3/11)
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Regulatory Roundup
Japan grants DTCC license for OTC derivatives data warehouse
Depository Trust and Clearing will become the first to operate a data repository for over-the-counter derivatives in Japan after receiving regulatory approval. Financial Times (tiered subscription model) (3/11)
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Bank says Libor should be set by deals, not estimates
Barclays supports tying benchmarks such as the London Interbank Offered Rate to actual transactions, instead of estimates. The bank says in a letter to the International Organization of Securities Commissions that administrators of financial benchmarks should have little or no say in setting the level. "Reporting transactions or tradeable prices available to the market would serve to reduce conflicts, especially as trades are already subject to a clear and robust regulatory framework," according to the letter. Bloomberg (3/12)
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SmartQuote
True merit, like a river, the deeper it is, the less noise it makes."
-- Edward Frederick Lindley Wood,
British politician
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