Buy-side firms raise concerns about CDS collateral calls | Banks aim to capitalize on derivative-clearing rules | Commodity derivatives outpaced others in 2012, WFE says
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March 8, 2013
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LSE strikes deal to buy majority stake in LCH.Clearnet
London Stock Exchange Group has agreed to a €536 million acquisition of a majority stake in trans-Atlantic clearinghouse LCH.Clearnet Group. "We will promote greater innovation, choice and competition in the risk-management industry, especially in listed derivatives," LSE CEO Xavier Rolet said. Nasdaq OMX Group also has increased its stake in LCH.Clearnet, and Nasdaq CEO Robert Greifeld will join the clearinghouse's board. Reuters (3/7), Financial News Online (U.K.) (subscription required) (3/7), Financial Times (tiered subscription model) (3/7), The Wall Street Journal (3/7)
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Buy-side firms raise concerns about CDS collateral calls
Users of credit default swaps are concerned they might face large collateral calls because regulations by the Securities and Exchange Commission do not allow clearing members to offer CDS cross-margining to customers. Some market participants remain hopeful that the SEC will provide a last-minute reprieve, while others say the agency might offer a compromise. Risk.net (subscription required) (3/8)
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Industry News and Trends
Banks aim to capitalize on derivative-clearing rules
Banks are prepared for their gatekeeper role when some derivatives-trading clearing becomes mandatory Monday. Many big banks have invested in trading platforms to help clients handle the change. JPMorgan Chase predicts it will bring in as much as $500 million in the next two to three years from derivatives clearing and related services. Reuters (3/7)
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Commodity derivatives outpaced others in 2012, WFE says
The World Federation of Exchanges reported Thursday that among derivatives, only commodity options and futures had higher trading volume in 2012. Commodity derivatives traded across the globe increased about 19% for a second straight year, the Paris-based WFE said. The group also reported that global trading activity on futures and options exchanges declined 15% in 2012. Reuters (3/7), The Wall Street Journal/Dow Jones Newswires (3/7)
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NYSE Euronext reportedly fails to find buyer for MCX stake
NYSE Euronext sought to sell its entire 4.79% stake in Multi Commodity Exchange of India at the upper end of a share-price band indicated on its term sheet, a source says. However, the exchange group reportedly was unable to find a buyer at that price. The Wall Street Journal (3/7)
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SGX sees Philippine, Thai futures as revenue boosters
Singapore Exchange President Muthukrishnan Ramaswami said the bourse plans to bolster revenue from derivatives by as much as 15% this year. SGX will launch equity-index futures on Thailand and the Philippines, Ramaswami said. "Singapore has become a good facilitator of derivatives transactions," he said. "It's much easier to transact in Singapore than to go directly into each of these individual markets. Investors find that rules don't change overnight." Bloomberg (3/7)
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Regulatory Roundup
SEC proposes rules aimed at trading platforms
The Securities and Exchange Commission has been working for more than a year on rules intended to ensure trading platforms are better prepared to handle technology glitches, hurricanes and other issues that might cause market disruptions. On Thursday, the SEC proposed rules that would require certain exchanges, clearing agencies and alternative trading systems to develop procedures to ensure security, resilience, integrity and capacity. Reuters (3/7), The Wall Street Journal (3/7)
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EU benchmark-rate inquiries at "advanced stage," official says
Eric van Ginderachter, director of cartels at the European Commission, says the commission's investigations into alleged manipulation of benchmark interest rates, such as the London Interbank Offered Rate, are "at an advanced stage." The commission hasn't taken action against banks, brokers or others suspected of manipulation. Bloomberg (3/7), Reuters (3/7)
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Analysis: Fed stress test might understate derivatives exposure
The Federal Reserve's stress test of banks highlights problems with the more lenient U.S. method of derivatives accounting, which might make banks look stronger than they would under the corresponding European method. European derivatives accounting does not let banks net out contracts owed to one another, while the U.S. method does. The U.S. method could disguise the true state of banks' exposure to derivatives and their overall balance-sheet health, analysts say. CNNMoney/Fortune/Term Sheet blog (3/7)
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SmartQuote
Hope is the physician of each misery."
-- Irish proverb
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