LCH.Clearnet faced technical glitch on New Year's Eve | MarkitSERV debuts derivatives-market credit-checking service | Cypriot rescue drives up gauge of U.S. corporate-credit risk
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March 26, 2013
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U.K. regulator finalizes rules on benchmark rates
The U.K. Financial Services Authority aims to prevent a repeat of alleged manipulation of benchmark interest rates by finalizing rules governing the setting of such rates. On Monday, the Financial Conduct Authority will replace the FSA and also will take on oversight of the London Interbank Offered Rate. "Confidence and trust are critical to financial markets," said Martin Wheatley, CEO-designate of the FCA. "That trust has been eroded by the Libor scandal and the recent enforcement action against several banks. These new rules today should help restore that faith and bring integrity back to Libor." Bloomberg Businessweek (3/25), Reuters (3/25), Financial Times (tiered subscription model) (3/25), The Wall Street Journal/Corruption Currents blog (3/25)
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Industry News and Trends
LCH.Clearnet faced technical glitch on New Year's Eve
The Bank of England says in its annual survey of payments systems that LCH.Clearnet Group suffered a significant technology glitch Dec. 31. "The nature of the problem created obstacles to reverting to contingency arrangements and also hindered internal and external communication," according to the central bank. "The incident was fully communicated to regulators, exchanges, members and clients at the time," LCH.Clearnet said in a statement. "We identified the issue and took measures to ensure this doesn't happen again. There were no financial losses as a result." Bloomberg Businessweek (3/25), Reuters (3/25), Financial Times (tiered subscription model) (3/25)
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MarkitSERV debuts derivatives-market credit-checking service
MarkitSERV Credit Centre allows institutions to check on credit lines at clearing facilities in real time, a service they can use to ensure trades do not fail because of exceeding a credit limit. "Ever since regulators proposed a horizontal structure for the clearing and execution of swaps, the industry has been struggling to understand how to manage the so-called certainty-of-execution issue," said Will Rhode of TABB Group. (3/25)
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Cypriot rescue drives up gauge of U.S. corporate-credit risk
The Markit CDX North American Investment Grade Index, which measures U.S. corporate-credit risk, has increased after Cyprus agreed with international creditors on a plan to avert default. "These are good headlines, but the underlying tone suggests this is a small example of a bigger problem that still exists," said Timothy Cox of Mizuho Securities USA. Bloomberg (3/25)
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Standards are developed for when bilateral trading shifts to SEFs
Leading banks are behind efforts to standardize and automate administrative messages on swap-execution facilities. The Trading Enablement Standardization Initiative "will define the trading relationship between the buy side and the sell side," said Sessan Danesh, managing partner of Etrading Software, which is developing the system with FIX Protocol. The Trade News (U.K.) (3/25)
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Commentary: CME is committed to providing clearing choices
CME Group is committed to providing a variety of derivatives-clearing options amid the changing regulatory environment, CME's Derek Sammann writes. "For CME Group, we are committed to building and offering market participants flexibility and choice. In the coming years, we feel this will lead to greater efficiencies for everyone," Sammann writes. (3/25)
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Regulatory Roundup
Basel panel studies alternatives to current-exposure method
The Basel Committee on Banking Supervision is looking into alternatives to the current-exposure method of calculating risks of derivatives counterparties, a source says. The panel's risk-management group discussed alternatives with ISDA and the Global Financial Markets Association late last year, a senior international regulator says. (subscription required) (3/25)
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Sen. Johnson reportedly will announce retirement
Sen. Tim Johnson, chairman of the Senate banking committee, reportedly will announce his retirement, leading to speculation that Sen. Sherrod Brown, D-Ohio, could inherit the gavel. While other senators might have better claims to the chairmanship if the Democrats maintain control of the Senate, observers say, they could pursue different priorities, leaving the banking committee to Brown. Reuters (3/25), The Hill/On the Money blog (3/25)
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There is no limit to what a man can do so long as he does not care a straw who gets the credit for it."
-- Charles Edward Montague,
British journalist
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