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February 1, 2013

Daily coverage for the global derivatives industry

Top Stories

CFTC's O'Malia suggests SEF rules are weeks away
Scott O'Malia of the Commodity Futures Trading Commission says rules for swaps-execution facilities might be finalized in the next two weeks. Although proposed rules were published in 2011, O'Malia says the CFTC has struggled to interpret specific language in the Dodd-Frank Act, leading to the delay. Risk.net (subscription required) (1/31)

Proponents of swaps and futures disagree at CFTC hearing
Commodity traders faced off with swaps brokers at a Commodity Futures Trading Commission hearing on whether swaps rules unfairly favor one group over the other. CFTC Chairman Gary Gensler downplayed the disagreement. "Approximately eight-ninths of the derivatives marketplace [is] swaps and until recently was unregulated," he said. "Now we bring regulation to both sides; is it not just natural there might be some realignment?" Reuters (1/31), Financial Times (tiered subscription model) (1/31), Bloomberg Businessweek (1/31)

Barnier warns against blocking OTC derivatives rules
EU Internal Market Commissioner Michel Barnier has written European Parliament members to urge them not to block over-the-counter derivatives rules. Lawmakers have said they are hesitant to adopt such rules, saying they could hurt businesses. Barnier says rejecting the rules could harm the EU's credibility and competitiveness. Bloomberg Businessweek (1/31)

Industry News and Trends

Some are unnerved by electronic-trading part of swaps rules
There is concern that moving swaps from bilateral voice transactions to instant, electronic multiple platforms could dry up liquidity, consultants at Sapient Global Markets say. In addition, there is some worry that switching to electronic exchanges could increase execution costs. AdvancedTrading.com (1/31)

Insurers consider shifting to swaps futures
Insurers are considering swaps futures as a way to keep hedging expenses in check, but experts are unsure whether swaps futures can provide the match insurers need for long-dated liabilities. Risk.net (subscription required) (1/31)

Denmark and Latvia adopt 2-way credit-support annex
Debt-management offices in Latvia and Denmark plan to post collateral to derivatives dealers. The change "allows us to benefit from better swaps prices and to trade in greater volume given the reduced credit risk," Latvian Treasury official Girts Helmanis said. Latvia and Denmark join Hungary, Ireland, Portugal and Sweden in operating under a two-way credit-support annex. Risk.net (subscription required) (1/31)

Mis-selling issue prompts banks to set aside £700M
The U.K. Financial Services Authority has ordered Lloyds Banking Group, Royal Bank of Scotland, HSBC Holdings and Barclays to review their sales of interest-rate swaps and related products. Financial Times (tiered subscription model) (1/31)

Regulatory Roundup

Opposition mounts to Europe's proposed transaction tax
Experts and industry groups are increasingly voicing opposition to a proposed tax on financial transactions in Europe. Noel Amenc, an EDHEC Business School professor, told EU Internal Market Commissioner Michel Barnier in a letter that the tax would increase the price of capital. "The theoretical arguments in support of [financial-transaction tax] as a measure to reduce volatility are, at best, mixed," Amenc wrote. Financial News Online (U.K.) (subscription required) (2/1)

EU official emphasizes importance of global Basel III adoption
Michel Barnier, the EU's internal-market commissioner, has reiterated a need for the U.S. and other nations to adopt Basel III rules. The U.S. delayed Basel II and did not pass it into law until years after Europe had introduced it. As it stands, 11 of the Group of 20 countries have introduced Basel III. Reuters (1/31)

Group urges parity between EU and U.S. clearing rules
The Committee on Capital Markets Regulation, a research group, has asked the U.S. Commodity Futures Trading Commission, the European Securities and Markets Authority and the European Commission to harmonize clearinghouse authorization to prevent market inefficiency. The Trade News (U.K.) (1/31)

SmartQuote

A man can fail many times, but he isn't a failure until he begins to blame somebody else."

--John Burroughs,
American naturalist and essayist

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