Clearing uncertainty surrounds expiration of CFTC exemption
Many non-U.S. firms may be redefined as a "U.S. person" and thus need to comply with Dodd-Frank Act clearing regulations when a Commodity Futures Trading Commission exemptive order expires in July. "It is a real problem not knowing whether your counterparty is a U.S. person or not. Maybe they are not today, but then when the exemptive order runs out on July 12 and the definition changes, all of a sudden they are a U.S. person," says Scott Cammarn of Cadwalader, Wickersham & Taft. Risk.net (subscription required)
|Minimizing Risk In Multi-Asset Class Portfolios|
In this paper, we show how to minimize downside risk in multi-asset class (MAC) portfolios. We show that compared with a Mean-Variance Optimization (MVO) approach, the CVaR approach generates MAC portfolios with better downside risk statistics, and that the CVaR hedges return more attractive risk decompositions and stress-test numbers—tools commonly used by risk managers to evaluate the quality of hedges.
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Collateral emerges as big concern in derivatives market
Collateral is in increasing demand in the post-crisis financial world, prompting concern about availability and whether its pursuit will create additional risk. Market participants and experts worldwide are expressing concern about collateral requirements for derivatives. "The scale of the need could be enormous," ISDA Chairman Stephen O'Connor said. The Banker magazine (U.K.)
City Index Asia introduces CFD trading platform
City Index Asia has launched a platform to trade contracts for difference, an instrument not allowed in the U.S. but popular in the U.K. for leveraging exposure to difficult-to-access foreign markets. Investors in Singapore are set to increase use of CFDs to increase exposure to world markets, Chief Operating Officer Goh Choh Tong says. The Wall Street Journal/MarketBeat blog
Investors in reverse convertibles could see bigger tax bill
A trend of treating reverse convertibles as "single income-bearing derivative contracts" instead of two instruments could double the tax bill for some investors, experts say. The change is occurring partly because brokers who bear the burden of tax reporting are simplifying the process, says Remmelt Reigersman, a partner at Morrison & Foerster. "It's a pain for them to have to change their reporting systems for the bifurcation treatment when the majority of other structured products are treated as single derivatives contracts," Reigersman said. Risk.net (subscription required)
Fund manager suggests ways to avoid "London whale"-type issues
JPMorgan Chase's "London whale" trades were "not a hedge, it was a bet," Saba Capital Management founder Boaz Weinstein said at an industry event. Weinstein was among those on the other side of the JPMorgan trades. Weinstein recommended that regulators establish "a rule that any time anyone wants to make an investment ... greater than $10 billion, the boss has to sign off on it." The Wall Street Journal
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