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October 23, 2012
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  Credit Markets 
  • Advent of credit futures cheers dealers
    IntercontinentalExchange plans to trade futures contracts based on Markit's European and North American corporate credit default swaps. "The number of users of credit products has grown exponentially. ... People are looking at easier ways to trade than currently exist, and this seems to fit the bill," an unidentified senior credit trader at a U.S. bank said. International Financing Review (free content) (10/20) LinkedInFacebookTwitterEmail this Story
  • European bank-funding recovery sparking, but unevenly
    The market is coming back to life, if slowly: Long-term bonds are being issued in favorable currencies such as the dollar, and the banks' costs for borrowing have dropped below those of European corporations for the first time in years. But the recovery is limited to major European countries and the largest banks, and that is troubling. The Economist (10/20) LinkedInFacebookTwitterEmail this Story
  • EU's CDS short-position ban takes a big toll in volume
    The net notional outstanding of EU sovereign-credit default swaps dropped to $112 billion from more than $140 billion at the height of the euro-zone crisis last year. The decrease was in anticipation of an EU ban on short positions as of 1 November. "The regulations are causing a natural compression in notionals right now as people get their heads around the relatively fluid developments from the regulators," one head of sovereign CDS trading at a European bank said. "The market will and should err on the defensive side -- the last thing anyone wants is to appear on the front of the newspaper accused of flouting the rules." Thomson Reuters/IFR Asia (10/19) LinkedInFacebookTwitterEmail this Story
  • Other News
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  Regulatory and Accounting Issues 
  • European, Japanese regulators jointly try to deflect U.S. swaps rules
    The Commodity Futures Trading Commission is the focus of an effort by financial authorities in Europe and Japan to avert quick implementation of rules on swaps trading between U.S. and foreign companies. In a joint letter to CFTC Chairman Gary Gensler, the regulators said, "At a time of highly fragile economic growth, we believe that it is critical to avoid taking steps that risk a withdrawal from global financial markets into inevitably less-efficient regional or national markets." Financial Times (tiered subscription model) (10/18), The Wall Street Journal (10/18) LinkedInFacebookTwitterEmail this Story
  • Misreading of derivatives deadline might lead to a scramble
    A misreading of one key sentence of new swaps rules may mean that derivatives users who speculate on elements such as changes in interest rates and corporate bankruptcies may need to find cash and Treasurys to back the trades sooner than they had expected. The Commodity Futures Trading Commission is facing pressure to push back the deadlines. Bloomberg (10/19) LinkedInFacebookTwitterEmail this Story
  • SEC's new capital rule for derivatives might be doomed
    With the option for big U.S. banks to monitor their own risk internally, the Securities and Exchange Commission's proposal that banks hold more capital for their securities derivatives may fail, observers say. The complex modeling that banks will use may enable them to simply produce the result they want, some point out. "You have to ask the question: If the regulators can't figure out the value-at-risk modeling, what is the point of all this?" asks former Goldman Sachs banker Wallace Turbeville. MarketWatch (10/19) LinkedInFacebookTwitterEmail this Story
  • SEC rules are designed to bolster clearing agencies' risk management
    The Securities and Exchange Commission is moving forward with measures mandated by the Dodd-Frank Act by adopting rules intended to improve clearing agencies' risk-management practices. "These new rules are designed to ensure that clearing agencies will be able to fulfill their responsibilities in the multitrillion-dollar derivatives market as well as more traditional securities markets," said Chairman Mary Schapiro. "They're part of a broader effort to put in place an entirely new regulatory regime intended to mitigate systemic risks that emerged during the financial crisis." Reuters (10/22) LinkedInFacebookTwitterEmail this Story
  • EU moves toward handing eurozone banking supervision to ECB
    Herman Van Rompuy, president of the European Council, said EU national leaders agreed to adopt a legal framework by year-end to shift eurozone banking supervision to the European Central Bank. "Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013," he said. However, leaders failed to agree on when the €500 billion European Stability Mechanism can begin helping troubled banks. Reuters (10/19), Bloomberg (10/19), Financial Times (tiered subscription model) (10/19) LinkedInFacebookTwitterEmail this Story
  • Basel Committee will take a close look at securitization
    The Basel Committee on Banking Supervision plans a review of how securitization is regulated, said Secretary-General Wayne Byres. "What will come out before the end of the year will be more a concept paper than a detailed set of rules," he said. "It'll pose some questions." Bloomberg (10/22) LinkedInFacebookTwitterEmail this Story
  • Insurers press for Solvency II timetable, action before 2014
    Europe's insurance companies are urging EU lawmakers to establish a firm timetable for the introduction of Solvency II. They are growing increasingly concerned that the European elections set for June 2014 could derail work on the legislation. (subscription required) (10/23) LinkedInFacebookTwitterEmail this Story
  • Other News
  • U.K. banks brace for claims stemming from mis-sold swaps
    United Kingdom banks Clydesdale and Yorkshire, which are jointly owned, have announced they will review the sale of fixed-rate loans to small businesses to see if any mis-selling has occurred. The Financial Services Authority said that more than 40,000 interest rate swaps are estimated to have been sold to small businesses. A number of banks have set aside money to cover any claims. The Telegraph (London) (10/21) LinkedInFacebookTwitterEmail this Story
  IACPM News 
  • Registration is ongoing for the IACPM Fall Conference and Educational Seminar
    IACPM will offer its two-day Fall Conference in New York on Nov. 15 to 16. Rooms have been reserved at The Roosevelt Hotel at a special low rate for our members and friends. Pre-meeting day activities include our one-day Educational Seminar, Roundtable Discussions and a Welcome Cocktail Reception. Join us. For more information and to register for the IACPM 2012 Fall Conference and pre-meeting activities, please visit our website. LinkedInFacebookTwitterEmail this Story
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Too often man handles life as he does the bad weather. He whiles away the time as he waits for it to stop."
--Alfred Polgar,
Austrian journalist

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