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February 21, 2013

Daily coverage for the global derivatives industry

Top Stories

ESMA proposes fee structures for trade repositories
The European Securities and Markets Authority has published three fee-structure proposals for trade repositories, a key part of infrastructure in overhauling derivatives markets. Financial Times (tiered subscription model) (2/21)

U.S. lawmakers plan to introduce transaction-tax bill
Political momentum for a U.S. financial-transaction tax seems weak, but two Democrats -- Sen. Tom Harkin of Iowa and Rep. Peter DeFazio of Oregon -- stand ready to reintroduce a bill to tax bond and equity transactions at 0.03%. Derivatives would be taxed, too, at a yet-to-be-determined rate. Those in the industry say such levies would curb economic growth and shrink trading volume. The Trade News (U.K.) (2/20)

Industry News and Trends

China works on master agreement for OTC derivatives
Last year, the Securities Association of China outlined rules governing over-the-counter derivatives for securities companies. The China Securities Regulatory Commission has authorized issuance of the document. Equity-derivatives transactions would be covered under the master agreement, but renminbi interest-rate swaps trades would be addressed by the regular mandate of the People's Bank of China. FinancialCAD (Canada) (2/20)

ASX will compete in derivatives-clearing space, CEO says
As Australia moves to comply with international clearing rules and norms, ASX CEO Elmer Kupper says it's important that his company compete with entities from Chicago and London to provide a derivatives-clearing service for customers. Brisbane Times (Australia) (2/21)

European banks eye higher capital ratios in recalculating risks
Large European banks are recalculating risks in their trading books and loan portfolios to increase the ratio of capital to risk-weighted assets. Such recalculations are fairly standard, but analysts say some banks are accelerating the move amid increased pressure to bolster capital ratios as Basel III rules start coming into effect. The Wall Street Journal (2/21)

FDIC's Hoenig seeks greater transparency on banks' risk exposure
U.S. accounting laws that allow banks to account for less of their derivatives portfolios than their European peers do mask the big banks' true size, says Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig. "Derivatives, like loans, carry risk," Hoenig says. "To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there." Bloomberg (2/19)

Regulatory Roundup

Internal Libor review is coming soon, U.K.'s FSA says
The U.K.'s Financial Services Authority has promised a parliamentary committee that it will publish an internal review of an investigation into manipulation of the London Interbank Offered Rate in the next few weeks. The Treasury Select Committee has expressed concern that despite the FSA's assertion that it worked with U.S. regulators, its investigation seemed to lag significantly. Meanwhile, Gary Gensler, chairman of the Commodity Futures Trading Commission, said that fraud continues to affect the way Libor is set. "We have a lot more work to do," said Gensler. Reuters (2/21), Bloomberg (2/21), BBC (2/21), The Wall Street Journal/Dow Jones Newswires (2/20)

Italy aims to regulate HFT with transaction tax
Italy recently introduced a tax on financial transactions, including equities and derivatives, that focuses on high-frequency trading. The move provides a test for governing such trading strategies. Financial Times (tiered subscription model) (2/19)

Australia issues financial-infrastructure guidance
Australian regulators have provided guidelines for interpreting infrastructure principles from the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions as they apply to settlement and clearing. The regulators have revised guidance to be in accord with norms set by CPSS and IOSCO and have agreed to comply with future standards set by the organizations. The Trade News (U.K.) (2/20)

SmartQuote

The psychic task which a person can and must set for himself is not to feel secure, but to be able to tolerate insecurity."

--Erich Fromm,
German psychologist

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