CFTC's delay in finalizing SEF rules causes concern | ICE plans CDS index futures | Clearing-execution agreement remains in limbo
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March 27, 2013
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European Commission extends investigation into CDS market
The European Commission unit that oversees antitrust regulation has announced that it is extending an investigation of credit default swaps market information to include ISDA. ISDA issued this statement in response to the announcement: "ISDA is aware that it has been made subject to these proceedings. ISDA is confident that it has acted properly at all times and has not infringed EU competition rules. ISDA is co-operating fully with regulatory authorities." Thomson Reuters/News & Insight (3/26), Bloomberg (3/26), The New York Times (tiered subscription model)/DealBook blog (3/26), Financial Times (tiered subscription model) (3/26), The Wall Street Journal (3/26)
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CFTC's delay in finalizing SEF rules causes concern
Market participants are upset with the Commodity Futures Trading Commission because its rules for swap-execution facilities will not be published until late April. "As an agency, we have been neglectful in not finalizing a rule," CFTC member Bart Chilton said. "Many of these platforms that will be SEFs are ready to go; they just need to know the rules." (subscription required) (3/26)
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Industry News and Trends
ICE plans CDS index futures
IntercontinentalExchange says it plans to launch four futures products for credit default swaps indexes in May and is leaving the door open to create further products. "We are optimistic that the new market will be successful and attract new players, but we cannot estimate how large it might become," said Peter Barsoom, chief operating officer at ICE Clear Credit. "All new markets take time to grow." The Trade News (U.K.) (3/26)
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Clearing-execution agreement remains in limbo
With a June 10 deadline looming for many buy-side firms to begin clearing over-the-counter swaps, some industry members want to revisit the framework for dealing with faulty execution. Although an agreement was thought to be in place and supported by ISDA and the Futures Industry Association, some buy-side firms are expressing concerns about provisions related to breakage fees and are working to reopen negotiations. International Financing Review (subscription required) (3/23)
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Australia plans to alter how benchmark rate is set
Australia's bank bill swap rate will soon be based on actual prices from electronic brokers and markets, rather than panelists' submissions, according to the industry group that publishes the benchmark. The change comes as major banks withdraw from the rate-setting panel. Bloomberg (3/27)
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Regulatory Roundup
Bank of Canada plans to supervise SwapClear
The Bank of Canada says it will supervise SwapClear, which is operated by LCH.Clearnet and is a major player for centrally clearing over-the-counter interest-rate swaps. The regulator cited systemic risk to the Canadian financial system in the move. Reuters (3/26), The Wall Street Journal/Dow Jones Newswires (3/26)
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Regulation could prompt HFT of interest-rate swaps
Changes to the interest-rate-swap market could lead to the beginnings of algorithmic trading, according to some experts. "I'm not sure we yet have the deep and liquid central limit order books that are required to tip the balance to support significant algorithmic trading ... but with the Dodd-Frank Act clearing mandate coming into effect in the U.S. during 2013, I think we will possibly see more algorithmic strategies emerging," said Simon Wilson of Royal Bank of Scotland. (subscription required) (3/25)
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Transaction taxes aren't meeting expectations, report says
Data from TMF Group show that Europe's financial-transaction taxes have reined in market activity but have fallen short in terms of the amount raised. Hungary's tax has pulled in less than half of what was expected. France is experiencing a similar return. Italy's tax launched only this month, but TMF says it has already shrunk trading volume 38%. City A.M. (London) (3/26)
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The will to succeed is important, but what's more important is the will to prepare."
-- Bobby Knight,
American basketball coach
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