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DerivAlert’s Top 10 News Stories of the Year: 2013

There was no shortage of big news from the derivatives market this year.  In the month of October alone, the deadline for trading derivatives electronically on SEFs was met while the federal government implementing these regulations was shut down. Across the Atlantic, another group of regulators was lobbying for a delay in those rules, citing potential cross-border issues.  

Meanwhile, CFTC Chairman Gary Gensler, who announced that he will step down at the end of the year, held firm to his agency’s game plan.  And so, the new era of SEF-based OTC derivatives trading was born, as mandated by Dodd-Frank. 

Amidst all of the upheaval of the past year – the passed rules and agency guidance, the extended deadlines, uncertainty around extraterritoriality and the gridlock in Washington – which stories grabbed the most attention among DerivAlert readers?  To find out, we dug into the analytics to find out which posts were the most viewed over the course of 2013. 

Here they are, chosen by you, the DerivAlert reader:

The Top Stories of 2013 
(along with a few honorable mentions that we couldn’t resist including on the list):

10) EMIR Flaws Could See Futures Reporting Delayed Till 2015
By Tom Osborn
Published July 29, 2013, Risk

The European Securities and Markets Authority (Esma) has confirmed it is considering pushing back its trade reporting deadline for exchange-traded derivatives until as late as January 2015, in order to give firms more time to adapt the reporting framework to futures and options products.

full article  (subscription)

 9) Standardized OTC Swaps to Launch Within Weeks
By Peter Madigan
Published April 19, 2013, Risk

Within weeks, fixed-income market participants will be able to trade a new, exchange-traded version of the over-the-counter interest rate swap, with eight tenors, standard coupons and quarterly maturity dates like those used in the futures market. Some of those involved in the work see it as a way of defending the OTC market against the threat posed by swap futures.

full article  (subscription)

8) Uh Oh: The Attempt to Regulate Swaps is Failing
By John Carney
Published April 6, 2013, CNBC

It's hardly surprising to hear that some of the largest derivatives brokerages are looking to set up futures exchanges. A huge portion of the traditional business these brokers did is in the process of migrating out of swaps and into futures.

full article  (free)

7) US in Compromise on Derivatives Trade Rules
By Michael Mackenzie and Gregory Meyer
Published May 16, 2013, Financial Times

Commissioners on the US Commodity Futures Trading Commission voted 4 to 1 to pass long-awaited derivatives trading rules on Thursday that preserve voice-based transactions in conjunction with electronic platforms.

full article  (subscription)

6) SEF Rules Hit Non-US Cross-Border Trading
By David Wigan
Published October 31, 2013, Euromoney

The requirement from October 2 for swap dealers and regular users of derivatives to transact swaps on Commodity Futures Trading Commission-mandated swap execution facilities (SEFs) was the last piece in the puzzle for US derivatives market regulation, after mandatory reporting and clearing came in earlier this year.

full article  (free)

5) Swaps Clearing Rules Divide Market
By Philip Stafford
Published August 21, 2013, Financial Times

An obscure part of the Dodd-Frank Act has become the unwitting battleground among market infrastructure operators as they seek to meet rules tightening derivatives trading.

full article  (subscription)

4) SEF Execution Agreement Requirement Angers Buy-Side
By Peter Madigan
Published September 24, 2013, Risk

Buy-side firms are refusing to sign participation agreements with some newly registered US swap execution facilities (Sefs), because of a controversial requirement that commits end-users to negotiate bilateral trade breakage agreements with any counterparty they transact with on the trading venues, Risk has learned.

full article  (subscription)

3) Traders Take Their Swaps Deals to Futures ExchangesBy Matthew Philips
Published January 24, 2013, Bloomberg Businessweek

On Friday, Oct. 15, a rule designed to improve government oversight of the multitrillion-dollar market for derivatives took effect. The following Monday, many energy traders moved their swaps business to a futures exchange. After the U.S. Commodity Futures Trading Commission put two years into building its regulatory framework for swaps, a slice of the market simply sidestepped it.

full article  (free)

2) CFTC to Shake Up Swaps Trading Market
By Michael Mackenzie, Gina Chon, and Philip Stafford
Published November 17, 2013, Financial Times

New guidance from the main US regulator of privately negotiated derivatives is set to test the business models of interdealer brokers, who have long played a crucial intermediary role between global banks.

full article  (subscription)

1) High Drama at the CFTC: The Battle Over Swaps and Futures
By Matthew Philips
Published February 1, 2013, Bloomberg Businessweek

Hearings at the U.S. Commodity Futures Trading Commission aren’t exactly known for their riveting entertainment value. Nor for their mass-market appeal. Yet on Thursday, it was standing-room-only at the CFTC headquarters in Washington as the commission held a roundtable discussion about the recent migration of swaps trading into the futures market.

full article  (free)

Honorable Mentions:
The Stories Made Us Stop and Say, ‘Whoa’

Three Wall Street Trade Associations Sue US Regulator
By Katy Burne
Published December 4, 2013, Wall Street Journal

Three Wall Street trade groups are suing a top U.S. regulator alleging procedural violations at the agency, in the latest effort by large banks to fight new rules that they contend will unfairly crimp their trading business.

full article  (subscription)

Wetjen Said to Face Vote as Acting CFTC Head Replacing Gensler
By Silla Brush
Published December 13, 2013, Bloomberg

Commodity Futures Trading Commissioner Mark P. Wetjen is poised to be voted acting chairman of the top U.S. derivatives regulator within days, according to two people with knowledge of the process.

full article  (free)

SEF MAT Submissions: Reality Check
By Radi Khasawneh
Published November 1, 2013, Tabb Forum

Implementing the Made Available to Trade rule will transform the swap market. But based on early SEF submissions to the CFTC, the industry needs clarity on which swaps will qualify.

full article  (free)

Standardization Needed in SEF Reporting Conventions
By Michael Watt
Published October 25, 2013, Risk

One of the core principles behind swap execution facilities (Sefs) – the new breed of trading platforms that opened for business under the US Dodd-Frank Act on October 2 – was to create greater transparency in the swaps market. In the words of the Commodity Futures Trading Commission (CFTC), Sefs must "make public timely information on price, trading volume, and other trading data on swaps to the extent prescribed by the commission".

full article  (subscription)

EMIR Reporting Questions Pile Up for Corporates
By Fiona Mawell
Published October 3, 2013, Risk

Amid fundamental questions about the timing and scope of Europe’s new derivatives reporting rules, corporates are weighing whether to delegate the work to their dealers. But some large companies are not keen – and many banks are sitting on the fence. Fiona Maxwell reports

full article  (subscription)

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Most Read Articles: October 24-November 6

Here are the five most-read articles on DerivAlert for the past two weeks:

For the latest breaking derivatives news, bookmark DerivAlert, follow us on Twitter @DerivAlert or subscribe to our daily e-mail newsletter by clicking here.

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Most-Read Articles: October 8th-16th

Here are the five most-read articles on DerivAlert for the past week:

For the latest breaking derivatives news, bookmark DerivAlert, follow us on Twitter @DerivAlert or subscribe to our daily e-mail newsletter by clicking here.

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DerivAlert Selected as Finalist in FTF News Technology Innovation Awards 2011

After more than a year of aggregating news and providing original content on regulatory reform in the OTC derivatives market, DerivAlert is proud to be acknowledged as a finalist in FTF News’ Technology Innovation Awards 2011 for the most effective use of social media.  In the past year, DerivAlert has evolved to become a premier blog portal for news and information on regulatory reform of the OTC derivatives markets through aggregated news alerts, blog commentary, legislative timelines, video content, industry research, a directory of financial & regulatory leaders, and other educational material.  And in the limited universe of global market participants in the swaps markets, DerivAlert now reaches a world-wide audience of more than 8,500 regulators, buy- and sell-side traders, journalists, analysts and industry leaders each month – plus more than 600 followers on Twitter!

We’d like to thank you, our readership, for your continued interest in derivatives reform and helping to make DerivAlert a success, in addition to the editorial team at FTF News for naming DerivAlert to the list of finalists.

To learn more about this year’s awards or support DerivAlert, you may register to FTF News for free here and submit your vote through this link before 6 p.m. ET on April 8th.

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CFTC, EC Release Joint Statement on OTC Derivatives Regulation

CFTC Chairman Gary Gensler traveled to Brussels the week September 27 to discuss various rules that will affect the OTC derivatives markets on both sides of the pond with European Commissioner Michel Barnier. After their meeting, the two released a joint statement solidifying the transatlantic intent to cooperate closely in strengthening the global financial system.

According to the joint statement, Commissioner Barnier and Chairman Gensler discussed several issues pertaining to enhancing oversight and reducing risk in the OTC derivatives market including:

  • Comprehensive regulating of derivatives dealers for capital and margin, recordkeeping and reporting and business conduct standards
  • Requiring standardized OTC derivatives to be cleared by central counterparties, imposing stringent prudential and organization rules for central counterparties and imposing risk mitigation standards for non-standardized contracts that are not centrally cleared
  • Increasing transparency of the OTC derivatives market

Read the full joint statement here.

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Transcripts & Webcast: SEC/CFTC Roundtables on SEFs and Swaps Data

On September 14th and 15th, the SEC and CFTC held two days of roundtables in Washington to discuss various issues relating to the Dodd-Frank Act, including swap execution facilities (SEFs), swaps data repositories and exceptions from the mandatory electronic trading rule.

The 400-page transcript of the roundtable discussions from September 14th is available here.

Streaming copies of the two webcasts from September 15th are available from the SEC via the following links:

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Tradeweb Responds to CFTC Draft Rules

Tradeweb has issued a statement in response to the CFTC draft rules that were announced today:

"We are entirely supportive of the regulators' efforts to modernize the derivatives market, but the new rules need to encourage the growth of a competitive marketplace. Investment in trading and clearing venues by market participants has provided the seed capital leading to the creation of solutions that support the transparency and systemic risk reduction the Dodd-Frank Act seeks to achieve. Competition between clearing organizations, in particular, is best stimulated by rules that ensure open and equal access to DCO's for all SEFs and market participants. Failure to achieve a level playing field for DCO's runs the danger of forming a combined execution and clearing monopoly, stifling innovation and competition."

In reference to governance:

"Tradeweb is in favor of independent directors, but at this stage it is unclear what their role will be. For outside board members to be effective, their interests need to be aligned with investors and other stakeholders." SocialTwist Tell-a-Friend

Senate Banking Committee Testifies on the Dodd-Frank Act

Federal Reserve Board Chairman Ben Bernanke and other top financial regulators will meet with the Senate Banking Committee this morning, at 10am EST, to discuss the implementation of the new financial regulation bill.

Watch the hearing live on C-SPAN3 here.

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Industry Presentations & Comments to the CFTC on Swap Execution Facility Registration

Over the past several weeks, the CFTC received public comments and held meetings with financial industry participants on SEF Registration Requirements and Core Principle Rulemaking,.  Coinciding with the recent CFTC-SEC roundtable discussions on SEFs held on September 14th and 15th, copies of presentations from these internal meetings are now available online to the public.

Links to PDFs for each of the presentations are available from the CFTC in chronological order below:

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SEC/CFTC, OTC Derivatives Industry Members Discuss Swap Execution Facilities

The U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) held a second day of roundtables in Washington, DC, yesterday, where industry members discussed issues around swap execution facilities (SEFs) and security-based swap execution facilities (SB SEFs). 

The panel discussion included representatives from the industry, including the SEC, CFTC, Tradeweb, the Intercontinental Exchange (ICE) and the Wholesale Markets Brokers Association Americas (WMBAA). Although there are still many unknowns when it comes to SEFs — including the finite definition, range of the venues and the scope of exception from mandatory trading requirement — the majority of the debate focused on the request for quote (RFQ) process.

Overall, the panelists were in agreement that whatever the SEF and RFQ models look like after the new rules are drafted, flexibility is crucial to the success of the marketplace. The OTC derivatives industry is still in early stages of evolution toward becoming a predominantly electronic market. Allowing for flexibility in SEF models will drive competition, technical innovation and liquidity to the OTC derivatives market. The panelists also discussed the necessity to include pre-trade transparency in how the SEFs will operate, the need to protect block-size orders and which instruments would be exempt from the mandatory trading requirement. SocialTwist Tell-a-Friend
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