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E.U. Regulators Consult on Compromise in Derivatives Spat with U.S.

By Huw Jones
September 3, 2015, Reuters

The European Union has signalled that one of its key rules for regulating financial derivatives could be aligned with U.S. practise to help to end a lengthy dispute that risks fragmenting the $630 trillion market.

The dispute revolves around a rule that would require European market players to hold far more capital than U.S. counterparts for clearing trades, with the disparity holding up a broader transatlantic deal on supervising a derivatives market that largely trades out of London and New York.

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Regional Swaps Booking Replacing Global Hubs

By Catherine Contiguglia
September 4, 2015, Risk

Given a free choice, banks would probably book all of their trades in a global hub. But growing supervisory concerns, plus shifting rules around swaps clearing and execution, bank resolution, capital and liquidity are producing a more fragmented – and possibly less efficient – model.

Two foreign banks with big London offices recently spoke to the Prudential Regulation Authority (PRA) about their derivatives-booking practices and came away with very different messages.

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Exchanges Draw Battle Lines for MiFID II Reporting

By James Rundle and Tim Cave
September 4, 2015, Financial News

Two of Europe's largest exchanges are working to offer cross asset reporting functionality to clients ahead of the release of final technical standards for MiFID II. Bats Chi-X-Europe and the London Stock Exchange are both looking to capitalise on the regulatory reform.

Bats Chi-X Europe, the largest exchange in the E.U. by market share, has set up a working group with 10 tier-one banks to explore an extension of its existing trade reporting facility into over-the-counter derivatives and bonds, according to a person familiar with the discussions.

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UBS Diverts $5 Billion of Asia Deposits to Curb Basel III Costs

By Regina Tan
September 3, 2015, Bloomberg Business

UBS Group AG has shifted more than $5 billion of riskier Asia-Pacific deposits into alternative cash investments as new rules raise the cost of holding them.

The world’s largest manager of millionaires’ money has helped some clients such as hedge funds move their cash into assets held in structures including special purpose vehicles, according to Alessandro Caironi, head of capital market and banking product sales for Asia Pacific at the Swiss bank’s wealth management arm. In return, clients receive securities such as short-term structured notes.

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Watchdogs Approve BofA's Models For Risk-Based Capital

By Evan Weinberger
September 3, 2015, Law360

Federal banking regulators on Thursday allowed Bank of America Corp. to use its own models when determining the capital levels it must maintain.

The Federal Reserve and the Office of the Comptroller of the Currency said that BofA and its subsidiaries had a successful “parallel run” of its models for determining how much risk-based capital the bank has to retain to meet the new requirements of the Basel III international banking accords. Now that the Fed and the OCC have determined that BofA's models meet their...

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Banks Bemoan Data Gap in MiFID II Systematic Internalizer Test

By Fiona Maxwell
September 3, 2015, Risk

E.U.-wide data is needed before banks can determine their market share under a key 'systematic internalizer' rule in MiFID II.

Dealers are complaining it is impossible to work out which products they trade bilaterally will be subject to controversial transparency requirements in 16 months' time. A lack of data is leaving them unable to prepare for the rule and calculate corresponding cost increases for end-users, they say.

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Banks Split on Accounting for KVA – Risk Survey

By Fiona Maxwell
September 2, 2015, Risk

The capital valuation adjustment (KVA) accounting standard is coming, say some, but others see no KVA requirement.

Banks are divided on whether the capital costs associated with their trading businesses will ultimately be recognised in the form of an accounting charge, even though the majority of respondents to a Risk survey already include the so-called capital valuation adjustment (KVA) when pricing trades.

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CME Guaranty Fund Cut Could Lure New Clearing Members

By Robert Mackenzie Smith
September 3, 2015, Risk

Regional banks and prop shops are eyeing direct membership, but the lower minimum guaranty fund contribution does little for existing FCMs.

CME Group's decision to slash its minimum guaranty fund contribution for interest rate swap clearers by 70% has piqued the interest of would-be clearing members.

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Quebec Extends Deadline for Derivatives Rules

By Dan Alderson
September 2, 2015, GlobalCapital

The state of Quebec has delayed the implementation of a new rule that would require registration for foreign brokers trading derivatives for investors located there.

In Canada, much of the regulation of securities and commodity markets is managed on the state or provincial level rather than at the federal. Not all of these individual regulatory bodies specifically address derivatives, with the results having created headaches for investors and a steady flow of work for regulatory attorneys.

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Buy and Sellside Hike Regulatory Spend as E.U. Deadline Looms

By James Rundle
September 2, 2015, Financial News

Trading firms on both the buyside and sellside have substantially increased their spending on compliance-related activities and technology over the past 12 months, according to a survey by Nasdaq.

The exchange operator’s first Global Compliance Survey collected responses from 330 trading firms involved in the retail as well as wholesale sectors. It correlated responses from 158 compliance-specific respondents to generate the data, which found that over half of their firms had increased their budgets for compliance-related activities by 25% or more.

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