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LCH.Clearnet Interest Rate Swaps Fall in Value

By Philip Stafford
November 27, 2014, Financial Times

LCH.Clearnet will this year report the first ever fall in the value of the interest rate swaps it clears for the world’s big investment banks as new global capital rules designed to reduce the leverage in markets begin to bite.

The UK clearing house said on Thursday it expected its SwapClear business to have processed swaps worth a notional $400tn by the end of the year. That is compared with $426tn it was risk managing at the start of the year, it added.

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Europe to Delay New Capital Rules for Banks

By Philip Stafford
November 26, 2014, Financial Times

Europe will formally push back next month’s introduction of new capital rules for banks as it continues to argue with the US over recognition of the latter as having “equivalent” rules to oversee clearing houses.

The disclosure, by Patrick Pearson, head of the financial market infrastructure unit at the European Commission, came at a conference in London on Wednesday.

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ISDA Calls for Uncleared Swaps Margin Extension

By Helen Bartholomew
November 27, 2014, IFR Asia

Under the current timetable for implementing a margin framework proposed by BCBS/IOSCO in September 2013, new rules are expected to be finalised by local regulators in April 2015. Initial margin requirements will take effect for the first wave of market participants – those with notional exposure over US$3trn – in December 2015 and a phased approach will bring more financial counterparties on board each year until the final wave is captured in December 2019.

According to the proposals, variation margin will apply to all counterparties with swaps exposures above the minimum threshold at the first 2015 implementation date.

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Buy-Side Boardroom: The Liquidity Challenge

By John Bakie
November 25, 2014, The Trade

Explaining complex trading concepts, such as dark pools and high-frequency trading, to senior managers and clients can prove equally as challenging as accessing liquidity, according to buy-siders at the Leaders in Trading event in London last week.

A session titled ‘Meeting Future Liquidity Challenges’, sponsored by ITG, brought together key buy-siders to consider how high-frequency trading (HFT) and MiFID II are likely to affect their ability to access liquidity.

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CME Group Defends Market Surveillance After CFTC Review

By Tom Polansek
November 25, 2014, Reuters

CME Group Inc on Tuesday defended its record of pursuing market manipulation, a day after U.S. regulators said the world's largest futures exchange operator should put more work into identifying an illegal trading practice known as "spoofing."

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Massad’s CFTC Pursues Softer Tone as Battles With Industry Fade

By Silla Brush
November 25, 2014, Bloomberg 

Southwest Airlines Co. complained for months in Washington that rules designed to curb excesses of the finance industry were hurting companies far from Wall Street.

Southwest lobbied regulators, wrote letters to lawmakers and testified at a congressional hearing that new safeguards for the swaps market were increasing its fuel costs by as much as $60 million a year. The agency that could do something about it, the Commodity Futures Trading Commission, refused to budge.

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Trade Group Calls for More Resilience and Transparency of Clearinghouses

By Andrew Ackerman and Katy Burne
November 25, 2014, The Wall Street Journal

A Wall Street trade group is pressing regulators to boost the resilience and transparency of clearinghouses, which constitute a key safety net for the financial system.

The International Swaps and Derivatives Association said firms likeCME Group Inc., LCH Clearnet Group Ltd. and other clearinghouse operators must take steps to reveal more about their business risks and set aside more cash reserves.

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CME to Launch Repo Futures Through BNY Mellon Agreement

November 25, 2014, The Trade

CME has teamed up with BNY Mellon to launch futures contracts based on US Tri-Party Repo indices, set to go live in 2015.

The new interest rate hedging tools will be introduced on the Chicago Board of Trade and track the US$400 billion per day of overnight repo transactions in the index asset classes processed daily on BNY Mellon's Tri-Party Repo platform.

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GFI Launches MAC Swaps Live on Order Book

By Beth Shah
November 25, 2014, GlobalCapital

GFI Group has launched dollar-denominated market agreed coupon (MAC) swaps on its swap execution facility. The firm now offers live tradable prices for such contracts in a central limit order book on its electronic platform known as RatesMatch.

MAC swaps have pre­determined, standardised terms which begin on the International Monetary Market dates. Due to the standardised nature of such swaps, they are far more suited to anonymous order book trading as opposed to request­for­quote, while also allowing for greater initial margin and line item efficiencies for market participants. By enabling MAC swaps to be traded this way, it will result in greater liquidity in the interest rate swap markets.

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SwapClear Hopes to Crush Notions by $600trn

By Tom Osborn
November 25, 2014, Risk

Removing old bilateral records for cleared trades will allow CCP to ramp up its compression services, cutting notionals by as much as $300 trillion this year and next, the industry hopes.

The swaps market may be about to wriggle out of the leverage ratio's stranglehold, thanks in part to a radical new approach to trade compression that is being rolled out at LCH.Clearnet. The clearing house is aiming to slash the outstanding gross notional of interest rate swaps at its SwapClear service by $600 trillion over 2013 and 2014 – roughly equivalent to the current size of the entire rates derivatives market.

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