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Chris Giancarlo Calls for Swaps Rule Rethink

By Aaron Timms
March 25, 2015, Institutional Investor

J. Christopher Giancarlo disagrees. He disagrees with the suggestion that the Commodity Futures Trading Commission’s overhaul of the U.S. swaps market is too advanced for there to be meaningful revisions to the rules already passed. And he disagrees with the suggestion that as a new CFTC commissioner recently arrived in Washington after 12 years in the interdealer brokerage business, his strident calls over the past couple of months for the CFTC to revisit its own rules on swaps trading represent the final death rattle of a stricken industry.

“This is not about defending an industry,” Giancarlo says. “Brokers have been around since the beginning of time and likely will be around to the end of time. It’s about defending liquidity and trading in the U.S. swaps market, which is vital to corporations’ ability to manage risk.”

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Regulators Cast Shadow on U.S.-EU Recognition Hopes

By James Rundle
March 26, 2015, Financial News

The ongoing dispute between the US and EU over recognising one another’s regulatory regimes for derivatives trading will not be easily solved, European regulators have said, amid urgent calls from the industry to fix the problem.

Regulators are currently feuding over whether US rules on risk management at central counterparties are inter-operable with EU regulations, with both sides refusing to recognise the other.

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Bowen: CFTC Should Complete Dodd-Frank Rules by Year End

By Joe Rennison
March 25, 2015, Risk

Leaving margin, governance and position limit rules “in flux” will harm market, CFTC commissioner warns.

The Commodity Futures Trading Commission (CFTC) should aim to complete outstanding rules on margin, governance and position limits by the end of this year, according to Sharon Bowen, one of the agency’s commissioners.

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CFTC Clamps Down on "Untenable" Reporting Rules

By Mike Kentz
March 26, 2015, IFR

The Dodd-Frank goal of a complete picture of swaps activity appears to be light years away. Chief regulator, the CFTC, is clamping down on industry compliance with newly established swaps reporting rules, just as market participants publicly complain to Congressional authorities that rules are too harsh.

Discord in the derivatives regulation is not new but the rhetoric surrounding troublesome Dodd-Frank reporting rules had been generally positive until recently, when the CFTC began handing down enforcement orders and warnings to those firms that failed to comply.

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Rates, CDS Notionals Both Up Year-on-Year

By Beth Shah
March 25, 2015, GlobalCapital

Both the overall interest rate notionals and trades counts that were reported to swap data repositories last week increased by 22% and 35%, respectively, from the same time last year, according to data from the International Swaps and Derivatives Association.

Overall reported credit default swap notionals and trade counts were also up compared to March 2014, but only by 1% and 5%, respectively.

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Lacklustre CLOB Participation Needs Trading Incentives

By Gabriel Suprise
March 25, 2015, GlobalCapital

Active trading on central limit order books needs larger liquidity providers and better incentives for more dealers and buyside firms to actively participate, say market particpants.

While the issues preventing adequate liquidity in CLOB trading platforms on swaps execution facilities are clear, determining how market participants will overcome them and what is required for them to migrate away from RFQ and voice broking systems continues to elude both buy­side and sell­side players.

“There will need to be a critical mass of market participants that want to publish liquidity into a central limit order book for CLOB trading to grow, whether they are traditional liquidity providers or some type of alternative liquidity­providing participants,” Elisabeth Kirby, director of rates strategy at Tradeweb in New York, told GlobalCapital. “However, we don’t expect an immediate shift by traditional buyside firms in the short term,” she added.

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ESMA Looks to Limit Retail Access to Embedded Derivatives

By Gabriel Suprise
March 24, 2015, GlobalCapital

As part of MiFID II, the European Securities and Markets Authority is soliciting comment on debt instruments with embedded derivatives. The outcome could restrict retail customers’ access to such products.

An ESMA consultation paper on the matter, which solicits public feedback until June 15, 2015, addresses a number of complex debt instruments and structured deposits that will be subject to scrutiny under the Markets in Financial Instruments Directive II. They focus is on how customers are able to comprehend the risks inherent in the product’s structural complexity.

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Comment: China’s Clearing and Reporting Regimes Being Built Bottom-Up

By Sol Steinberg
March 24, 2015, Risk

China’s derivatives market will be built on the back of G20 reforms, giving one of the world’s largest economies a swaps market designed from the ground up for transparency, regulatory oversight and management of systemic risk.

When members of the Group of 20 met in Pittsburgh in 2009 in the wake of the global financial crisis, they committed to reforms that ushered in a more calculated approach to systemic risk in the financial industry, and along with it, a new market structure for over-the-counter derivatives. Anchored by the principles of mandatory reporting of OTC derivatives transactions, mandatory clearing through central counterparties (CCPs) and mandatory trading on exchanges or electronic trading platforms, the new market the G20 planned for the OTC derivatives space stressed transparency, risk controls and improved protections against market abuses.

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CME Urges Tougher U.S. Response to EU Clearing Dispute

By Philip Stafford
March 25, 2015, Financial Times

The head of the US’s largest derivatives exchanges has suggested European clearing houses be restricted from US markets, if a long-running regulatory spat between the world’s two main regions for derivatives trading is not resolved soon.

Terry Duffy, executive chairman of CME Group, will tell an agriculture committee of the US House of Representatives on Wednesday that equivalent recognition of US clearing houses by European regulators is “the one overriding issue” facing the country’s derivatives markets.

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JWG Regulatory Trading Digest – The End of the Beginning: Conclusions from Paris

March 25, 2015, Automated Trader

This month, ESMA hosted a broad cross-section of market participants for a final 'hearing' on the MiFID II technical standards they will send to Brussels for approval this summer. Of course, many attendees were surprised to find that, while they were en route to Paris, another 355 pages of MiFID II technical standards consultation were issued for comment by 20 March.

As we have known for a while, if all goes according to plan, the 2500+ pages of consultation will redefine the trading landscape in the European Union in 2017. What was apparent from this hearing is that, despite the rush to Paris, we are nearing the end of the initial discussion phase and the implementation phase is nearly ready to launch.

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