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E.U. Regulators Split Over Using Initial Margin to Resolve CCPs

By Cecile Sourbes
December 10, 2015, Risk

European regulators are divided over whether initial or variation margin should be haircut as a last-ditch measure to save a stricken central counterparty (CCP) – a choice that places the burden of bailing out a CCP on different users of the venue.

The debate is said by two sources with knowledge of the discussions to have held up long-awaited European Commission rules on recovery and resolution for clearing houses, which were originally expected to be published last month.

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Basel to Propose New Leverage Ratio Accounting for Cleared Derivatives

By Archie van Riemsdijk
December 4, 2015, The Wall Street Journal

International banking regulators will propose a new method for calculating the leverage ratios of banks, as requested by market participants, in a move that could provide relief for the global clearing industry.

The Basel Committee for Banking Supervision is set to allow its standardized approach for measuring counterparty credit risk exposures, or SA-CCR, for banks to calculate their derivatives exposure for the leverage ratio, people with knowledge of the discussions have told The Wall Street Journal.

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Comment: You'll Have to Save Yourself from Systemic Risk

By John Dizard
November 13, 2015, Financial Times

If you have had too much time on your hands lately, or if you were stuck in airports looking up at any screen available , you may have watched the US presidential candidates’ debates. Save your despair for later; this was the good, substantive part of the political process. It will only get worse.

We now have a bit over 14 months until a new president and Congress are sworn in. Until then, the national policymaking process will not be functioning. If a decision on financial laws or regulations has not been made yet, it will be on hold until early 2017.

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Comment: Too Much Regulation Creates Bank Brain Drain

By Edmund Parker and Mayank Gupta
October 18, 2015, Financial Times

Increasingly stringent banking regulations are changing how financial institutions of all shapes and sizes do business.

Tighter regulation is designed to improve standards, but one unintended consequence is the disincentivising of talented investment bankers. Many are now gravitating towards lighter-regulated, smaller finance houses and private equity and investment funds

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The Clearing House Takes Aim at CCP Risk Governance

By Matthew Stevens
September 29, 2015, Risk

Banks call for audit trails and a beefed-up role for risk committees.

The Clearing House – a New York-based group of 24 US banks – has criticized inconsistencies in the risk governance of central counterparties (CCPs) and called on regulators to impose tougher minimum standards.

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Comment: Frenemies at the Gate

By Joe Channer
August 18, 2015, Banking Technology

The sector is not renowned as a home for co-operation: competition is intense, the stakes high, and individualism rewarded. Yet the industry has recently seen a marked increase in collaborative ventures. The post-crisis environment, with regulations driving transparency, is forcing firms to focus resource on areas where there is less competitive advantage, such as risk management or reporting. As a result, fierce rivals are beginning to buck the trend, putting aside their differences to mutualise solutions to problems regulatory, logistical and technical. Consortiums, industry groups and open source projects abound.

Only last month, 13 major banks announced joint backing for an effort to create a utility to reduce disputes over the margin used in swaps trading. This comes soon after the world’s largest swaps dealers began discussions on the creation of an open source model for calculating margin for bilateral derivatives deals. Both moves are a direct response to new rules requiring dealers to post more margin in order to mitigate counterparty risk.

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Massad Reinforces CFTC’s Push for Margining Uncleared Swaps

By Eugene Grygo
July 28, 2015, FTF News

CFTC Chairman Timothy Massad says he will push for new rules to cover margin collection for uncleared swaps, and changes for clearinghouses, swaps dealers, SEFs and swaps data repositories.

Five years after the onset of the Dodd-Frank Act (DFA), CFTC Chairman Timothy G. Massad outlined last week the regulator’s next phase in the DFA rule-making process, which will include margin collection for uncleared swaps, stress tests for clearinghouses, a new definition of a swaps dealer, SEF trading improvements, and cross-border harmony for swaps data repositories (SDRs).

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Comment: Securitization Is Still Running on the Spot

By Owen Sanderson
June 16, 2015, GlobalCapital

Since the crisis, the European securitization market has been pleading unfair treatment. Being tarred with the same brush as US subprime meant the product has had to fight against a huge tide of regulation — and it still hasn’t made much difference.

As the European market gathers for its annual Global ABS conference, the bugbears of the conference are eerily familiar.

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Futures Brokers Feel Strain from Low Interest Rates and Red Tape

By Gregory Meyer and Philip Stafford 
April 12, 2015, Financial Times

The ranks of futures brokers are shrinking at a quickening pace as low interest rates and new financial regulations put severe strain on the middlemen of the $27tn listed derivatives markets.

Data from the Commodity Futures Trading Commission, the US derivatives regulator, shows the number of registered brokers — known as futures commission merchants — stood at 74 at the end of February. That is down from 91 a year earlier, and 189 in February 2005, and the US trend of accelerating industry concentration is a proxy for the global market because most big futures brokers have operations spread across the world.

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Clearing Members Propose Concessions

By Mike Kentz
February 21, 2015, IFR

Derivatives bankers have offered a major concession to global regulators in an effort to save a business they believe is being threatened by Basel leverage ratio requirements.

Major bank executives offered, at a Basel-convened meeting in London two weeks ago, to give up the right to reinvest the collateral their clients post to back derivative transactions if it means regulators will relax leverage ratio requirements.

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