News

Current Articles | RSS Feed RSS Feed

Clearing House Members Fear They May Have to Stump Up in Case of a Failure

By Philip Stafford
November 5, 2014 Financial Times

Post-financial crisis, regulators have been steadfast in their insistence that more of the derivatives market be passed through risk managers known as clearing houses. But many market participants worry about the implications of a failure of one these institutions.

Clearing houses, which stand between two parties in a trade, and guarantee it in the event that one party defaults, are meant to act as the financial markets’ shock absorbers.

full article describe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

Eurex Puts Asia at Core of Growth Strategy

By Jon Watkins
October 21, 2014 The Trade

Eurex has outlined a medium-term plan, putting expansion into Asia and the growth of its OTC clearing business at the forefront of its ambitions.

The German exchange said it is in ‘advanced talks’ with regulators in Singapore to launch its clearing house, while cross-listing and market data deals with Asian exchanges are also on the horizon.

full article describe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

ESMA Lightens Frontloading Burden

By Helen Bartholomew
Published October 4, 2014 IFR

Europe’s key derivatives regulator has reduced the burden that swaps counterparties face as part of a requirement to retrospectively load derivatives into central clearing. However, in its attempt to ease congestion, the European Securities and Markets Authority may have unleashed a new stumbling block for the industry.

In its final draft regulatory technical standards on the clearing obligation for over-the-counter interest rate derivatives, ESMA mandated four classes of swaps for clearing – similar to US requirements under the Dodd-Frank Act (see chart).

full article describe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

Initial Margin Requirements to Grow By $1 Trillion

Published October 2, 2014 Markets Media

Initial margin requirements are expected to increase by more than $1 trillion by 2018 leading to a need to unlock dormant collateral held by institutional investors.

A joint report, “The Capital Markets Industry: The Times They Are A-Changin’ “, from consultants Oliver Wyman and Swift, the payment and messaging firm, said new regulations will cause significant growth in centrally cleared volumes and make collateral management more important.

full article describe the image (free)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

CME Faces Questions Over Pending Swaptions Service

By Tom Osborn
Published October 1, 2014 Risk

The interest rate swaptions market – bifurcated and largely illiquid – will not be easy to drag into clearing houses, although the benefits could be huge. CME Group hopes to launch a service, but dealers are viewing it with caution

They are tried and tested products, with a broad, loyal user-base, but when it comes to clearing, interest rate swaptions have so many quirks that one dealer describes them as "toxic waste". Buy-side demand focuses on European-style swaptions, leaving dealers structurally short on that portion of the market. In turn, dealers balance their portfolios using Bermudan-style or mid-curve swaptions, yield curve spread options and constant maturity swaps.

full article describe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

Comment: The Standard OTC Oxymoron

Like many businesses, financial service providers grapple with a dilemma. On the one hand, they want to offer standardised products – and benefit from volume efficiency – while also striving to build a tailored service that offers more lucrative margins.

But post-crisis we have a new term to juggle; the paradoxically named “standardised OTC”. Over-the-counter (OTC) denotes something bespoke, while “standardised” suggests something “off the peg”. Investors like OTC contracts because they are tailored to meet a specific need.

full article describe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

CCP Heads Warn Against Dangers of Cross-Product Margining

By Daniel O’Leary
Published September 24, 2014 GlobalCapital

Cross-product margin models at central counterparty clearinghouses must be focused on structurally correlated products to maintain clearing member access to funds in the event of a default.

Speaking at the 35th annual Bürgenstock Global Forum for Derivatives Markets in Geneva Wednesday, Daniel Maguire, global head of SwapClear, LCH Clearnet, warned clients must separate the reality from the brochures when choosing margin models. "Structurally correlated products can be offset through portfolio margin - it's on a spreadsheet," he said. "But I do worry that we go too far with this and put everything in this magical bar calculator. Remember that when the default happens, you've got to be able to go and trade."

 

full articledescribe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

Barnier Hints at Longer Pensions Clearing Exemption

By Cecile Sourbes
Published September 12, 2014 Risk

The EC's head of internal markets, Michel Barnier, has hinted that the regulator will extend the pension funds derivatives clearing exemption beyond 2015

The European Commission's outgoing head of the internal market and services division, Michel Barnier, has hinted that the EC will extend the temporary exemption pension funds have from mandatory clearing of their over-the-counter derivatives trades beyond 2015.

full articledescribe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

New Clearing Model Emerges as Costs Rise

By Jon Watkins
Published September 12, 2014 The Trade

Rising fees set by clearing brokers have spurred a new model aimed at smaller buy-side firms who are looking for a cost-efficient way to clear their derivatives trades.

The new concept, known as a sub central counterparty (CCP), was inspired by elements from Asia’s clearing market and is now being considered in Europe and the US.

full articledescribe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails

CCPs Should Prioritise Resolution and Recapitalisation, Says JP Morgan

Published September 12, 2014 The Trade

A J.P. Morgan research paper has called for substantive changes to ensure that central counterparties (CCPs) can continue as ongoing concerns and serve as the market-stabilising force envisaged by regulators.

The bank’s Office of Regulatory Affairs has questioned the robustness of CCPs and whether they have sufficient financial safeguards to minimise the threat of the new too big to fail.

full articledescribe the image (subscription)

SocialTwist Tell-a-Friend Related Posts with Thumbnails
All Posts