By Lukas BeckerOctober 28, 2014 Risk
Banks are turning to credit swaptions and guarantees to reduce the earnings volatility that arises when hedging the credit valuation adjustment capital charge in Basel III.
Since late 2012, Deutsche Bank has lost €443 million euros on hedges that cut its capital requirement for derivatives counterparty exposure – a trade-off banks face because the regulatory and accounting definitions of credit valuation adjustment (CVA) are different, meaning regulators might see a hedge as effective, while accountants do not. That problem has prompted some institutions – and individuals – to look for ways to satisfy both sets of rules.
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By Gregg WirthPublished August 13, 2014 Traders Magazine
The turf war among regulators in the U.S. and Europe in the area of clearing of over-the-counter (OTC) derivatives has made central counterparties (CCPs) in those countries nervous about a mid-December deadline to reach regulatory equivalence. Among those CCPs is Chicago-based CME Clearing, which clears a large portion of euro/dollar interest rate swaps, and worries the industry could be impacted if an agreement isn't reached.
Traders spoke to Suzanne Sprague, executive director of collateral and risk for CME Clearing about the impasse, how to resolve it, and what it means for the clearing market.
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By Andrew Saks-McLeodPublished August 12, 2014 LeapRate
As the European rulings on post-trade processing continue to take shape, the European Securities and Markets Authority has today published a list of central counterparties (CCPs) which are established in countries located outside the European Union and European economic area, that have applied for recognition under the European Union regulatory framework on OTC derivatives, CCPs and trade repositories in accordance with the European Market Infrastructure Regulation (EMIR).
The list comprises of thirty-eight executing venues, clearing houses, exchanges, diversified market places and depositories, which are located in various regions including Australia, the Asia Pacific, Israel, and North America.
By John D'Antona, Jr.Published August 4, 2014 Traders Magazine
With more trading and risk in the swaps market, clearinghouses should be more open and disclose their operating procedures for the benefit of the marketplace.
That's the viewpoint of market consultancy Tabb Group, which said in a recent report that the concentration of risk among central counterparties in the new global market structure must be accompanied by a proportional increase in transparency and reporting at the CCPs.
By Marina DarasPublished August 4, 2014 Waters Technology
The Chicago Mercantile Exchange Group's (CME) European clearinghouse, CME Clearing Europe, has received regulatory approval to operate as a central counterparty clearinghouse (CCP) in accordance with the European Market Infrastructure Regulation (Emir).
CME Clearing Europe handles a broad range of over-the-counter and exchange-traded derivatives, including interest-rate swaps, energy and commodities contracts, and foreign-exchange derivatives for clearing.
By Christopher WhittallPublished July 19, 2014 IFR
Efforts from central counterparties to expand the range of rates products they clear are stalling amid growing industry concern that it could be dangerous to shoehorn more exotic derivatives into clearing houses.
While CCPs may soon launch clearing of inflation swaps, bringing the far larger swaptions market into the fold is proving a much tougher nut to crack. This has led to a difference of opinion between the two largest interest rate swap CCPs regarding how soon the product can begin to be cleared.
By Mike KentzPublished July 21, 2014 IFR
Swaps brokers are looking to capitalise on growing market demand to reduce the margin costs associated with central clearing, by launching services that allow users to switch between derivatives clearing houses with greater ease.
Tradition and GFI Group are both building out infrastructure to allow participants to seamlessly switch exposures across the two major swaps clearing houses, CME Group and LCH.Clearnet.
By Peter MadiganPublished July 18, 2014 Risk
The Federal Reserve Bank of New York plays a key role in the supervision of clearing houses and other new swap market players. Peter Madigan speaks to Jeanmarie Davis, head of the agency's financial market infrastructure function, about the challenges involved
A visit to the Federal Reserve Bank of New York in lower Manhattan is an odd and slightly intimidating experience – as it should be, perhaps. Resembling an imposing, sandstone fortress from the outside, entering the building involves passing through airport-style security, complete with ID checks, scans and stony-faced guards, before emerging into the windowless and featureless grey corridors that are a hallmark of most US government buildings.
By Jon WatkinsPublished July 15, 2014 The Trade
The Commodity Futures Trading Commission (CFTC) is considering a request from ICE Clear Europe to allow non-clearing members to benefit from cross-border margin offsets.
A petition filed by ICE builds on an existing order allowing its European central counterparty (CCP) to offer portfolio margining to its clearing members.
Published July 14, 2014 The Trade
How will forthcoming clearing regulations spur competition in Europe?
New regulations will dramatically change the clearing landscape across Europe. The MiFID II requires central counterparties (CCPs) to clear derivatives trades for any venue across the continent, known as the open access rule. The overhaul is in line with increasing transparency and competition within the derivatives market.
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