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Buy-Side Should Be Allowed to Provide Liquidity to CCPs

February 3, 2016, Markets Media

The European Association of CCP Clearing Houses has asked the European Commission to consider allowing highly creditworthy buy-sidefirms to act as potential investment counterparties to central clearers.

Last October the E.U. Commission launched a Call for Evidence and requested comments by last month on the benefits, unintended effects, consistency and coherence of more than 40 pieces of legislation that has been adopted in direct response to the 2008 global financial crisis. EACH said in its response that certain buy-side firms should be allowed to enter into repo transactions with CCPs for cash balances against high-quality liquid assets. “This would allow CCPs to further diversify their investment counterparty risk profile while providing additional liquidity to the repo market for buy-side institutions,” added EACH.

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Liquidity Concerns Highlighted to E.U. Commission

February 2, 2016, Markets Media

The possibility that European Union rules may harm fixed income liquidity was highlighted in responses to the E.U. Commission as it reviews the regulatory framework for financial services in the region.

Last October the E.U. Commission launched a Call for Evidence and requested comments by last month on the benefits, unintended effects, consistency and coherence of more than 40 pieces of legislation that has been adopted in direct response to the 2008 global financial crisis. The Commission said in a statement: “The Call for Evidence also presents an opportunity for respondents to consider holistically the last six or so years of European law-making across the financial services market and provide feedback accordingly.”

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ESMA Endorses Clearing Exemption to 16 U.K. Pension Funds

By Joe Parsons
February 2, 2016, 
The Trade

Europe’s regulatory authority has endorsed an exemption to mandatory swaps clearing for 16 U.K.-based pension funds due to concerns over costs.

On Tuesday the European Securities and Markets Authority (ESMA) published a list of opinions on the exemption for pension funds, in which arguments for the exemption is “justified” due to difficulties faced with meeting the variation margin requirements.

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Equities Considered for Margin Collateral

February 1, 2016, Markets Media

Many market participants are considering using equities as collateral for initial margin payments as new regulations come into effect in September.

The initial margining (IM) requirements under the European Market Infrastructure Regulation will place additional pressure on market participants as this non-cash collateral needs to be segregated and cannot be re-used according to Clearstream, the international central securities depository owned by Deutsche Börse.

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New Name for SOFA as It Plots Global Expansion

February 1, 2016, Global Investor Magazine

The Swiss Futures & Options Association (SFOA) has changed its name to the International Commodities and Derivatives Association (ICDA). 

The re-brand comes amid major change across the derivatives markets, with regulations such as Dodd-Frank, European Market Infrastructure Reporting (EMIR) and Markets in Financial Instruments Directive (MiFID II) having an impact.

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ESMA to Cooperate with Mexican and South African Regulators on CCPs

January 26, 2016, MondoVisione

The European Securities and Markets Authority (ESMA) has established two Memoranda of Understanding (MOUs) under the European Markets Infrastructure Regulation (EMIR) with the Mexican Comisión Nacional Bancaria y de Valores (CNBV) and the South African Financial Servcies Board (FSB) respectively. 

The MoUs establish cooperation arrangements, including the exchange of information, regarding Central Counterparties (CCPs) which are established and authorised or recognised in Mexico or South Africa, and which have applied for E.U. recognition under EMIR. 

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Comment: Obstacles to Europe's Reporting Vision

By Chris Hall
January 28, 2016, FOW

Almost two years since new reporting rules were introduced in Europe, major hurdles remain to achieving their underlying regulatory objectives: identifying and monitoring systemic risks in the over-the-counter derivatives market.

Individual firms are struggling to report trades consistently across business lines. Counterparties are failing to agree on trade identifiers. Reconciliation rates between trade repositories (TRs) remain low. The European Securities and Markets Authority’s (ESMA) data aggregation plans are subject to delay. And regulators globally are taking different approaches to data quality requirements within their own jurisdictions.

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Europe May Face EMIR Changes

January 14, 2016, Markets Media

Abide Financial, which provides reporting services, said there is likely to be further changes to the European Market Infrastructure Regulation as regulators try to globally harmonize reporting of Unique Product Identifiers.

Chris Dingley, global transaction reporting sales at Abide Financial, said in a blog that the recommendations last month from the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions interact awkwardly with the proposed timelines for the EMIR reporting proposals from the European Securities and Markets Authority.

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ESMA to Cooperate on Non-E.U. CCPs

January 12, 2016, Securities Lending Times

The European Securities and Markets Authority (ESMA) has established agreements with Canadian and Swiss regulators to cooperate regarding central counterparties (CCPs) that have applied for E.U. recognition under the European Markets Infrastructure Regulation (EMIR).

Three memoranda of understanding include agreements on the exchange of information, and refer to CCPs that are established, authorised or recognised in Alberta, Manitoba, Ontario, Quebec or Switzerland.

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Banks Pitch Flexible ‘Sunset CSAs’ for Pension Funds, Insurers

By Callum Tanner
January 11, 2016, Risk

Banks have come up with a way for European pension funds and insurers to avoid the two-tier pricing that has emerged in the swaps market between swaps with cash-only credit support annexes (CSAs) and those without.

By adding a clause to the terms of CSAs, banks are offering buy-side firms the opportunity to post government bonds as swap collateral until central clearing requirements force a move to cash – later this year for insurers, but probably not until 2018 for pension funds. At least one European bank is known to have used the new approach – typically referred to as a sunset CSA – with a U.K. insurer.

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