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Derivatives Clearing Diverts Capital from Long-Term Investing – PensionsEurope

By Jonathan Williams
June 24, 2015, IPE

Mandating central clearing of derivatives trades would only serve to increase profits for clearinghouses and could increase risk, PensionsEurope has warned. 

In a discussion paper on the Capital Markets Union (CMU), published to coincide with the industry group’s annual conference in Brussels, the association warned that a more coherent capital market could be undermined by regulatory requirements diverting funds away from investment opportunities.

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Can Firms Afford to Comply with Trade Reporting Requirements?

June 24, 2015, FTSE Global Markets

Now that most G20 member states have mandated trade reporting of derivatives, market participants have an opportunity to evaluate the agility and sustainability of their current approach. In this article, Randall Orbon, Arun Karur and Cian Ó Braonáin of Sapient Global Markets discuss the state of trade reporting and show how growing costs, complexity and regulatory scrutiny are fuelling a compelling business case for third-party managed solutions.

To address the trade reporting requirements outlined in Dodd-Frank and EMIR, many organisations made significant investments in internal systems. Now additional regulations and further enhancements—including MiFID II/MiFIR and requirements in other regions—are poised to effect more change. In addition, it is likely that regulators will begin to scrutinise data and organizations will need ways to create assurance and paths to remediation for trades that are self-reported or reported on their behalf.

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Clearers Challenge Massad Over E.U. Client Protections

By Kris Devasabai and Cecil Sourbes 
June 23, 2015, Risk

Market participants have challenged CFTC chairman Timothy Massad's suggestion that Europe's CCP margin rules put customers at greater risk.

Clearing banks and central counterparties (CCPs) have challenged a top US regulator's suggestion that European clearing rules put customers at greater risk.

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CCP Wrangling Sparks New Frontloading Fears

By Fiona Maxwell
June 17, 2015, Risk

Dealers fear trades could be booked at CCPs they are not able to use

Banks and end-users may be forced to close out and replace trades that are destined to be cleared as a result of the delay to the authorisation of third-country clearing houses, dealers are warning. The danger zone starts up to seven months prior to the clearing deadline.

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ISDA Rallies Support for Derivatives Data Reporting Rethink

By Elliott Holley
June 16, 2015, Banking Technology

Eleven financial associations have published their support for a new set of derivatives reporting standards developed by ISDA, which is calling for greater cross-border harmonisation of data standards – even if that means some national laws will have to be amended.

ISDA – essentially the representative body for participants in the derivatives markets with 800 members including banks, exchanges, clearing houses, investment managers, commodities and energy companies, insurers and government entities –  has published a set of data reporting principles, which it says will improve the consistency of the data being reported and thus help regulatory transparency.

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Leverage Ratio Threatens Clearing Viability, Warns FIA

By Helen Bartholomew
June 13, 2015, IFR

The swaps clearing mandate under the European Market Infrastructure Regulation is not viable unless regulators relent on Basel III leverage ratio requirements that treat client segregated margin as a leveraged asset on the balance sheet, the Futures Industry Association in Europe has warned.

Coinciding with its annual European IDX Derivatives Expo held in London last week, the industry group – representing 170 firms involved in listed and centrally cleared derivatives markets – is calling on regulators to recognise the exposure-reducing effect of client segregated margin that is held by clearing brokers to back cleared over-the-counter derivatives trades.

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MiFID II Open Access to CCPs Called Into Question

By Elliott Holley
June 11, 2015, Banking Technology

As the European Commission’s MiFID II legislation moves towards implementation of technical standards, some of Europe’s national regulators are seriously worried that mandatory open access to CCPs may not be such a good idea. Concerns about the ability to manage risk and the ability to effectively handle data were highlighted by speakers at the IDX FIA conference in London yesterday.

“A CCP must be able to contain all the risks it is introducing,” said Sander van Leijenhorst, senior supervision officer, Netherlands Authority for the Financial Markets. “The whole point is to mitigate risk. If there is a regulatory requirement to provide access to a venue, but the CCP can’t mitigate the risk from that venue, that’s not good. Forcing the entire industry to access each other’s infrastructure is not good if it means that CCPs can’t mitigate the risk.”

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Leverage Ratio Threatens Clearing Viability, Warns FIA

By Helen Bartholomew
June 8, 2015, IFR

The swaps clearing mandate under the European Markets Infrastructure Regulation is not viable unless regulators relent on Basel III leverage ratio requirements that treat client segregated margin as a levered asset on the balance sheet, the Futures Industry Association in Europe has warned.

Ahead of its annual European International Derivatives Expo to be held in London this week, the industry group – representing 170 firms involved in listed and centrally cleared derivatives markets – is calling on regulators to recognise the exposure-reducing effect of client segregated margin that is held by clearing brokers to back cleared over-the-counter derivatives trades.

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Spotlight on CCP Risk

June 4, 2015, Automated Trader

Regulators around the world are increasingly looking to central counterparty (CCP) clearing houses as a way to mitigate counterparty risk in the market. But is this just the next too-big-to-fail in the making?

CCPs bring counterparties together and manage the risk of financial transactions between them. But by becoming an essential infrastructure, CCPs can possibly pose significant systemic risk to the market.

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Calling Collateral

June 3, 2015, Automated Trader

After cracks developed in global financial markets post-crisis, regulators embarked on sweeping reforms to the OTC derivatives world. The $630 trillion notional OTC derivatives market has been impacted by regulations such as Dodd-Frank in the US, EMIR in Europe and Basel III globally. Implementation means a major shake-up in how derivatives are settled, collateralised and reported.

Consequently, the once obscure world of collateral management is being thrust into the spotlight.

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