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Dealers Fear Mix-and-Match Margining for Cross-Border Swaps

By Fiona Maxwell 
July 31, 2015, Risk

National conflicts in margin rules can only be fixed via mutual recognition.

Basic differences in national rules on bilateral swap margining could force firms engaging in cross-border derivatives trades to apply the more stringent jurisdiction's regulation, dealers and lawyers are warning. That would drag more counterparties and products into the scope of the regime, which applies clearing-style safeguards to non-cleared trades.

The solution is for jurisdictions to mutually recognise each other's rules, but market participants fear these decisions will not happen in time to avoid a painful process of modifying contracts to comply with the relevant regimes.

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Comment: Post-Trade Realities Hit Home on the Buy-Side

By Virginie O'Shea
July 27, 2015, FOW

The ongoing global regulatory debate about the Tier-one asset management community’s systemic significance reflects the dramatic shift in attitude toward the buy-side over the last 24 months. Though it continues to be fiercely debated, the potential impact of a large asset manager’s failure on the financial markets is at the forefront of the regulatory crackdown on non-bank financial institutions. The buy-side community has already faced a gamut of new regulatory requirements, and it is confronted with the prospect of many more in the coming years. Buy-side-focused regulation may begin to rival that focused on the sell-side in five years if nonbank reform continues to be drafted at this pace.

All of these requirements have already impacted the buy-side’s middle- and back-office operations, and firms that put technology purchases on hold during the 2008 economic and market crisis are evaluating their internal technology environments. Systemic and operational risk concerns have also heightened these firms’ scrutiny of third-party outsourcing relationships, leading to an uptick in reconciliation processes and the introduction of additional reporting layers between firms and their service providers.

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DTCC Appoints New European Trade Repository Chief

By Anna Irrera and Tim Cave 
July 28, 2015, Financial News

The Depository Trust & Clearing Corporation has appointed a securities industry veteran as chief executive of its European derivatives trade repository, as EU regulators consult on the impact of the region’s post-crisis derivatives reforms.

Andrew Douglas, DTCC’s head of government relations in Europe, Middle East, Africa, and Asia, has assumed the additional role of chief executive of DTCC Derivatives Repository Ltd, or DDRL, the European arm of DTCC’s global trade repository which provides post-trade and reporting services for both over-the-counter and exchange-traded equity and credit derivatives.

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Comment: What Happened to the Dream of Consistent Regulation?

By Owen Sanderson
July 23, 2015, GlobalCapital

After the financial crisis, regulators and politicians promised that really, this time, they meant it. The Basel Committee was to be obeyed; regulators would talk to each other, global firms would have a level playing field and standards would be raised.

But it didn’t happen. The derivatives industry has been grappling for years with the mutual incompatibility of the Dodd-Frank Act in the United States and EMIR in the European Union.

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Inflation Games

By Jon Watkins
July 16, 2015, The Trade

Regulators have had interest rate and credit default swaps in their sights ever since the financial crisis, and to an extent non-deliverable forwards. Inflation swaps though, have proved to be an afterthought when it comes to enforcing mandatory clearing.

Escaping the claws of regulatory reform for now, the bilaterally traded product will continue to exist in an uncleared market. However, other regulatory factors could begin to push the buy-side towards clearing the products despite having no obligation to do so.

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ISDA Releases European Clearing Classification Letter

By Cian Burke
July 14, 2015, FOW

Tool allows counterparties to notify each other of their clearing obligations. 

The International Swaps and Derivatives Association (Isda) published on Tuesday a new classification letter allowing trading firms to notify each other of their clering and regulatory obligations under the European Market Infrastructure Regulation (Emir).

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August Launch for GMEX Swap Future

By Helen Bartholomew  
July 7, 2015, IFR

Start-up exchange GMEX will launch its Constant Maturity Future for hedging and trading interest rate exposure on August 7, introducing the latest new derivatives product to target a shift towards centralised clearing.

The euro-denominated hybrid contract offers trading across the entire euro interest rate curve from two to 30 years and will be available for trading and clearing over the Eurex Exchange.

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The Data Deluge

July 2, 2015, Automated Trader

"It's like hell on earth data-wise," says Michael Atkin, a renowned data professional and managing director of the Enterprise Data Management (EDM) Council trade body, in reference to the fragmented nature of over-the-counter (OTC) derivatives and other global capital markets.

The rising demand for data is being driven by a whole raft of new post-crash regulations such as the US Dodd-Frank rules and European Market Infrastructure Regulation (EMIR). These mean that the sell and buy side must store, report, consolidate and use data - often on a real-time basis - as never before. Better data quality, standardised utility-like platforms, efficiency and control are all required in this new environment.

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Buy-Side Facing Up to Derivatives Challenge

June 29, 2015, The Trade

The buy-side share of the derivatives business has grown to record levels over the last decade, as they use derivatives in significant volumes to hedge risks or tap hard-to-access investments. But will this work be curtailed due to the clutch of new market regulations on the horizon?

It is a tricky situation to be in. On the one hand, investors have been grappling with a low interest rate environment and derivatives are being used more than ever to tap into higher-yielding investment strategies and hedge risk. On the other hand, new regulations like the European market infrastructure regulation (EMIR), Solvency II, UCITS V and MiFID II are putting ever more stringent requirements on investors, making it more costly and more complicated to use derivatives. Many believe this could curtail buy-side use of derivatives in the future.

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Asifma: OTC Extraterritoriality to Boost Asia's Capital Markets

By Mark Austen
June 29, 2015, Risk

As part of Asia Risk's 20th anniversary Asifma CEO, Mark Austen, writes about how enforced Asia regulatory co-operation will have long-term benefits

The extraterritorial application of EU and US derivatives regulation, which was designed for a western crisis, exposed the adverse impacts that global reforms can have on nascent capital markets in Asia. There is now widespread recognition that conflicting and duplicative derivatives rules fragment markets, distort competition, and reduce financial market participants' abilities to operate across borders – much to the detriment of Asia-Pacific financial markets.

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