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Knowledge Needed to Prevent Lehman Repeat

By Andrew Haldane, Aurel Schubert and Richard Berne 
January 14, 2015, Financial Times

When Lehman Brothers failed in 2008, it exposed faultlines in the global financial architecture. Many of those have since been recognised and progress made towards closing them, led by the Financial Stability Board under the auspices of the G20 heads of state.

One important but relatively less discussed of those faultlines was a lack of data. It was data gaps that made it nearly impossible for financial regulators and market participants to assess the scale of exposures to Lehman and to the network of Lehman-affiliated firms.

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Regulatory Uncertainty Poses Risks for Canadian Derivs Markets

By Gabriel Surprise
December 8, 2014, GlobalCapital

A lack of clarity and finality surrounding Canadian rules and regulatory oversight between provincial regulators has posed some challenges for derivative market participants. As Canada looks to fulfill components of the G20 reform mandate for OTC derivatives trading--including trade reporting, clearing, and margin requirements--lack of uniform compliance among participants and rule making differences between regulators pose hurdles for the market. 

Components of the G20 global reform agenda, such as trade reporting, went live in Canada in October 2014, and there has been growing interest in Canadian listed futures and options markets from both domestic and international investors. But operational issues surrounding implementing regulations at a company level as well as the timing and certainty of rule making from regulatory authorities have challenged the market.

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Hong Kong Advances on OTC Derivatives Compliance

By Simon Osborne
December 4, 2014, The Trade

Hong Kong is moving ahead with new OTC derivatives regulations, as required by G20 obligations. The Securities and Futures Commission (SFC)and the Hong Kong Monetary Authority (HKMA) have issued their findings following a joint public consultation on the mandatory reporting and record keeping obligations.

The SFC and HKMA have reduced the initial application of the mandatory reporting rules that originally included reporting obligations for Hong Kong persons and asset managers, for those trades entered into on behalf of their clients.

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Massad Backs Cross-Border Co-operation

By Luke Jeffs
November 18, 2014, Futures & Options World

The Europeans have not yet recognized the equivalenc of US clearing houses.

Tim Massad, the chairman of the Commodity Futures Trading Commission, has backed the principals of dual registration and co-operation between national regulators but admitted cross-border harmonization G20 reforms "will take time".

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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.

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ICAP’s Post-trade Business Under Threat from MiFID II

October 31, 2014 The Trade

ICAP is lobbying for an amendment to the MiFID II trading obligation rule which in its present form would force the interdealer broker to discontinue four of its key post-trade risk reduction services. 

The group’s TriOptima and Reset services for OTC derivatives are post-trade risk management tools allowing firms to reduce second order risks in their portfolio.

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Iosco Warns on Data Challenge to Risk Oversight

By Jeremy Grant
October 29, 2014 Financial Times

The top body representing global markets watchdogs has issued a warning over the proliferation of data collection systems in the $700tn derivatives markets, saying regulators will be unable to spot risks building up in the financial system unless data are aggregated properly.

The group of G20 nations in 2009 directed governments to create a composite record of over-the-counter (OTC) derivatives deals to better spot potential systemic risk in banks and clearing houses and help prevent the next big financial meltdown.

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Singapore to Examine Swaps Trading Change

By Jeremy Grant
October 28, 2014 Financial Times

Singapore is considering whether to require market participants to trade on regulated electronic trading platforms, marking a change of tack on its policy on a key aspect of over-the-counter (OTC) derivatives reforms.

Sweeping reforms of the $700tn OTC derivatives markets have been under way since the G20 in 2009 agreed on measures to clean up the financial system after the crisis of the previous year.

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ICE Clear Europe Eyes OTC Rates Push

By Tim Cave
October 13, 2014 Financial News

IntercontinentalExchange is planning to introduce an over-the-counter interest rate swap clearing service to coincide with the introduction of European reforms next year, in a bid take on incumbent provider LCH.Clearnet.

ICE Clear Europe, the Atlanta-based group's London clearing house, aims to have an interest rate swaps clearing service in place during the second half of 2015, according to a person familiar with the situation.

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Deutsche Pullback Shows CDS Challenges

By Christopher Whittall
October 11, 2014 IFR

Deutsche Bank has significantly scaled back single-name credit default swap trading in Europe as it struggles to meet regulatory hurdles on leverage. It is a move that is symptomatic of a wider malaise in a market wallowing in low volumes and spiralling costs.

As the market adjusts to trading a brand new CDS contract, participants say the industry giant is conspicuous by its absence in single names, capping off a two-year period that has seen an exodus of senior traders and a fall in market share in CDS trading.

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