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Collateralisation Jumps by a Fifth, Says Isda Margin Survey

By Tom Osborn
Published April 11, 2014 Risk

The proportion of uncleared swaps backed by bilateral margin payments jumped by a fifth last year, with 90% of all these trades now subject to a collateral agreement, according to the International Swaps and Derivatives Association's annual margin survey, which was published yesterday.

This year's 61 respondents – the vast majority of them banks or broker-dealers – said that, as of the end of 2013, 87% of their uncleared over-the-counter derivatives trades were backed by a version of Isda's credit support annex (CSA), the industry standard collateral agreement. The majority of those trades not backed by Isda agreements were typically subject to country-specific laws, or non-standard CSAs, the survey finds.

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Emir Reporting Launch Was Satisfactory – Esma’s Petrenko

By Matt Cameron
Published April 11, 2014 Risk

Thousands of companies were stuck in queues when Europe's reporting regime took effect on February 12, some repositories were overwhelmed with data, and more than half of the one-sided trade reports filed so far cannot be matched up with the second side of the transaction – but the rules have got off to a satisfactory start, according to an official at the European Securities and Markets Authority (Esma).

Speaking yesterday at the annual meeting of the International Swaps and Derivatives Association in Munich, Olga Petrenko, market integrity officer with Esma, said problems had been expected and stressed the vast amount of work required by the industry.

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ISDA AGM: Calls for “Fat Finger” Derivatives Safeguards

By Christopher Whittall
Published April 10, 2014 IFR

The new market structure for trading derivatives on electronic platforms and clearing through central counterparties needs more robust safeguards against operational blunders such as “fat finger” trades, an audience at the ISDA AGM in Munich heard today.

Cash equities and futures exchanges have developed controls and protocols to deal with trading errors over the past decade as high frequency trading has become more prevalent. Bill De Leon, global head of portfolio risk management at Pimco, said derivatives markets haven’t really seen a shift towards HFT, but noted this may happen in certain segments of the market that are undergoing greater standardisation.

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Barclays' Harrison Calls for Phased Start to Clearing in Europe

By Duncan Wood
Published April 10, 2014 Risk

European derivatives users have been urged "don't be late to the party", with the clock now counting down to the start of mandatory clearing.

Speaking at the annual meeting of the International Swaps and Derivatives Association, Harry Harrison, co-head of securities at Barclays, said European regulators should relieve pressure on market participants by phasing the start of the regime, as was the case when clearing rules took effect in the US last year.

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Isda Hoping to Detoxify Derivatives

By Lukas Becker
Published April 9, 2014 Risk

The International Swaps and Derivatives Association wants to change public perceptions of over-the-counter derivatives by highlighting the value of the products to the wider economy. That message got a lot of airtime on day one of the association's annual meeting in Munich yesterday, generating discussion among delegates, some of whom saw it as evidence of a sell-side confidence crisis, while others argued it was a long-overdue attempt to stem unfair attacks.

Speaking to reporters at a mid-morning briefing, Isda chairman Stephen O'Connor – who quoted actor Shia LaBeouf in his opening remarks as an example of widespread, and inaccurate, criticisms of the OTC market – explained the motivations. 

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Growth Threatened in $693 Trillion Derivatives Review

By Abigail Moses
Published April 9, 2014 Bloomberg

Global regulators’ failure to align efforts to reform the $693 trillion derivatives market threatens to undermine economic growth, according to the International Swaps & Derivatives Association.

Investors are struggling to adapt to regional differences to changes agreed by the Group of 20 nations as the industry meets for its annual conference in Munich today. In the U.S. traders have been reporting derivatives transactions to data repositories and have been required to have central clearinghouses back their contracts since last year, while European regulators are still defining the requirements.

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IB Head Raises CCP Capital Fears

By Christopher Whittall
Published April 9, 2014 IFR

Regulators should review the business model of clearing houses that handle over-the-counter derivatives to ensure they can withstand future crises, a senior investment banker said today.

Speaking at the ISDA Annual General Meeting in Munich, Jean Pierre Mustier – head of corporate and investment banking at UniCredit – said the G20 goal of shifting OTC derivatives into central counterparties to reduce systemic risk made a lot of sense.

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Derivative Risk to Financial System Seen Easing in ISDA Survey

By John Glover
Published April 8, 2014 Bloomberg

The threat posed to financial markets by derivatives has been curbed by regulators even as costs for investors have increased, according to an industry survey.

More than 57 percent of those questioned by the International Swaps & Derivatives Association said the system is on a sounder footing than it was before the financial crisis. That improvement has brought with it more red tape, as well as greater expense, according to respondents, of which 42 percent were non-financial corporates, almost 30 percent were banks and 20 percent asset managers.

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CDS Trades Jump on SEFs

By Richard Henderson
Published April 4, 2014 The Trade

Credit default swaps (CDS) traded on swap execution facilities (SEFs) grew 75% from January to April, according to data compiled by the International Swaps and Derivatives Association (ISDA), while rate swaps have seen little growth.

In March, 8,198 CDS trades were executed on SEFs, up 74.1% from January’s total of 5,112 trades. The highest daily trading value was on 13 March, with 566 trades worth US$17.8 executed on SEFs. The data includes all US dollar CDS product types executed on SEFs across all tenors.

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Industry Seeks Urgent Clarification on Frontloading

By Paloma Migone
Published March 27, 2014 The Trade

Market participants are seeking answers from European regulators on a frontloading obligation for OTC derivatives after it was recently triggered by the approval of the first central counterparty (CCP).

In a joint letter to the European Securities and Markets Authority (ESMA) last week, the International Swaps and Derivatives Association (ISDA) and FIA Europe called for “swift action” on guidance for the industry on frontloading.

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