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U.S. Bank Watchdogs Implement ISDA Stay Provision for Swaps

By Douwe Miedema
December 16, 2014, Reuters

U.S. bank regulators on Tuesday issued a rule to allow a stay in terminating derivative contracts if a bank lands in trouble, a provision needed to help them wind down failed banks without causing market mayhem.

The rule by the Federal Reserve and the Office of the Comptroller of the Currency reflected changes to the standard contract made by the International Swaps and Derivatives Association (ISDA) and 18 major banks.

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CDS Notional Continues Upward Trend

By Gabriel Surprise 
December 15, 2014, GlobalCapital

Overall credit default swap notion that was reported to swap data repositories last week increased by 33% from the previous week, according to data from the International Swaps and Derivatives Association.

However, overall interest rate derivatives trading that was reported declined by 20% from the previous week, following a week of moderate increases in trading for both CDS and rates.

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CCP Stress Tests on Tap

December 10, 2014, Markets Media

When Lehman Brothers collapsed in late 2008, LCH SwapClear, which was already clearing inter-dealer trades in significant volume, took on the role of clearing every position at every CCP that Lehman was a member of. The nightmare scenario of one or more clearing members cascading through the financial system is still a real threat, so much so that the InternationalSwaps and Derivatives Association has called for CCPs to undergo mandatory stress testing and make public the results.

“It’s not the same as activities in the normal bilateral market, where counterparties, once they get the idea that a particular counterparty risk management is not effective, can decide not to trade with them,” John Williams, a derivatives lawyer at Milbank Tweed, told Markets Media. “It doesn’t work that way with CCPs.”

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ISDA’s O’Malia: CFTC Rules Need Reassessing

By Zoe Thomas
December 10, 2014, International Financial Law Review

Six months after becoming chief of the global OTC trade body, Scott O'Malia discusses his plans for the cross-border derivatives market. 

It's been a year of change for Scott O'Malia. In July he resigned as commissioner of the Commodity Futures Trading Commission (CFTC). A month later, he became CEO of the International Swaps and Derivatives Association (ISDA).

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Default Needed for Complete Switch to 2014 CDS Definitions

By Hazel Sheffield
December 3, 2014, GlobalCapital

A credit event similar to the 2013 default of SNS Reaal would rest out new terms of derivatives contracts, likely convincing some market particpants to make the switch from credit default swap contracts governed by 2003 definitions, to the new rules implemented by the International Swaps and Derivatives Association earlier this year.

As of yet, not all market participants are convinced about the necessity to update their contracts, according to Danny White, European credit derivatives researcher at JPMorgan in London. “In terms of what we’ve seen from investors, take up has been good, but what we might need to see for a complete switch over from the old contracts is some sort of case study credit event: a corporate or sovereign default where the performance of the old and new contracts could be compared. You could see a lot more people switching to the new contracts after that,” White said.

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O’Connor to Step Down as Chair of ISDA

By Philip Stafford
December 1, 2014 Financial Times

Stephen O’Connor has stepped down as full-time chairman of the International Swaps and Derivatives Association (Isda), one of the market’s biggest and most influential trade bodies, after just 18 months in the role.

He will be replaced by Isda vice-chairman Eric Litvack, who will combine the position with his existing role at Société Générale as managing director and head of regulatory strategy for the group’s Global Banking and Investor Solutions business. The changeover will take place on January 1, Isda said on Monday.

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ISDA Calls for Uncleared Swaps Margin Extension

By Helen Bartholomew
November 27, 2014, IFR Asia

Under the current timetable for implementing a margin framework proposed by BCBS/IOSCO in September 2013, new rules are expected to be finalised by local regulators in April 2015. Initial margin requirements will take effect for the first wave of market participants – those with notional exposure over US$3trn – in December 2015 and a phased approach will bring more financial counterparties on board each year until the final wave is captured in December 2019.

According to the proposals, variation margin will apply to all counterparties with swaps exposures above the minimum threshold at the first 2015 implementation date.

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Trade Group Calls for More Resilience and Transparency of Clearinghouses

By Andrew Ackerman and Katy Burne
November 25, 2014, The Wall Street Journal

A Wall Street trade group is pressing regulators to boost the resilience and transparency of clearinghouses, which constitute a key safety net for the financial system.

The International Swaps and Derivatives Association said firms likeCME Group Inc., LCH Clearnet Group Ltd. and other clearinghouse operators must take steps to reveal more about their business risks and set aside more cash reserves.

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End Users Face Swap Margin Requirements

November 11, 2014, Markets Media

The issue of margin for non-cleared derivatives is a contentious one for swap-market participants.

Although hedge funds are generally subject to both initial and variation margin, non-financial end users are faced with the prospect of having to post margin for the first time.

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Hedge Fund, Investor Groups Hammer Swaps ‘Stays’

By Andrew Ackerman
November 4, 2014 The Wall Street Journal

Hedge funds, insurers and other companies said global regulators shouldn’t implement new rules aimed at protecting the financial system against the failure of big banks.

At issue are changes endorsed by global banking regulators that would require banks and investors to give up their contractual rights to terminate swaps contracts with a troubled financial institution.

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