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O'Malia Hits Out at Leverage Ratio Rules

By Cian Burke
August 27, 2015, FOW

Leverage ratio rules need to account for the exposure reducing effects of segregated client margin.

Scott O'Malia, chief executive of the International Swaps and Derivatives Association (ISDA), has urged global regulators to review the language ratio rules to take into account the exposure reducing effects of segregated client margin.

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SEF Trading in the Doldrums, ISDA Data Show

By David Wigan
August 25, 2015, IFR

The evolution of electronic derivative trading continued its stuttering progress in recent months, with swap execution facility (SEF) volumes barely growing, according to data from Isda.

Some 51.2% of average daily interest rate derivative trading activity was executed on SEFs in the second quarter, compared with 50% in the same period in 2014. Trade sizes were 19.5% lower than a year earlier on average.

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CFTC Aims for Swap Auto Affirmation

By Mike Kentz
August 15, 2015, IFR

The US derivatives industry is scrambling to develop a market-wide method for affirming voice-executed swap trades in just minutes, following a behind-the-scenes CFTC ultimatum to come up with a plan or expect a rule to be made.

The agency is disappointed with the industry’s reluctance to move from manual affirmation processes that sometimes takes hours or days to an automatic affirmation process that should only take minutes.

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Central Clearing Has Shifted Collateral Support for Derivatives, Finds ISDA

By Dan Alderson
August 11, 2015, GlobalCapital

The shift toward centrally clearing derivatives has contributed to a decline in the total amount of collateral supporting non-cleared derivatives transactions, according to the latest ISDA Margin Survey, with cleared transactions gaining from the swing.

This shift meant the collateral supporting cleared transactions in 2014 greatly increased, said the International Swaps and Derivatives Association. The number of client cleared collateral agreements also experienced sharp growth, as an increasing number of end users began clearing in response to regulatory changes.

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Greek Test for ISDA CDS Definitions

By David Wigan
August 8, 2015, IFR

A possible restructuring of Greek bank debt is set to provide the first test for new credit derivative definitions launched last year after the old contract was deemed unfit for purpose.

A government-led restructuring or bondholder bail-in will trigger new provisions in the 2014 ISDA definitions designed to avoid a repeat of past failures that left buyers of credit protection without proportionate recompense for losses.

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CFTC to Clamp Down on Delays in Swap Clearing

By Peter Madigan
August 5, 2015, Risk

US regulators have run out of patience with swaps confirmation practices that are delaying the submission of trades to clearing houses – a crackdown is in the works. Dealer lobbyists are hoping to soften the blow. 

Hours-long delays in sending derivatives transactions from trading platforms to clearing houses will have to be slashed under new proposals being drawn up by the US Commodity Futures Trading Commission, Risk has learned.

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Unlinking Accelerates Swap Compression Volume

By Helen Bartholomew 
August 1, 2015, IFR

Derivatives participants have eliminated almost US$450trn of notional outstanding in interest rate derivatives over the last 12 years as they aim to reduce their legacy swaps books ahead of the imposition of the Basel III leverage ratio, which is calculated on gross notional exposures.

“As it stands, the leverage ratio will be particularly problematic for banks with client clearing businesses, as segregated client initial margin counts towards the bank’s exposure calculation,” noted ISDA in a new report on the impact of compression on the interest rate derivatives market.

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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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Regulation Is Creating ‘Fractured Markets’, Says ISDA

By Jon Watkins
July 30, 2015, The Trade

The leading voice in lobbying for improvements in OTC derivatives reforms has warned against new regulations resulting in fractured rules, markets and liquidity.

The International Swap and Derivatives Association’s chief executive, Scott O’Malia, has said that the Dodd-Frank rules implemented in the US have resulted in exposing end users to duplicative and sometimes inconsistent requirements. 

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FSB Highlights Trade Reporting Problems

July 27, 2015, Markets Media

The Financial Stability Board, the international body that monitors the global financial system, said authorities have challenges accessing, using and aggregating trade reporting data.

The FSB said in its ninth progress report on implementing over-the-counter derivatives market reforms that the availability and use of trade repositories and central counterparties continues to expand, particularly for credit and interest rate derivatives.

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