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ISDA Delays Overhaul of $18 Trillion Derivatives: Credit Markets

By Abigail Moses
Published September 18, 2014 Bloomberg

The International Swaps & Derivatives Association said it postponed the biggest overhaul to the $18 trillion credit derivatives market in more than a decade to give investors more time to prepare for the changes.

New rules governing credit-default swaps will take effect Oct. 6 rather than Sept. 22, ISDA said in a statement yesterday. The changes seek to fix flaws in sovereign and bank insurance that prevented some contracts from paying out as intended since the financial crisis.

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Markit Mulls Delay to Derivative Index Change to Match New Rules

By Abigail Moses
Published September 16, 2014 Bloomberg

Trading of new credit-default swap indexes may be delayed to coincide with changes to rules governing the insurance contracts, according to Markit Group Ltd.

New benchmarks may be postponed to Oct. 6 from Sept. 22, the index administrator said in a statement on its website. Indexes are updated every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading.

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DERIVATIVES: Swaps Fragmentation Begins to Subside

By Mike Kentz
Published September 11, 2014 IFR Asia

The fragmentation of liquidity in certain over-the-counter swaps contracts across national borders may finally be subsiding, a year after Dodd-Frank regulations first pushed European market participants away from their US counterparts.

International clients are slowly beginning to warm to the idea of trading on swap execution facilities after having avoided the platforms for the past year, according to platform operators. 

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CDS Notional Begins Increase Following Sizeable Slump

By Beth Shah
Published September 11, 2014 Global Capital

Overall credit default swap notional reported to swap data repositories last week increased 33% from the previous week, according to data from the International Swaps Derivatives Association.

This follows two weeks of falling volumes with a combined decrease of 57%. Overall interest rate derivatives that was reported, also increased by 18%.

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OTC Industry to Aid Bank Resolutions

Published September 11, 2014 Markets Media

The rights of holders of OTC derivatives to terminate the contracts during the course of a bank resolution are likely to be trimmed back, according to regulatory and industry officials.

The Financial Stability Board, the oversight group of the world’s central banks, is working to mitigate the risks caused by early termination by lengthening the time required to suspend such contracts.

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Fragmentation Worries OTC Users: Survey

Published September 10, 2014 Markets Media

Fragmentation in the OTC markets is being driven by a lack of cohesion by national regulators on execution, reporting, and clearing of swaps transactions, according to a survey by the International Swaps and Derivatives Association.

“We don’t want market fragmentation,” ISDA CEO Scott O’Malia said at a press briefing on Tuesday at the ISDA North America conference in New York. “In the end-user documentation, we have concerns regarding fragmentation, and the cost, and the quality of the liquidity. That’s a concern for end users, and they believe it’s going to undermine their ability to get access and get good pricing.”

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Global Deal in Sight to Prevent Re-run of Post-Lehman Chaos

By Huw Jones
Published September 9, 2014 Reuters

The $700 trillion (434.16 trillion pounds) financial derivatives industry will make a fundamental change to its contracts this year to help regulators wind down failed banks without destabilising markets, the world's main derivatives body said on Tuesday.

Global financial watchdogs want to be able to put a temporary halt on market participants trying to "close out" derivatives contracts if a bank runs into trouble.

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IM Poses Serious Concerns, Standardisation Model Needed

By Beth Shah
Published September 9, 2014 Global Capital

Calculating initial margin for uncleared over-the-counter derivatives posing significant challenges for the industry and market participants need to look at adopting a standardized model to ensure consistency when calculating margin.

Speaking at Tuesday's International Swaps and Derivatives Association’s 2014 Annual North America Conference in New York, ISDA Chairman Stephen O’Connor said without a standardised model the system will grind to a halt. During the Fireside Chat with Scott O’Malia, ceo at ISDA, O'Connor noted pricing OTC margin is going to make things more expensive for the market. He added there is a very short implementation deadline – beginning Dec. 2015– and a phased-in approach coupled with implementation delays are required because national regulators have yet to finalise rules.

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D.E. Shaw: Buyside Irked Over Counterparty Trading Constrictions

By Beth Shah
Published September 9, 2014 Global Capital

US regulation may mean investment managers that are operated and managed out of the US will have to constrict their trading to US counterparties, therefore introducing barriers to trading opportunities and hampering their competition.

Speaking at the International Swaps and Derivatives Association’s 2014 Annual North America Conference on Tuesday, Darcy Bradbury, managing director and director of external affairs at the D.E. Shaw Group, noted where a firm is established has become an issue. If an investment manager operates out of, and is headquartered in the US, they will be subject to US rules for a US entity despite perhaps having funds that are in other jurisdictions, for example the Cayman Islands, Bradbury said. “A UK manager might have an offshore location as well and the establishment language in both [the European Market Infrastructure Regulation] and [Markets in Financial Instruments Directive and Regulation] doesn’t give them a lot of flexibility,” she said.

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ISDA Insight Survey: Derivatives Vital to End-Users, but Fragmentation a Concern

Published September 9, 2014 ISDA Press Release

Over-the-counter (OTC) derivatives continue to be an integral part of end-user risk management strategies, according to a survey published today by the International Swaps and Derivatives Association, Inc. (ISDA) at its 2014 ISDA Annual North America Conference in New York.

An overwhelming majority of end-users intend to keep their use of derivatives at similar or higher to current levels over the last three months of the year. However, the survey shows that end-users are concerned about the impact of a lack of regulatory coordination, market fragmentation and increased costs of hedging.

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