News

The International Swaps and Derivatives Association (ISDA) has launched a reporting protocol aimed at helping market participants comply with mandatory trade reporting rules.

Under the US Dodd-Frank Act, standardised OTC derivatives trades must be cleared through central counterparties and reported to a swap trade repository (STRs). The data is then passed on to regulators as part of an attempt to reduce systematic risk in the market. Reporting is also being introduced in all other Group of 20 financial markets.

At data services provider Markit's annual New York customer conference last week, Robert Pickel, CEO of the International Swaps and Derivatives Association (ISDA), remarked on the problem of "extraterritoriality" when it comes to regulation of financial industry operations.

Pickel defined the concept as national regulators taking different stances concerning the same areas of rulemaking, although "extraterritoriality" can also mean exemptions from local law. With either definition, the problem Pickel correctly identifies is that regulatory fragmentation can be the result.

Sovereign CDS trading volumes have fallen off a cliff since the EU’s ban on “naked” or outright short positions came into force last November (see article), with some arguing that trading is migrating to financial CDS, which are not covered by the rules.

“Because of the ban on sovereign CDS, activity has moved to bank CDS.  That is something policymakers have to think about very carefully as it creates a feedback loop [between banks and weak sovereigns],”  Athanassios Diplas, a senior adviser to the International Swaps and Derivatives Association Board, told the ISDA Annual General Meeting in Singapore last week.

More than half of buyside participants transacting over-the-counter swaps with US dealers caught in the Dodd-Frank net could lose their derivatives trading capabilities in the coming week as the CFTC’s Business Conduct Standards requirements become a reality on May 1.

At the Annual General Meeting of the International Swaps and Derivatives Association in Singapore, lawyers and market participants raised concerns that many buyside entities had failed to sign up to the relevant protocols intended to protect US customers, with just days to go until the deadline.

Derivatives users should be prepared to make amendments to one of their most-treasured legal rights to help in the fight to end too-big-to-fail, attendees at the International Swaps and Derivatives Association Annual General Meeting in Singapore heard today.

Wilson Ervin – vice-chairman in the group executive office at Credit Suisse and a leading architect of the so-called debt bail-in framework – argued in a keynote speech to ISDA delegates that modifying legal documentation that currently allows swaps counterparties to leapfrog other creditors of bankrupt firms was “essential”.

Derivatives users should be prepared to make amendments to one of their most-treasured legal rights to help in the fight to end too-big-to-fail, attendees at the International Swaps and Derivatives Association Annual General Meeting in Singapore heard today.

Wilson Ervin – vice-chairman in the group executive office at Credit Suisse and a leading architect of the so-called debt bail-in framework – argued in a keynote speech to ISDA delegates that modifying legal documentation that currently allows swaps counterparties to leapfrog other creditors of bankrupt firms was “essential”.

Leading derivatives experts have warned of the limits – and potential dangers – of current measures aimed at bolstering transparency in the over-the-counter swaps market, calling into question the effectiveness of one of the key planks of regulatory reforms aimed at averting a repeat of the 2008 global financial crisis.

Participants on a panel session at ISDA’s AGM in Singapore today argued regulators are having difficulty digesting and analysing derivatives transaction data reported to trade repositories. Moreover, it was suggested the transaction data would be relatively meaningless unless regulators also had access to information on the collateral backing the trades, which is currently unavailable.