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Split Emerges Over IRS Clearing Expansion

By Dave Wigan
July 27, 2015, IFR

A European regulator proposal to expand clearing of interest rates swaps to six new currencies has led to a split among market participants over the merits of the plan.

The European Securities Market Association in a May consultation said OTC interest rate derivatives in non-G4 currencies represent a significant share of the rates market, as well as the overall derivatives markets. Many of the contracts reach minimum levels of standardisation, volume, liquidity and pricing, it said. On that basis it recommended compulsory clearing of vanilla swaps denominated in Czech koruna, Danish krona, Hungarian forint, Norwegian Krone, Swedish krona and Polish zloty.

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Comment: Clearing Houses Are an Over-Clever Way to Prepare for a Crisis

By John Dizard
July 24, 2015, Financial Times

Cousin Zeb (fool looking at a poker game): Uh, is this a game of chance?

Cuthbert J. Twillie (a dishonest player): Not the way *I* play it, no.

My Little Chickadee, 1940

There are clever ways to prepare for increased illiquidity in financial markets, or even to prepare to profit from a crisis. Then there are what could be over-clever ways, such as using credit-risk derivatives to invest in “tail risk”, or unlikely but disastrous market events.

The hedge fund world has more marketing power than productive new ideas at the moment. So its people are seeking to raise money from sources, such as rich individuals or underperforming pension funds, who have been reading about the lack of liquidity in the fixed income markets, to make derivatives-leveraged bets on a bond market seize-up.

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Swap Execution Facilities: Be Careful What You Wish For

By Paul Golden
July 22, 2015, Global Investor

Data from the Futures Industry Association supports the view that swap execution facilities (SEFs) have made uneven progress. The association’s SEF tracker indicates that trading volume across all three asset classes (interest rates, credit default swaps and foreign exchange) averaged $364.8bn per day in April, down 27% from the previous month but up 8% from April 2014.

The International Swaps and Derivatives Association (ISDA) has been concerned about the fragmentation of derivatives markets along geographic lines since the SEF rules came into force and  says the effects have been particularly notable in the market for euro interest rate swaps.

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Challenges Remain for Derivatives Market Reform, Says ISDA, as Dodd-Frank Turns Five

By Dan Alderson
July 20, 2015, GlobalCapital

Marking the five-year anniversary of the US signing into law the Dodd-Frank Act, the International Swaps and Derivatives Association has put forward a wish list of “targeted amendments” for derivatives regulatory regimes.

Although ISDA believes that “significant progress has been made in implementing derivatives market reforms”, the organisation contends that a number of outstanding issues need to be resolved.

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ISDA Releases European Clearing Classification Letter

By Cian Burke
July 14, 2015, FOW

Tool allows counterparties to notify each other of their clearing obligations. 

The International Swaps and Derivatives Association (Isda) published on Tuesday a new classification letter allowing trading firms to notify each other of their clering and regulatory obligations under the European Market Infrastructure Regulation (Emir).

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D2LT: 'A-Greek-Ment' - Managing the Uncertainty

July 14, 2015, Automated Trader

Amid one of the worst crises in the EU's history, many financial institutions are still unsure as to the potential legal and financial implications that the exit of Greece - or indeed of any nation from the single currency - may cause. 

Akber Datoo & Simon Leifer, co-partners of D2 Legal Technology, call on financial institutions to urgently review their derivatives contracts to determine the true level of risk exposure and to take remedial action as appropriate. 

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Dodd-Frank: No High Fives Yet

By Mike Kentz
July 11, 2015, IFR

Five years after US Congress signed Dodd-Frank into law – the largest piece of financial market infrastructure overhaul since the Great Depression – financial regulators and market participants doled out lukewarm approval for the legislation.

The law has been the subject of intense criticism from federal officials requesting a repeal of the entire legislation, while financial institutions continue to chip away at the less savoury portions for their businesses.

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GFMA, IIF, ISDA Plan Liquidity Lobbying Push

By Duncan Wood
July 10, 2015, Risk

Draft report urges regulators to consider impact of Fundamental review of the trading book and financial transaction taxes on markets. 

Three industry associations are preparing a major new lobbying offensive on the topic of market liquidity, based on research and analysis conducted by consulting firm PwC.

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ISDA Plans to Reduce Roll Dates to Boost CDS Market

By Cian Burke
July 8, 2015, FOW

Under new schedule CDS trades roll to new "on the run" contract semi-annually.

The International Swaps and Derivatives Association (Isda) recommended on Wednesday a reduction in the number of roll dates for single name credit default Swaps (CDS) in a bid to revive liquidity in the flagging CDS market.

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Comment: Banks Promise No Lehman Moment by Relying on Unfinished Derivative Rule Change

By Antoine Gara
July 7, 2015, Forbes

“Relax! This time, if we fail, we won’t drag the rest of capitalism down with us.” That seems to be the message from America’s financial powerhouses after a read through of their updated living wills, delivered to the Federal Reserve and FDIC this July.

JPMorgan ChaseGoldman Sachs Group and Morgan Stanley all said that if they were to default in a new crisis scenario, they don’t foresee another Lehman Brothers moment — a messy bankruptcy that freezes trillions of dollars in trades and anchors the country’s largest lenders and asset managers to a single sinking firm. But, much of that assurance rests on an arcane and yet to be finalized change to the way trading occurs in the $630 trillion market for over-the-counter derivatives.

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