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CFTC’s Scott O’Malia to Resign From U.S. Swaps Regulator

By Silla Brush
Published July 21, 2014 Bloomberg

Scott O’Malia, a Republican who used his position on the Commodity Futures Trading Commission to criticize some of the agency’s efforts to rein in the $700 trillion global swaps market, said he will resign next month.

O’Malia, 46, the longest-serving member of the current CFTC panel, will step down effective Aug. 8 after more than four years at the agency, he said in a letter released today.

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The Smart Way to Regulate Overseas Swaps Trading

By Timothy A. Karpoff
Published July 21, 2014 American Banker

The U.S. and Europe have overhauled their approach to regulating swaps over the past five years, generally moving in the same direction and at similar paces. But on key issues like trading, price discovery and market structure, the U.S. and Europe are out of sync—a situation that's been creating upheaval in the cross-border swaps businesses. 

The debate over how to apply U.S. swaps rules abroad has largely centered on the perceived riskiness of overseas trades. But most of the companies that are making the trades are already subject to risk management and capital requirements under both U.S. and European jurisdiction. Now the question is how the application of U.S. swaps rules abroad will impact market integrity and price formation in the derivatives market.

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Wall Street Adapts to New Regulatory Regime

By Victoria McGrane and Julie Steinberg
Published July 21, 2014 Wall Street Journal

Four years after the Dodd-Frank financial law became reality, Washington's regulatory machine is altering Wall Street in fundamental ways.

Banks are selling off profitable business lines, pulling back from the short-term funding market, cutting ties with businesses that could attract extra regulatory scrutiny, and building up defenses to help weather future crises. While profits are up as firms slash costs and reduce funds set aside to cover future losses, their traditional profit engine—trading—is showing signs of weakening as banks step away from some activity amid regulatory pressure.

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Q&A: Jeanmarie Davis, Federal Reserve Bank of New York, on CCP Oversight

By Peter Madigan
Published July 18, 2014 Risk

The Federal Reserve Bank of New York plays a key role in the supervision of clearing houses and other new swap market players. Peter Madigan speaks to Jeanmarie Davis, head of the agency's financial market infrastructure function, about the challenges involved

A visit to the Federal Reserve Bank of New York in lower Manhattan is an odd and slightly intimidating experience – as it should be, perhaps. Resembling an imposing, sandstone fortress from the outside, entering the building involves passing through airport-style security, complete with ID checks, scans and stony-faced guards, before emerging into the windowless and featureless grey corridors that are a hallmark of most US government buildings.

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Russia Sanctions Could Trip Up CDS Markets, Lawyers Warn

By Matt Cameron and Fiona Maxwell
Published July 17, 2014 Risk

Sanctions imposed this week by the EU and US on named Russian companies could trigger CDSs, but would also make auctions difficult, lawyers are warning

The extension of European and US sanctions on Russia to include a number of banks and energy companies could trigger defaults on the companies’ foreign currency bond issues, lawyers are warning – and could also make it difficult for firms that are holding credit default swap (CDS) protection on those names to settle the trades.

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Esma Clearing Draft Prompts New Focus on Frontloading

Published July 16, 2014 Risk

Dealers may push for get-out clauses in trades with smaller clients Banks may seek to insert new termination clauses in contracts with some clients, as they prepare for an 18-month frontloading window to open

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U.S. House Passes Spending Bill with Dodd-Frank Changes

By Emily Stephenson
Published July 16, 2014 Reuters

The Republican-led U.S. House of Representatives on Wednesday passed a bill to slash funding for Wall Street oversight and revamp new agencies dedicated to cracking down on fraud against consumers and policing risks after the financial crisis.

The $21.3 billion funding bill, which covers appropriations for the 2015 fiscal year beginning Oct 1 for financial services and other areas of government, passed the House in a 228 to 195 vote along largely partisan lines.

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US, EU Differences on Cross-Border Rules Risk Permanent Liquidity Drain: O'Malia

By Christopher Tremulis
Published July 15, 2014 Platts

US and European regulators must quickly come together to harmonize international derivatives trading rules before market fragmentation and low liquidity become lasting fixtures of the swaps and futures markets, Commissioner Scott O'Malia of the US Commodity Futures Trading Commission said Tuesday.

In a keynote address before a quadrilateral meeting of financial lawyers groups at the Federal Reserve Bank of New York, O'Malia renewed calls for the European Commission and the CFTC to declare that the US regulatory regime is equivalent under the European Market Infrastructure Regulation.

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Open Access Brings New Clearing Efficiencies

Published July 14, 2014 The Trade

How will forthcoming clearing regulations spur competition in Europe?

New regulations will dramatically change the clearing landscape across Europe. The MiFID II requires central counterparties (CCPs) to clear derivatives trades for any venue across the continent, known as the open access rule. The overhaul is in line with increasing transparency and competition within the derivatives market.

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Banks Shake Up Clearing

By Mike Kentz
Published July 12, 2014 IFR

Leading investment banks are set to raise the price they charge to clear derivatives trades on behalf of clients, as two high-profile exits in the space of six months have highlighted the shake-up needed to make OTC client clearing a viable service under Basel III.

Derivatives dealers engaged in a price war on clearing services when the Dodd-Frank mandate went live last year as they vied to get client trades whizzing through their pipes, but some are thought to have over-stretched themselves ahead of the finalisation of rules regarding capital and leverage.

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