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U.S. Bank Watchdogs Implement ISDA Stay Provision for Swaps

By Douwe Miedema
December 16, 2014, Reuters

U.S. bank regulators on Tuesday issued a rule to allow a stay in terminating derivative contracts if a bank lands in trouble, a provision needed to help them wind down failed banks without causing market mayhem.

The rule by the Federal Reserve and the Office of the Comptroller of the Currency reflected changes to the standard contract made by the International Swaps and Derivatives Association (ISDA) and 18 major banks.

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Clearinghouses Face EU Push on Too-Big-to-Fail Risks

By Jim Brunsden
December 17, 2014, Bloomberg

The European Commission will propose legislation next year to toughen regulation of clearinghouses in a bid to prevent financial turmoil should one of them fail.

Jonathan Hill, the European Union’s financial-services chief, said in a Dec. 15 interview in Brussels that the bill will be a priority.

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Trade Reporting Takes Step in the Right Direction

By Jon Watkins
December 16, 2014, The Trade

A new attempt at improving trade reporting in Europe has already begun to advance the process towards its intended goal of increasing transparency in the derivatives market, according to industry experts.

On 1 December, European regulators introduced a rule whereby trade repositories would have to reject any reports with incomplete or missing data.

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Top Democrat Says Regional Banks Key to Wall Street Win on Derivatives

By Amanda Becker and Emily Stephenson
December 16, 2014, Reuters

A top Democrat in the U.S. House of Representatives on Tuesday said unpopular Wall Street banks got a long-sought rollback to Dodd-Frank reforms through Congress last week partly by leveraging the influence of smaller banks that hold greater sway with lawmakers.

"They have been working for a long time, trying different strategies on it," California Representative Maxine Waters said in an interview. "The big banks are in trouble with most legislators... so they put the regional banks in front of them in order to gain more support."

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Wall Street's Revenge

By Paul Krugman
December 14, 2014, The New York Times

On Wall Street, 2010 was the year of “Obama rage,” in which financial tycoons went ballistic over the president’s suggestion that some bankers helped cause the financial crisis. They were also, of course, angry about the Dodd-Frank financial reform, which placed some limits on their wheeling and dealing.

The Masters of the Universe, it turns out, are a bunch of whiners. But they’re whiners with war chests, and now they’ve bought themselves a Congress.

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ICE Urges Caution on Derivatives Reform

By Philip Stafford
December 16, 2014, Financial Times

Intercontinental Exchange has urged Europe to give clearing houses leeway over what products they must accept, warning that lawmakers' plans to open up the derivatives market would remove operators' incentives for innovation.

The New York Stock Exchange owner has again warned that trading could move away from Europe if the continent pursues new rules in the coming days to introduce more competition for derivatives.

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Let’s Pretend Dodd-Frank Works

December 12, 2014, The Wall Street Journal

The political left is outraged over a corner of Congress’s omnibus spending bill that rolls back a corner of the 2010 Dodd-Frank law. The premise of this made-for-media furor is that Dodd-Frank must never be altered because it ended taxpayer bailouts of giant banks. If only.

The Dodd-Frank provision at issue requires each bank holding company to move roughly 5% of its derivatives contracts from its commercial bank insured by the Federal Deposit Insurance Corporation into a separate subsidiary that is not insured by the FDIC. Therefore all the derivatives exposures would still belong to the same bank holding company, and roughly 95% would stay in the FDIC-insured depository institution.

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Europe Presents Olive Branch to U.S. in Derivatives Skirmish

By Andrew Ackerman
December 11, 2014, The Wall Street Journal

European policy makers took steps Thursday to ease a cross-border dispute with the U.S. over the regulation of derivatives, delaying onerous capital charges that would have gone into effect for European banks that do business with U.S. clearinghouses like CME Group Inc. and Intercontinental Exchange Inc.

The European Commission formally delayed until June 2015 a requirement that European banks face significantly higher capital charges unless they move derivatives trades away from clearinghouses based in the U.S. and other countries that operate under rules that haven’t been deemed “equivalent” to those in Europe. The higher capital charges were set to go into effect next week without the delay.

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ESMA Cannot “Fix” Rules, Swinburne Says

By Hazel Sheffield
December 11, 2014, GlobalCapital

Kay Swinburne, Conservative co-ordinator for economic and monetary affairs, has hit back at the idea that the more controversial aspects of the Markets Financial Instruments Directive can be fixed when the European Securities and Markets Authority writes its technical standards.

Swinburne used her keynote speech at the ICI global trading and market structure conference in London on Tuesday to make very clear that ESMA does not make policy decisions and cannot choose a different framework to that which is laid out in the EU treaty.

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Possible Swaps Push-Out Repeal Win for Derivs Market

By Beth Shah
December 11, 2014, GlobalCapital

The US Congress is scheduled to consider a proposal in the government funding bill which would allow banks to keep swaps trading units, rescinding a provision in Dodd-Frank that forces banks to spin off certain derivatives trading activities into another legal entity.

Derivatives that are pushed out of section 716 of Dodd¬Frank are removed from taxpayer support and the accompanying subsidy of insured deposit funding.

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