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FDIC Backs Rules Requiring Lenders to Keep Stakes in CLOs

By Clea Benson
Published October 21, 2014 Bloomberg

Lenders will have to keep stakes in mortgages and highly leveraged corporate bonds they package for sale to investors under measures approved by U.S. regulators to rein in risky credit practices.

The interagency rule adopted by the Federal Deposit Insurance Corp. today drops a requirement that banks retain part of mortgages with down payments of less than 20 percent, a proposal that drew protests from bankers and consumer groups when it was proposed in 2011. At the same time, managers of collateralized loan obligations or their underwriters will have to hold at least 5 percent of the debt they package or sell.

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J.P. Morgan Fined by EU Regulators Over Rate Rigging, Operating Cartel

By Tom Fairless
October 21, 2014 The Wall Street Journal

J.P. Morgan Chase & Co. was fined a total of more than €72 million ($92 million) by European Union regulators Tuesday for rigging a benchmark interest rate and operating a separate cartel for Swiss franc derivatives, marking the latest phase in an EU crackdown on alleged market abuse by financial institutions.

The European Commission, the bloc’s central antitrust regulator, said J.P. Morgan and Royal Bank of Scotland Group PLC had colluded between March 2008 and July 2009 in an attempt to rig the Swiss Franc London interbank offered rate, a benchmark interest rate.

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Recovery Rules Could Force LCH and ICE to Accept More Risk

Published October 20, 2014 Risk

CCPs will be unable to pass on operational losses to clearing members, according to new CPMI-Iosco guidelines, which goes against the approach taken by Ice Clear Europe in the UK Central counterparties (CCPs) will have to absorb all losses related to operational failures, according to new international guidelines - a decision that contradicts the approach taken by Ice Clear Europe in response to recent UK legislation.

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CFTC’s Massad Sees ‘Progress’ On Global Derivatives Rules

By Andrew Ackerman
October 16, 2014 The Wall Street Journal

European policy makers are far behind their U.S. counterparts in setting up postcrisis regulations for the multitrillion-dollar derivatives industry but Timothy Massad, the top U.S. overseer of swaps, said a coordinated system will ultimately emerge.

Mr. Massad, four months into his tenure as head of the Commodity Futures Trading Commission, said in a speech Thursday that regulators are making progress in establishing a coordinated system for the regulation of derivatives across borders, though he acknowledged global rules won’t be completed quickly.

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Artificial Intelligence and the Future of Financial Regulation

By Alexander Campbell
October 16, 2014 Risk

Software has taken over from humans in trading – and will spread further in the years to come. Regulators will need to prepare for a faster, darker industry

At some point in the last few years, the human stock trader became an endangered species. Most trades on the world's equity markets are now conducted by machines – algorithmic trading systems. And research in the areas of machine learning, big data and artificial intelligence promises to change the financial world still more fundamentally in the near future – bringing both new benefits and new challenges for operational risk teams and compliance managers.

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JSCC to Gain DCO Status from US Regulator Before Year-end

By Viren Vaghela
October 17, 2014 Risk

Japanese clearing house will soon be able to clear for US clients, attendees hear at a recent event where the CFTC's outgoing policy chief spoke

The Japan Securities Clearing Corporation (JSCC) is poised to become the second Asia clearing house to be awarded derivatives clearing organisation (DCO) status, with the outgoing director of the clearing and risk division at the US swaps regulator, Ananda Radhakrishnan, telling the audience at a recent event in Tokyo that he could see no issues with the entity being granted a licence.

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DERIVATIVES: SEF Rulebook Review Could Shuffle Market

By Mike Kentz
October 15, 2014 IFR

Swap execution facilities awaiting final confirmation from the CFTC regarding their status as registered derivatives trading platforms say that eventual decisions made by the agency are likely to rattle a so-far benign market.

The CFTC is in the process of reviewing SEF rulebooks to update the current ‘provisionally registered’ status that it has afforded the 24 platforms currently executing over-the-counter swaps under Dodd-Frank execution rules.

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Regulators Are Set to Tighten Swaps Rules

By Andrew Ackerman,Victoria McGraneand and Katy Burne
October 14, 2014 The Wall Street Journal

Global regulators are preparing to impose new restrictions on banks, asset managers and others who use swaps to help hedge risks and speculate on market moves.

The Federal Reserve and banking authorities around the world are developing new rules that would prevent banks from entering into swaps agreements with certain customers unless their contracts include measures to help protect the financial system in the event of a big bank’s failure, according to people familiar with the matter.

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British Banks Award Only 38 Percent from Mis-sold Swaps Refund Pot

By Matt Scuffham
Published October 8, 2014 Reuters

Britain's biggest banks have paid out less than 40 percent of the 4 billion pounds ($6.4 billion) set aside to cover the mis-selling of complex interest rate hedging products, according to data from the financial regulator.

The Financial Conduct Authority (FCA) last year ordered banks to review 29,500 cases for possible mis-selling after finding "serious failings" in how interest rate swaps were sold.

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ICE Clear Europe Eyes OTC Rates Push

By Tim Cave
October 13, 2014 Financial News

IntercontinentalExchange is planning to introduce an over-the-counter interest rate swap clearing service to coincide with the introduction of European reforms next year, in a bid take on incumbent provider LCH.Clearnet.

ICE Clear Europe, the Atlanta-based group's London clearing house, aims to have an interest rate swaps clearing service in place during the second half of 2015, according to a person familiar with the situation.

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