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Dodd-Frank's Swaps "Push-out" Rule Upsets Smaller Banks

By Victoria McGrane
October 31, 2014 The Wall Street Journal

Regional banks are quietly joining the fight against one of the most hated Dodd-Frank provisions on Wall Street.

The target is the so-called swaps push-out provision, which requires banks to spin off certain derivatives trading activities into units that don’t enjoy access to the government safety net.

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Uncertainty Surrounds CFTC Footnote 513

By Ashley Lee
October 30, 2014 International Financial Law Review

The CFTC's no-action relief for yet another wide-reaching extraterritorial provision ends this year. The market is concerned that it will not be renewed.

Footnote 513 was included in the CFTC's 76-page cross-border guidance released in July 2013. It states that a US branch of a non-US swap dealer would be subject to transaction-level requirements without substituted compliance available.

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Manage Asia Derivative Risk Locally, Says Bank of England

By Viren Vaghela
October 29, 2014 Risk

Booking trades where they are originated rather than within offshore booking hubs creates better risk management

Banks in Asia should book and manage transactions closer to home as it leads to better risk management according to Paul Fisher, deputy head of the Prudential Regulation Authority and executive director, supervisory risk and regulatory operations at the Bank of England.

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Eurex CEO Slams European Clearing Mandate Delay

By Aaron Woolner
October 29, 2014 Risk

The global nature of OTC derivative markets means a synchronised approach to clearing is required, according to Andreas Preuss, Eurex chief executive

The European Union's decision to delay the introduction of its over-the-counter derivative clearing mandate to 2015 is "unfortunate" and creates an "implemented disadvantage" for the aim of increasing safety in the sector, according to Andreas Preuss, chief executive of Frankfurt-based Eurex.

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Iosco Warns on Data Challenge to Risk Oversight

By Jeremy Grant
October 29, 2014 Financial Times

The top body representing global markets watchdogs has issued a warning over the proliferation of data collection systems in the $700tn derivatives markets, saying regulators will be unable to spot risks building up in the financial system unless data are aggregated properly.

The group of G20 nations in 2009 directed governments to create a composite record of over-the-counter (OTC) derivatives deals to better spot potential systemic risk in banks and clearing houses and help prevent the next big financial meltdown.

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Japanese Regulator Questions Process for Cross-border Recognition

By Aaron Woolner
October 28, 2014 Risk

US and Europe need to speed up moves to recognise third-country regulation as equivalent

Moves by European and US regulators to recognise third-country regulations have been slow and lack transparency and there has been little evidence of the 2013 G-20 commitment to pay deference to home country supervisors actually being implemented, according to Masamichi Kono, vice minister for international affairs, at the Japan Financial Services Agency (FSA).

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Banks Face Trade-off Tied to Credit-valuation Adjustment

By Lukas Becker
October 28, 2014 Risk

Banks are turning to credit swaptions and guarantees to reduce the earnings volatility that arises when hedging the credit valuation adjustment capital charge in Basel III.

Since late 2012, Deutsche Bank has lost €443 million euros on hedges that cut its capital requirement for derivatives counterparty exposure – a trade-off banks face because the regulatory and accounting definitions of credit valuation adjustment (CVA) are different, meaning regulators might see a hedge as effective, while accountants do not. That problem has prompted some institutions – and individuals – to look for ways to satisfy both sets of rules.

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Swap Market Fears CFTC Deadline

By Mike Kentz
October 27, 2014 IFR

An upcoming US regulatory deadline is distressing swaps users as execution platforms say they will not be able to offer transactions pairing interest rate swaps with certain other derivatives following the cut-off.

Following a roll-off of regulatory relief on November 15, traders hoping to package US Treasury futures, corporate bonds, credit options, mortgage-backed securities, interest rate options, and equity total return swaps with a comparable or offsetting vanilla interest rate swap will likely find themselves with no place to trade.

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Financial Entity Definition Worries US Utilities

By Alexander Osipovich
October 27, 2014 Risk

US utilities fret their trading units could be classified as financial entities under Dodd-Frank, forcing them to clear all their OTC derivatives and face other regulatory requirements.

US utilities fear being saddled with additional regulatory requirements due to their subsidiaries being classified as 'financial entities' under the US Dodd-Frank Act, even though those subsidiaries are primarily focused on physical activities.

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Singapore to Examine Swaps Trading Change

By Jeremy Grant
October 28, 2014 Financial Times

Singapore is considering whether to require market participants to trade on regulated electronic trading platforms, marking a change of tack on its policy on a key aspect of over-the-counter (OTC) derivatives reforms.

Sweeping reforms of the $700tn OTC derivatives markets have been under way since the G20 in 2009 agreed on measures to clean up the financial system after the crisis of the previous year.

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