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Risky Derivatives Trades Face Higher Costs

By Philip Stafford
February 4, 2016, Financial Times

Reform of derivatives enters its final phase this year and tougher rules for banks have aroused fears that other financial institutions will need billions of dollars to remain in the market.

In mid-December U.S. regulators finalized their version of global standards that will require users of highly-tailored and illiquid swaps to post margin, or insurance for trading, with their counterparties — usually global banks.

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Uncleared Margin Rules Face Trans-Atlantic Mismatch

By Mike Kentz
January 30, 2016, IFR

Yet another mismatch is looming in the delivery of post-crisis derivatives reforms across borders – this time in an area that participants say will have the deepest competitive implications for the banking industry of any of the 2009 G20 reforms.

European regulators have yet to finalise rules requiring the collateralisation of uncleared derivatives, but remain publicly committed to an implementation schedule that begins this September.

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ISDA to Give Buy-Side a Bigger Say

By James Rundle
January 13, 2016, Financial News

An influential voice in over-the-counter derivatives is expanding its board to reflect the increasingly prominent role that non-bank firms have in this market.

The International Swaps and Derivatives Association said it is to increase the size of its board of directors from 26 to 30 people, following elections to be held in the first quarter of 2016.

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Derivatives Regulation Spat Nears Transatlantic Detente

By Barney Jopson and Philip Stafford
December 20, 2015, Financial Times

A transatlantic dispute that has left a glaring gap in global financial regulation is on course to be resolved in 2016 after the U.S. signalled it was ready to end years of bickering and strike a compromise with Europe.

The U.S. and European Union have been locked in a spat that has left them without common standards for the $553tn global derivatives market, a crucial piece of unfinished business mandated by world leaders after the last financial crisis.

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Cross-Border Conundrums Still Hampering OTC Derivatives Markets

By Michael Watt
December 1, 2015, The Banker

Laufenburg, a small, non-descript town of some 2000 people, straddling the Swiss-German border, is not likely to be familiar to the average derivatives market regulator, but it offers a cautionary tale that could have proved useful over the past few years.

In 2003, the authorities in Laufenburg decided to build a bridge over the river Rhine, which bisects the town. Construction was started on both banks, but as the structure neared completion, it became clear that someone had blundered – the two sections of the bridge did not neatly meet in the middle. In fact, one was a full half-metre higher than the other, forcing an embarrassing rebuild on the German side.

Derivatives market supervisors have found themselves in a similar fix. The years since the financial crisis have seen the construction of perhaps the most extensive and intensive set of regulatory changes in the history of financial markets. Given the scale of the change, it is remarkable that so many new rules, which encompass dozens of different jurisdictions, have been brought into force with a minimum of fuss. Regulators have introduced massive changes to capital and liquidity standards without serious geographic schisms.

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Single-Name CDS Changes Set for Year-End Launch

By Helen Bartholomew
September 26, 2015, IFR

A new framework aimed at reinvigorating the flagging market for single-name credit default swaps is set to be implemented by the end of this year as industry participants work to agree final details on a plan that will see contracts roll on a semi-annual rather than a quarterly basis.

“The market is working to implement the reforms in a consistent manner by the end of the year as everyone needs to make the same changes,” ISDA CEO Scott O’Malia told reporters at the industry body’s annual European conference in London last Tuesday.

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Industry Frets on Margin Timeline

By Mike Kentz
September 19, 2015, IFR

The CFTC hopes to finalize uncleared margin rules in December, leaving just nine months before implementation of the transformational reforms and triggering calls from industry participants for yet another delay in implementation.

CFTC commissioner Sharon Bowen told delegates at ISDA’s North American conference last week that it was her “hope” that the commission would reach finalization of uncleared margin rules, which force counterparties to exchange collateral to back their bilateral swaps exposures, by the end of the year.

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ISDA Launches Initiative for a Derivatives Product Identification Standard

September 18, 2015, Automated Trader

ISDA is overseeing the symbology project, which involves a consortium of buy- and sell-side market participants, vendors, platforms and trade associations. London-based capital markets technology consultancy Etrading Software is acting as project manager.

The initiative comes in response to a variety of regulatory changes, including the European Union's revised Markets in Financial Instruments Directive/Regulation (MIFID II/MIFIR) and the U.S. Securities and Exchange Commission's (SEC) reporting rules, which require a standardized means of identifying derivatives instruments at a granular level. A common methodology for classifying and identifying derivatives instruments across all platforms will also cut complexity and costs for market participants that need to connect to multiple trading venues, and simplify the distribution of liquidity.

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White House Prepares to Nominate Ex-House Aide for CFTC Seat

By Andrew Ackerman
September 9, 2015, The Wall Street Journal

The White House is preparing to nominate Brian Quintenz, a former House aide, to fill a Republican vacancy on the Commodity Futures Trading Commission, according to people familiar with the matter.

Mr. Quintenz, the managing principal at Saeculum Capital Management in Washington, previously worked as a senior policy aide to former Rep. Deborah Pryce (R., Ohio) from 2001-07. His current firm, Saeculum, offers “investment solutions for families, individuals, private partnerships and institutions,” according to its website.

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O'Malia Hits Out at Leverage Ratio Rules

By Cian Burke
August 27, 2015, FOW

Leverage ratio rules need to account for the exposure reducing effects of segregated client margin.

Scott O'Malia, chief executive of the International Swaps and Derivatives Association (ISDA), has urged global regulators to review the language ratio rules to take into account the exposure reducing effects of segregated client margin.

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