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Rates, CDS Notionals Both Up Year-on-Year

By Beth Shah
March 25, 2015, GlobalCapital

Both the overall interest rate notionals and trades counts that were reported to swap data repositories last week increased by 22% and 35%, respectively, from the same time last year, according to data from the International Swaps and Derivatives Association.

Overall reported credit default swap notionals and trade counts were also up compared to March 2014, but only by 1% and 5%, respectively.

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Comment: China’s Clearing and Reporting Regimes Being Built Bottom-Up

By Sol Steinberg
March 24, 2015, Risk

China’s derivatives market will be built on the back of G20 reforms, giving one of the world’s largest economies a swaps market designed from the ground up for transparency, regulatory oversight and management of systemic risk.

When members of the Group of 20 met in Pittsburgh in 2009 in the wake of the global financial crisis, they committed to reforms that ushered in a more calculated approach to systemic risk in the financial industry, and along with it, a new market structure for over-the-counter derivatives. Anchored by the principles of mandatory reporting of OTC derivatives transactions, mandatory clearing through central counterparties (CCPs) and mandatory trading on exchanges or electronic trading platforms, the new market the G20 planned for the OTC derivatives space stressed transparency, risk controls and improved protections against market abuses.

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SEFs Coming of Age

March 23, 2015, Markets Media

The U.S. Commodity Futures and Trading Commission, in drafting rules for swap execution facilities, was placed in an uncomfortable position of reconciling the OTC and listed derivatives markets.

On the one hand, the Dodd-Frank Act made clear that swaps must be offered on one-to-many platforms, but on the other hand, the CFTC had nothing to use as a starting point for rulemaking other than the futures exchange model.

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Exchanges and Clearers Miss Out on Market Changes

By Philip Stafford
March 20, 2015, Financial Times

Some fascinating points came out of the annual Oliver Wyman/Morgan Stanley survey of the wholesale and investment banking industry this week.

Its headline findings — that there’s a liquidity risk in markets and most pronounced in fixed income — should come as no surprise. But its findings also gave the market infrastructure industry several points to chew on.

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‘Futurizing’ the OTC Market

March 18, 2015, Markets Media

Dodd-Frank represents a move toward ‘futurizing’ the OTC swaps by moving them to an exchange model, which is a big change from the bilateral world, in which banks handled most OTC transactions on behalf of end users, i.e., corporations and asset managers.

“The rule making has been pretty extensive,” said Jacob Preiserowicz, special counsel at Washington, D.C. law firm Schulte Roth & Zabel. “The CFTC is regulating a lot more of the industry than they have done in the past. That does require the industry to modify a lot of what they’ve done, whereas in the past there may have been more flexibility in what they can and can’t trade, and who was overseeing them. That has changed a lot over the last three years. Asset managers who are focused at all on the commodity space are almost certainly going to have to register with the CFTC.”

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SEFs: The Road Ahead

March 17, 2015, Markets Media

For swap execution facilities, volumes are expected to continue trending higher, but there remain some question marks pertaining to the framework of the business as set forth by the U.S. Commodity Futures Trading Commission.

As participants and observers of the SEF space await a clearing of the regulatory smoke, SEFs themselves are moving ahead with initiatives to attract order flow.

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SEF ‘Packages’ Almost Wrapped Up

March 3, 2015, Markets Media

Institutional investors and large non-financial companies that trade swaps are rarely one-off users; rather, they’re in the market regularly as part of enterprise-wide hedging or speculative programs. To optimize efficiency, packaging trades into a single transaction can be indicated.

As swap execution facilities have developed since the industry’s Oct. 2013 start date, so-called package trades have been an area of uncertainty, as the phased approach implemented by regulators has meant that at times, certain swaps had to be traded on SEFs when others didn’t.

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Price Is Sole Factor in Best Execution – Pimco

By Catherine Contiguglia 
February 26, 2015, Risk

Portfolio manager calls for tougher oversight of market-makers

Dealers are trying to lure clients into thinking about best execution in terms other than pure price, a portfolio manager at Pimco argued yesterday at a conference in London. Fellow bank panellists had suggested a distinction between best price – which should be the goal of more “vulnerable” clients – and fair execution, which would serve the need of more sophisticated customers.

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SEFs: A Progress Report

February 26, 2015, Markets Media

For a business that’s all of 16 months old, swap execution facilities have made steady progress in establishing themselves as viable trading venues.

In December, weekly volume in interest-rate swaps was reported as high as $970 billion, while credit swaps weighed in at $236 billion, according to the FIA SEF Tracker released in early February. While that represents only a small fraction of a global swap market whose size is estimated at $600 to $700 trillion, SEF operators and observers note that trading volumes have increased from $0 as of Oct. 1, 2013, the day before the first SEFs commenced operations.

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CFTC Close to ‘Game-Changing’ Guidance on SEF Anonymity

By Joe Rennison
February 11, 2015, Risk

Agency could prevent Sefs from revealing identities of order book participants - a practice some buy-side firms claim is a way of preserving dealer interests.

The Commodity Futures Trading Commission (CFTC) is close to finalising guidance that could require parties trading on swap execution facilities (Sefs) to remain anonymous, according to three industry sources – a move one describes as a "game changer".

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