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CDS Notional Continues Decline by 27%

By Beth Shah
Published August 26, 2014 Global Capital

ISDA reported that there was a 33% decrease in the notional cleared for CDS and 41% less executed on swap execution facilities, compared with the previous week. Rates also saw a decrease, with 18% less volume cleared, and 21% less executed on SEFs last week.

The total notional cleared only dropped to 74% in both asset classes, with a 6% drop in CDS, and 5% decline in rates. The total notional executed on SEFs also dropped in CDS and rates; 13% to 56%, and 5% to 47%, respectively.

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SEF Consolidation Likely as Volumes Slowly Increase

By Ivy Schmerken
Published August 21, 2014 Wall Street & Technology

It’s been a quiet summer for swap trading venues. SEF trading has been mandatory for many over-the-counter derivatives, mainly credit indexes and interest rates, since mid–February. Yet the transition from opaque voice trading to SEFs (swap execution facilities) has been evolving slowly.

While 21 SEFs, including big players and startups, have registered with the Commodity Futures Trading Commission (CFTC), analysts are predicting that a wave of consolidation may hit the sector over the next year.

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Fix and FpML: a Friendly War

By Peter Madigan
Published August 22, 2014 Risk.net

For most of their existence, the over-the-counter derivatives market's two standardised trading languages have been able to rub along quite nicely. Financial products markup language (FpML) – the junior of the two – was invented as a medium for the more complex messages required in the post-trade environment, while financial information exchange (Fix) conveys order information for a variety of products and asset classes. In other words, they served very different parts of the trade life cycle.

Not any more. The arrival of mandatory clearing in the US – coupled with the requirement to execute many of these trades on swap execution facilities (Sefs) – has created the need for a pre-trade clearing limit check, bringing post-trade functions into the pre-trade workflow. The separate worlds of Fix and FpML are colliding.

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ISDA Sets Argentina CDS Auction Date After Yen Bond Inclusion

By Davide Scigliuzzo and Christopher Whittall
Published August 21, 2014 Reuters

The International Swaps and Derivatives Association (ISDA) has set an action date of September 3 to settle Argentina's credit default swaps after including two controversial yen-denominated bonds in the list of deliverable securities.

In a 14-to-1 vote, members of ISDA's determinations committee decided Thursday to allow the yen bonds to be delivered in the auction that will determine the payout for the US$813m net notional of CDS, rejecting a challenge that they should be left out.

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CFTC Issues No-Action Relief on Confirmations of Uncleared Swap Transactions

Published August 20, 2014 Hedgeweek

The US Commodity Futures Trading Commission (CFTC) has issued a no-action letter providing swap execution facilities (SEFs) time-limited, conditional relief from certain data reporting and record-keeping requirements in relation to confirmations required for uncleared swap transactions.

The no-action relief provided will expire at midnight (EDT) on 30 September 2015.

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Delta Lloyd Cuts Swap From Mortgage Bonds to Reduce Ratings Risk

By Alastair Marsh
Published August 19, 2014 Bloomberg

Delta Lloyd Bank NV sold the first Dutch mortgage bonds that don’t contain derivatives protecting against moves in interest rates to reduce the risk of the securities being downgraded.

The 685 million euros ($912 million) of notes securitized by the banking unit of insurer Delta Lloyd NV (DL) are the first residential mortgage-backed securities issued publicly in the Netherlands that don’t include interest-rate swaps, according to Hendrik Jan Luikinga, a director in the Amsterdam-based bank’s treasury department.

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Buy Side Responds to ESMA on Clearing Swaps

Published August 21, 2014 Markets Media

Asset management firms have welcomed the introduction of mandatory clearing for over-the-counter derivatives in Europe but expressed concerns on the lack of clarity for exemptions for pensions, lack of international harmonisation and frontloading requirements.

The European Securities and Markets Authority issued a consultation paper on clearing interest swaps and has published responses from the financial industry on its website.

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SEFs Receive a 12-Month Documentation Reprieve

By Rob Daly
Published August 19, 2014 The Trade

Swap execution facility (SEF) operators are breathing a little easier as the Commodity Futures Trading Commission (CFTC), the US derivatives regulator, has given SEFs conditional relief from certain recordkeeping requirements relating to confirmations of uncleared swaps.

The CFTC’s Regulation 37.6(b) states that a SEF is to provide each counterparty to a transaction entered into on or pursuant to the rules of the SEF with a written record of all terms of transactions, which supersedes any previous agreement and serves as the confirmation of the transaction.

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Investors Dine on Fresh Menu of Credit Derivatives

By Tracy Alloway and Michael Mackenzie
Published August 19, 2014 Financial Times

In March of last year, Kyle Bass, founder of the hedge fund Hayman Capital Management, made a startling proclamation: aggressive young bankers in Japan were pushing complex over-the-counter derivatives similar to those that rapidly soured during the financial crisis of 2008.

Mr Bass warned of the return of the spectre of AIG, the giant insurer that required a huge bailout during the depths of the crisis, after selling billions worth of credit default swaps (CDS) that offered payouts to investors in defaulted mortgage bonds.

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CDS Notional Drops by 30%

By Beth Shah
Published August 18, 2014 Global Capital 

ISDA reported that there was a 31% decrease in the notional cleared for CDS and 32% less executed on swap execution facilities, compared with the previous week. Rates saw an increase, with 11% more volume cleared, and 14% more executed on SEFs last week.

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