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EU Seeks U.S Swaps Rule Deal Before Bank Capital Deadline

By Jim Brunsden
December 17, 2014, Bloomberg

The European Union’s financial-services chief said he’ll push for a deal with the U.S. on rules for swaps clearinghouses by a June 2015 deadline.

Jonathan Hill said in an interview in Brussels that he sees “encouraging” signs that the impasse, which has implications for EU-based banks’ capital requirements, can be brought to an end.

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U.S. Bank Watchdogs Implement ISDA Stay Provision for Swaps

By Douwe Miedema
December 16, 2014, Reuters

U.S. bank regulators on Tuesday issued a rule to allow a stay in terminating derivative contracts if a bank lands in trouble, a provision needed to help them wind down failed banks without causing market mayhem.

The rule by the Federal Reserve and the Office of the Comptroller of the Currency reflected changes to the standard contract made by the International Swaps and Derivatives Association (ISDA) and 18 major banks.

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RBS Launches Second DPC to Prop Up Swaps

By Lukas Becker
December 16, 2014, Risk

RBS has set up a DPC to guarantee two securitisation swaps following the UK bank's downgrade – the second such derivatives vehicle it has launched this year.

Royal Bank of Scotland has set up a new derivatives product company (DPC) to help fix the problems created by the bank's downgrade earlier this year. The boom-era vehicle is designed to guarantee swaps RBS might otherwise have defaulted on.

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State Street Exiting Swaps Clearing Business, Citing New Rules

By Silla Brush
December 4, 2014, Bloomberg

State Street (STT) Corp. is closing down its swaps business after clients said new regulations steered them away for using the products.

The bank will shutter its U.S. business for clearing swaps early next year and will shelve plans to start a similar operation in Europe, Anne McNally, a spokeswoman for the Boston-based company, said in an e-mail statement today.

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O’Connor to Step Down as Chair of ISDA

By Philip Stafford
December 1, 2014 Financial Times

Stephen O’Connor has stepped down as full-time chairman of the International Swaps and Derivatives Association (Isda), one of the market’s biggest and most influential trade bodies, after just 18 months in the role.

He will be replaced by Isda vice-chairman Eric Litvack, who will combine the position with his existing role at Société Générale as managing director and head of regulatory strategy for the group’s Global Banking and Investor Solutions business. The changeover will take place on January 1, Isda said on Monday.

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Massad’s CFTC Pursues Softer Tone as Battles With Industry Fade

By Silla Brush
November 25, 2014, Bloomberg 

Southwest Airlines Co. complained for months in Washington that rules designed to curb excesses of the finance industry were hurting companies far from Wall Street.

Southwest lobbied regulators, wrote letters to lawmakers and testified at a congressional hearing that new safeguards for the swaps market were increasing its fuel costs by as much as $60 million a year. The agency that could do something about it, the Commodity Futures Trading Commission, refused to budge.

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GFI Launches MAC Swaps Live on Order Book

By Beth Shah
November 25, 2014, GlobalCapital

GFI Group has launched dollar-denominated market agreed coupon (MAC) swaps on its swap execution facility. The firm now offers live tradable prices for such contracts in a central limit order book on its electronic platform known as RatesMatch.

MAC swaps have pre­determined, standardised terms which begin on the International Monetary Market dates. Due to the standardised nature of such swaps, they are far more suited to anonymous order book trading as opposed to request­for­quote, while also allowing for greater initial margin and line item efficiencies for market participants. By enabling MAC swaps to be traded this way, it will result in greater liquidity in the interest rate swap markets.

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SwapClear Hopes to Crush Notions by $600trn

By Tom Osborn
November 25, 2014, Risk

Removing old bilateral records for cleared trades will allow CCP to ramp up its compression services, cutting notionals by as much as $300 trillion this year and next, the industry hopes.

The swaps market may be about to wriggle out of the leverage ratio's stranglehold, thanks in part to a radical new approach to trade compression that is being rolled out at LCH.Clearnet. The clearing house is aiming to slash the outstanding gross notional of interest rate swaps at its SwapClear service by $600 trillion over 2013 and 2014 – roughly equivalent to the current size of the entire rates derivatives market.

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Tullet Takes Hard Line on Trader Liability

By Mike Kentz
November 21, 2014, IFR

Market participants are alleging that inter-dealer broker Tullett Prebon is improperly forcing swaps users to sign intrusive legal agreements that include the right to penalise an individual trader transacting on its swaps broking platform – as opposed to just a firm – for up to five years after an alleged offence.

The accusations highlight increasingly contentious debates surrounding the legal framework for newly created swap execution facilities – electronic swaps broking platforms created by Dodd-Frank just over a year ago.

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EU Stress Tests Show €14bn Funding Burden on Italy Swaps

By Joe Rennison
November 24, 2014, Risk

EU-wide stress test shows a group of 14 banks with net positive derivatives exposure to Italy. Because the country’s debt office does not collateralise, this implies a “massive funding requirement,” says one trader.

Italy had almost €90 billion of uncollateralised derivatives trades with a group of 14 European banks at the end of last year, European Union stress tests have revealed, leaving the banks to fund margin calls on as much as €13.8 billion of exposure. BNP Paribas alone had net derivatives exposure of €3.4 billion to Italy.

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