News

JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. and the world’s largest banks are set to win a rollback in final Dodd-Frank Act rules intended to transform the swaps market by increasing competition.

The Commodity Futures Trading Commission’s five members are scheduled to vote in Washington today on rules determining how buyers and sellers must trade credit-default, interest-rate and commodity swaps in a $633 trillion global market. 

The proposal forms part of a wider overhaul of the CDS definitions, which are being revisited for the first time in a decade to fix a number of flaws in the instruments, including the way they react to sovereign debt restructurings such as that of Greece (see article).

Along with sovereign CDS, amending financial CDS to account for the new bail-in regime is seen as a top priority in overhauling the contract to ensure it remains a viable hedging product.

Financial regulators have given themselves until September to try to resolve differences over how to supervise derivatives markets in the wake of the financial crisis, a U.S. watchdog said on Wednesday.

Leaders of the Group of 20 economies (G20) pledged in 2009 to make off-exchange traded derivatives like credit default swaps more transparent. They wanted rules in place by the end of 2012, but this has proved difficult to achieve.

Mexico is planning to launch derivatives rules this year in sync with its northern neighbor but is concerned an overly tough regime could push trades into the United States where they are subject to less oversight, Mexico's chief bank regulator said.

U.S. regulators are hammering out a raft of new rules aimed at boosting transparency in the swaps market after risky derivatives trading helped fuel the 2007-2009 financial crisis and led to multi-billion dollar taxpayer bailouts.

Carson Block’s bet against Standard Chartered Plc, the British lender that makes most of its profit in Asia, triggered a surge in the cost of protecting against losses on the British lender’s debt.

Block, the short-seller who runs Muddy Waters LLC, said at a May 10 conference in Las Vegas that he’d bought five-year credit-default swaps on Standard Chartered for about 85 basis points. The cost of CDS tied to the lender’s debt jumped to 103.98 basis points today, according to data compiled by Bloomberg. The shares fell 1.9 percent to 1,552.5 pence in London trading.

At data services provider Markit's annual New York customer conference last week, Robert Pickel, CEO of the International Swaps and Derivatives Association (ISDA), remarked on the problem of "extraterritoriality" when it comes to regulation of financial industry operations.

Pickel defined the concept as national regulators taking different stances concerning the same areas of rulemaking, although "extraterritoriality" can also mean exemptions from local law. With either definition, the problem Pickel correctly identifies is that regulatory fragmentation can be the result.

A market has yet to materialize for credit default swaps offering protection on Apple Inc's record USD17bn bond issue, despite the enormous size of the deal.

While quotes are available and prices have been published by data vendors since May 1, activity has been negligible, with only a handful of investors attempting to make a market in the five-year maturity.

Nearly 50% of buy-side firms have yet to make operational adjustments for collateral requirements under new OTC derivatives rules - an investment that will cost the finance industry US$53 billion in infrastructure and technology, according to a new report.

Celent, a US-based financial research and consulting firm, released a survey on institutional investors' adoption of new services to achieve greater collateral efficiency, ahead of regulatory changes.