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Dodd-Frank: No High Fives Yet

By Mike Kentz
July 11, 2015, IFR

Five years after US Congress signed Dodd-Frank into law – the largest piece of financial market infrastructure overhaul since the Great Depression – financial regulators and market participants doled out lukewarm approval for the legislation.

The law has been the subject of intense criticism from federal officials requesting a repeal of the entire legislation, while financial institutions continue to chip away at the less savoury portions for their businesses.

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Dealing with Swaps

By Anna Reitman
July 10, 2015, Automated Trader

If you ask CFTC commissioner Mark Wetjen to describe the ideal SEF marketplace of the future, he'll tell you that a vision could look like the futures exchanges today - deep liquidity, active trading, ease in getting in and out of positions, and a diverse group of liquidity providers.

But that comes with a caveat. There are important differences between futures and swaps markets, and recognising those differences is a policy goal. As a result, SEFs are designed to be "flexible".

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DBRS and Fitch Consider Bail-In Boost for Swap Ratings

By Catherine Contiguglia 
July 7, 2015, Risk

If agencies follow Moody's lead, S&P would be isolated.

Two more rating agencies may introduce separate counterparty ratings for derivatives, following the lead of Moody's Investors Service – a step that would help legitimise the new thinking and could allow more banks to act as swap providers in structured finance deals.

Currently, swap ratings triggers and thresholds are tied to senior unsecured debt ratings, but DBRS and Fitch are considering introducing a separate – higher – scale, based on the expectation that losses will be inflicted on bonds ahead of derivatives liabilities in the event of a bank entering resolution proceedings. Moody's took that step in March, with its counterparty ratings assessment (CRA) resulting in two- and three-notch upgrades for many dealers.

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Comment: Ensuring Swaps Compliance, One Loophole at a Time

By Anthony J. Perrotta, Jr. 
July 1, 2015, TABB Forum

Barney Frank and others apparently had the easy job: crafting the legislation that would become the Dodd-Frank Act and the law of the land. Regulators now have the unenviable task of making it work. Sometimes that means pushing aside personal views for the common good.

The CFTC unanimously voted today to further strengthen the stability of the OTC swaps markets by proposing a rule closing a loophole that allows U.S. banks, subject to the Dodd-Frank Act, to potentially circumvent regulatory requirements by pushing swaps business into non-guaranteed foreign entities. The unanimous vote was a sign of solidarity, but ultimately belies the inherent complexity of a process that has drawn battle lines on both “political” and “common-sense business” fronts.

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Derivatives ‘Not Untouchable’ for Bail-In, Warns SRB’s König

By Catherine Contiguglia and Cecile Sourbes 
June 29, 2015, Risk

Rating agencies “might be wrong” to see swaps as safer, says eurozone resolution chief.

The head of Europe’s resolution authority has warned market participants not to assume derivatives liabilities will get preferential treatment next time a big bank collapses – one of the central planks of a new derivatives assessment methodology published by Moody’s Investors Service in March.

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CFTC Casts Margin Net to Catch U.S. Banks' Affiliates

By Peter Madigan
June 30, 2015, Risk

Agency redefines ‘guarantee’, but lawyers caution it may not stick.

Foreign affiliates of US banks that dropped parental guarantees to avoid trading requirements of the Dodd-Frank Act would still be caught by new cross-border margin rules proposed on June 29 – one of a series of potentially divisive provisions in the draft rules. Lawyers are already challenging the ability of US regulators to regulate so-called non-guaranteed affiliates.

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U.S. Swaps Regulator CFTC To Close Cross-Border Loophole

By Douwe Miedema
June 29, 2015, Reuters

The U.S. derivatives market regulator on Monday proposed a rule for safety margins for uncleared swaps to close a loophole Wall Street banks have used to duck new trading provisions by shifting business abroad.

U.S. firms would have to comply with the regulation, which the Commodity Futures Trading Commission adopted unanimously, in most cases, even when doing business abroad.

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Regulatory Impact on Swaps Minimal, Managers Say

By David Wigan
June 27, 2015, IFR

Soaring interest rate volatility led to a surge in hedging activity in recent weeks, providing the first clear picture of the impact of post-crisis regulation on investor demand for over-the-counter derivatives. And the apparent answer is that not much has changed.

With European and US bond yields soaring to their highest levels in eight months, fund manager appetite for swaps appeared to be undiminished, while futures activity remained flat.

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Collateral Technology Spend Increasing

June 24, 2015, Markets Media

Global spending on collateral management technology should reach $331m by the end of this year according to a survey by Aite Group.

In a survey this week the consultancy said spending on collateral management technology is set to significantly increase over the next few years due to regulatory changes.

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Wall Street Could Save Billions on Swaps as Regulators Squabble

By Jesse Hamilton and Silla Brush
June 25, 2015, Bloomberg Business

A quarrel among regulators could add up to billions in savings for Wall Street banks.

At stake is a proposed rule that has dragged on for years that could require firms like JPMorgan Chase & Co. and Morgan Stanley to set aside tens of billions of dollars in collateral when trading swaps with their own affiliates. Now, a last-ditch effort by bank lobbyists has helped spur some regulators to second-guess how strict they should be, according to three people familiar with the discussions.

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