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Volatility Could Limit Banks’ Buy-Side Support

Published April 11, 2014 The Trade

The ability of banks to support asset managers’ OTC derivatives trading and clearing could be limited due to increased market volatility, Piers Murray, global head of fixed income prime brokerage for Deutsche Bank, has said.

Banks face growing pressure to lower the amount of capital used to support client swaps activity as part of post-crisis reforms to reduce systemic risk. This, Murray said, could be exacerbated by changes to volatility.

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Emir Reporting Launch Was Satisfactory – Esma’s Petrenko

By Matt Cameron
Published April 11, 2014 Risk

Thousands of companies were stuck in queues when Europe's reporting regime took effect on February 12, some repositories were overwhelmed with data, and more than half of the one-sided trade reports filed so far cannot be matched up with the second side of the transaction – but the rules have got off to a satisfactory start, according to an official at the European Securities and Markets Authority (Esma).

Speaking yesterday at the annual meeting of the International Swaps and Derivatives Association in Munich, Olga Petrenko, market integrity officer with Esma, said problems had been expected and stressed the vast amount of work required by the industry.

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ISDA AGM: RFQ Dominates SEF Execution

By Helen Bartholomew
Published April 10, 2014 IFR

A regulatory-driven overhaul in the way that over-the-counter derivatives are traded has seen much of the US$693trn swaps market cleared through central counterparties and standardised contracts traded over newly-created swap execution facilities. But the rise of new platforms for trading swaps remains some way from the exchange-like model that regulators may have envisaged, with client and dealer preferences veering firmly towards the “request for quote” model that has always prevailed in OTC markets.

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Traders Warn on Deadline for New Swaps Rules

By Philip Stafford
Published April 10, 2014 Financial Times

Swaps dealers have warned a mid-May deadline forcing them to comply with new US rules for over-the-counter trading remains tight, even after a US regulator clarified its positions on some key issues.

The Commodity Futures Trading Commission said late on Wednesday that venues trading US products, and customers in Europe will be required to report trades to US data repositories. They will also provide US officials with monthly reports on the activity of their US customers.

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Barclays' Harrison Calls for Phased Start to Clearing in Europe

By Duncan Wood
Published April 10, 2014 Risk

European derivatives users have been urged "don't be late to the party", with the clock now counting down to the start of mandatory clearing.

Speaking at the annual meeting of the International Swaps and Derivatives Association, Harry Harrison, co-head of securities at Barclays, said European regulators should relieve pressure on market participants by phasing the start of the regime, as was the case when clearing rules took effect in the US last year.

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Derivatives Rules Softened in Victory for Banks

By Matthew Leising
Published April 10, 2014 Bloomberg

In a victory for banks, global financial regulators revised rules governing how much money must be set aside to cover losses by swaps traders, backing away from guidelines that firms warned would destabilize the $693 trillion derivatives market.

The Basel Committee on Banking Supervision’s final rule, released today, would require swaps dealers to hold less cash to protect against defaults than did a proposal published last year. The plan now applies a minimum 20 percent risk weighting to money deposited at clearinghouses, which are third parties that guarantee the transactions, down from 1,250 percent in the original proposal. The change takes effect on Jan. 1, 2017.

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Tough Swap Standards Drive Up Trade Costs 92-Fold

By Matthew Leising
Published April 10, 2014 Bloomberg

New rules aimed at making the world safer from blowups in the $693 trillion derivatives market are poised to drive up costs so much for retirement funds and other users that bankers say they do just the opposite.

The toughened standards, hatched five years ago after derivative losses almost crashed the global economy, are meant to safeguard trades and bring more openness to a market whose secrecy and sheer size overwhelmed regulators in 2008. Where swaps had been one-on-one deals before, now they would be backstopped by third parties in clearinghouses that ensure everyone can pay, with the aim of avoiding emergency bailouts and panic.

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Isda Hoping to Detoxify Derivatives

By Lukas Becker
Published April 9, 2014 Risk

The International Swaps and Derivatives Association wants to change public perceptions of over-the-counter derivatives by highlighting the value of the products to the wider economy. That message got a lot of airtime on day one of the association's annual meeting in Munich yesterday, generating discussion among delegates, some of whom saw it as evidence of a sell-side confidence crisis, while others argued it was a long-overdue attempt to stem unfair attacks.

Speaking to reporters at a mid-morning briefing, Isda chairman Stephen O'Connor – who quoted actor Shia LaBeouf in his opening remarks as an example of widespread, and inaccurate, criticisms of the OTC market – explained the motivations. 

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Growth Threatened in $693 Trillion Derivatives Review

By Abigail Moses
Published April 9, 2014 Bloomberg

Global regulators’ failure to align efforts to reform the $693 trillion derivatives market threatens to undermine economic growth, according to the International Swaps & Derivatives Association.

Investors are struggling to adapt to regional differences to changes agreed by the Group of 20 nations as the industry meets for its annual conference in Munich today. In the U.S. traders have been reporting derivatives transactions to data repositories and have been required to have central clearinghouses back their contracts since last year, while European regulators are still defining the requirements.

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Derivative Risk to Financial System Seen Easing in ISDA Survey

By John Glover
Published April 8, 2014 Bloomberg

The threat posed to financial markets by derivatives has been curbed by regulators even as costs for investors have increased, according to an industry survey.

More than 57 percent of those questioned by the International Swaps & Derivatives Association said the system is on a sounder footing than it was before the financial crisis. That improvement has brought with it more red tape, as well as greater expense, according to respondents, of which 42 percent were non-financial corporates, almost 30 percent were banks and 20 percent asset managers.

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