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US Regulators Urged to Accept Dealers' Use of Affiliates

By Peter Madigan
Published July 18, 2014 Risk

Politicians and regulators in the US should learn to live with the fact that US banks are funnelling a large portion of their overseas swaps business through non-guaranteed affiliates (NGAs), according to two former senior regulators. Potential responses to the strategy – which insulates the affiliates and their non-US customers from the Dodd-Frank Act – could set the US on a collision course with foreign officials, they argue.

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Hong Kong Regulators Seek Industry Input on Derivatives

By Michelle Price
Published July 18, 2014 Reuters

Hong Kong moved one step closer to implementing the G20 post-crisis reform agenda on Friday with the publication of a long-awaited consultation on the treatment of derivatives trades.

The paper, jointly-issued by the Hong Kong Monetary Authority (HKMA), the city's de facto central bank, and the Securities and Futures Commission (SFC), will help establish detailed rules on how information relating to privately-negotiated derivatives trades are reported to the regulators.

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Trade Reporting Fines on the Horizon

By Jon Watkins
Published July 17, 2014 The Trade

Regulators are set to clamp down on widespread trade reporting breaches across Europe as a six-month grace period since the rules were introduced expires, according to industry sources.

Issues surrounding unique trade identifiers (UTIs), legal entity identifiers (LEIs) and the complexity of the 85 fields required by regulators have plagued the process from the outset.

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EU Bank Proprietary-Trading Ban Plan Runs Into Opposition

By Jim Brunsden
Published July 16, 2014 Bloomberg

The European Union’s bid to set structure rules for about 30 of the bloc’s biggest banks has run into resistance from countries opposed to a planned proprietary trading ban.

A “substantial number of countries” have “expressed serious concerns or reservations” about the proposed ban, according to a report prepared by Italy, which holds the EU’s rotating presidency. “Only very few countries are explicitly in favor.”

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LEI Body Names Chief Executive for Identifier Push

By Alexander Campbell
Published July 14, 2014 Operation Risk and Regulation

The Global Legal Entity Identifier Foundation (GLEIF) has named Stephan Wolf as its first chief executive, following an inaugural board meeting late last month. Based in Basel, GLEIF was set up following a 2011 call by the G-20 group of leading economies for a uniform system of identifiers for financial markets, and is working towards objectives laid out by the Financial Stability Board (also located in Basel) in 2012.

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Leverage Burden Drives Cash-to-Swaps Shift

By Helen Bartholomew
Published July 12, 2014 IFR

More stringent regulatory capital and leverage requirements are set to drive up the cost of government bond market-making, causing some banks to scale back or pull out altogether and potentially pushing more activity towards derivatives-based alternatives as banks struggle to hit ROE hurdles.

“Banks’ government bond inventories are clearly going down as regulation takes its toll. A lot of banks are asking the question whether they need to stay in this business and for what reason,” said the global head of rates trading at one European house.

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ESMA Gets an Earful from Industry

Published July 10, 2014 Automated Trader

As the financial industry prepares to make recommendations for MiFID II and MiFIR regulation, a number of outstanding issues have yet to be resolved.

On July 7, exchanges, brokers, investment firms, trade associations, vendors, issuers and others gathered to get clarity on proposals and begin making comments on the discussion and consultation papers released May 22.

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Loan System Promising Automation Ready for ISDA Approval

By Kristen Haunss
Published July 8, 2014 Bloomberg

Efforts under way since 2007 to automate the $750 billion market for junk-rated corporate loans may soon pay dividends just as Moody’s Investors Service warns managers may not be able to refund investors trying to flee.

The International Swaps and Derivatives Association may start reviewing as soon as this month whether electronic notifications aimed at automating quarter-end payments and interest ratesare ready to be used instead of fax machines, Bhavik Katira, chair of an ISDA group responsible for the initiative, said in an interview. Messages focused on cutting the time its takes to settle a trade from the current three weeks could also be sent for approval this year.

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U.K. to Fight for City of London in Court Clash With ECB

By Jim Brunsden
Published July 8, 2014 Bloomberg

Bruised by David Cameron’s defeat over the leadership of the European Union’s executive arm, the U.K. faces its next clash with the EU tomorrow. It touches a sensitive point -- the City of London.

Britain’s lawyers will take on the European Central Bank in a hearing at the bloc’s top court -- fighting policies they argue would punish the nation’s financial hub because the U.K. has kept the pound sterling.

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Smaller Clearing Houses Push for Third-Country Equivalence

By Viren Vaghela
Published July 8, 2014 Asia Risk

Just four months ago Asia's smaller clearing houses – those in China, India and Korea – were like a series of unfinished stadiums in the lead-up to hosting a major international sporting event with the participants fretting about the risk of injury caused by playing in an incomplete infrastructure.

Dealers at foreign banks were expressing concerns about systems and processes not meeting international standards, the capital costs being punitive and a lack of recognition from European and US regulators. But to their credit Asia's central counterparties (CCPs) have confounded the naysayers and are ready for mandated clearing.

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