Derivs - Clearing and Exchanges

The European Commission has proposed a further two year exemption for pension funds from central clearing requirements for their over-the-counter derivatives transactions.

Interdealer broker Tradition has made three senior hires in London and New York in a bid to expand its hybrid and electronic business.

Volumes in market adjusted coupon swap trading are increasing due to margin efficiencies, increased liquidity and the ease of trading, according to speakers at the TABB Forum Fixed Income 2015 conference in New York on Thursday.

As buyside firms transact in ever larger volumes, asset managers need to reduce the delta risk, known as DV01, the change in the value of their trades caused by a basis point change in rates. However, this is very difficult as capital requirements for investment banks mean that a dealer’s ability to warehouse risk for its buyside clients is diminished.

Tools that enable firms to reduce the number of line items in a portfolio, while keeping the same risk profile, are changing the way market participants trade derivatives. These tools are becoming the new market norm as users look to optimise their balance sheets as increased regulation envelops the derivatives market. Gabriel Suprise was granted an exclusive interview with Lucio Biase, CEO, and Hilary Park, chief strategy officer at LMRKTS, a new firm that offers a novel type of tool in order to minimise counterparty risk. Topics of discussion included what LMRKTS is, how it works and why it is different from other compression offerings in the derivatives marketplace.

Compression is behind a 3.6% drop in gross notional outstanding of interest rate derivatives between December 2013 and June 2014, according to the International Swaps and Derivatives Association, who said that the growth in services available at central counterparties and other portfolio compression providers combined with regulatory pressure is driving the trend.

Alberto Pravettoni, managing director and global head of exchanges at LCH.Clearnet in London, has left the firm.

John Grace, ex-senior managing director at AIG, has joined the Options Clearing Corporation as executive vice president and chief risk officer.

The Options Clearing Corporation (OCC) has established a pre-funded $1bn committed repurchase facility with a leading pension fund in order to increase the central counterparty’s overall liquidity resources from $2bn to $3bn.

Overall interest rate derivatives trading that was reported to swap data repositories last week increased by 14% from the previous week, according to data from the International Swaps and Derivatives Association.

BGC Partners has retaliated once more within hours of CME Group announcing an increased two-tier, front end-loaded tender offer for GFI Group at $5.85 per share, with the interdealer broker offering a fully financed, all-cash tender offer of $6.10 per share.

CLS Group and TriOptima have teamed up to offer an FX forward compression service in order to address the regulatory requirement for financial counterparties to have procedures in place to analyse the possibility of portfolio compression for non-centrally cleared over-the-counter derivatives.