Derivs - Credit

Numerous press articles in recent years have predicted the death of single name credit default swaps. Onerous capital requirements, costly changes in market structure and alternative hedging tools have all been cited as factors driving the inexorable decline in the product.

Deutsche Bank, its balance sheet and the market it operates in are worlds away from where major financial institutions stood in 2008 — so those scaremongering either have their own incentives for doing so or should know better.

The European Commission has approved, with some amendments, rules for collecting margin on uncleared derivatives, traversing a key hurdle as Europe seeks to catch up with Canada, Japan and the US.

Post-trade reporting of non-equity trades under MiFID II will be too onerous and expensive for single services, known as consolidated tape providers (CTPs), the European Securities and Markets Authority has said, suggesting instead that specialisations for a number of different instruments — including derivatives — be allowed.

Tullett Prebon is set to lose its European chief executive, who becomes the second senior departure in the past week from a planned Tullett-ICAP combined group as the two interdealer brokers look to merge by the end of this year.

ICE Clear Credit, the credit derivatives clearing unit of Intercontinental Exchange, has been recognised as a third-country (non-EU) central counterparty (CCP) under European rules.

Intercontinental Exchange has named a replacement for the president of its ICE Clear US operation, Thomas Hammond, who will leave the post at the end of this year.

We noted last week that Deutsche Bank could soon become the widest name in the Markit iTraxx Europe index if its credit deterioration continued. It came to pass perhaps sooner than many expected, with its senior five year spreads closing at 251bp on Monday, 6bp wider than Glencore.

Syndicated loans are becoming a focal point of firms looking to demonstrate the power of blockchain, or distributed ledger technology, with different initiatives ramping up and competing to solve the problem of lengthy settlement times in the private debt market.

The roll of iTraxx credit indices this week, coupled with a monthly credit options expiry, prompted a burst of trading activity and brought some surprises — with Crossover trading going against expectations and volatility traders entering into unusually long-dated expiries.

Blockchain came sharply into focus this week for the derivatives market, as industry bodies warned on both the need for such technology and to regulate its use. Meanwhile, firms rolled out a range of new initiatives to address the market’s mounting challenges around margin and settlements.

Intercontinental Exchange, the US based exchange and clearing business, has made main board appointments and named a new chairperson for the board of its ICE Clear Europe subsidiary.