Derivs - FX

The U.S. Commodity Futures Trading Commission’s one-month delay for registered swap execution facilities from any enforcement under the SEF rules with regard to market participants who trade on such SEFs isn’t long enough for the industry.

The Shanghai Free Trade Zone could become a competing market for Hong Kong’s offshore China yuan market, with end users there potentially having access to the full range of fx products allowed in Hong Kong, according to structurers and traders.

Mark Mehtonen is a Portfolio Manager, Tactical Allocation/Ilmarinen Alpha, at Ilmarinen Mutual Pension Insurance Co. in Finland. He spoke to Managing Editor Rob McGlinchey prior to the beginning of the Chicago Board Options Exchange’s Risk Management Conference Europe, at the Penha Longa Resort in Sintra, Portugal.

Enhancing counterparty credit risk management practices is a key focus for banks. This is in response to changes in accounting rules and new prudential and market regulations, which have tightened substantially following the financial crisis.

Larry Tabb has carved a unique spot as an objective observer of the derivatives market over the last 10 years. His firm’s research is seen as having the pulse of buy- and sellsiders—he also has the ear of regulators as evinced by his role in the Commodity Futures Trading Commission effort to define high-frequency trading. In an extensive interview with DW, he forecasts a vastly different OTC landscape emerging over the next five-seven years. The regulatory changes will see less bespoke flow and deals concentrated in fewer hands. He also foresees teething issues as swap execution facilities get off the ground, for example through a dash to get as many products as possible made available to trade.

Interoperability of global clearing models is not only undesirable but could kill product innovation, said Phupinder Gill, ceo of CME Group, at the 34th Bürgenstock annual global derivatives markets conference in Geneva.

The capital cost of clearing for banks could lead end-users to create shadow-banking entities to clear trades, according to panelists.

Migrating clients onto newly-approved swap execution facilities could take months, despite the U.S. Commodity Futures Trading Commission Wednesday deadline for swaps trading to be moved onto the platforms.

Scott O'Malia, a commissioner at the Commodity Futures Trading Commission, wants an extension to the Oct. 2 deadline for trading on a swap execution facility, he told DW on the sidelines of the 34th Bürgenstock Global Derivatives Forum in Geneva today.

Deliverable swap futures could boost liquidity in derivatives markets and lead to a healthier industry going forwards, Jeffrey Howard, managing director and global co-head of prime services markets at RBS Securities, told the Bürgenstock global forum for derivatives markets in Geneva today.

Investors have been tapping short-dated topside calls on sterling against the U.S. dollar ahead of the U.S. non-farm payroll report and Bank of England’s Monetary Policy Committee meeting and announcement Oct. 4 and Oct. 10, respectively.

Global agencies may need to be created to co-ordinate derivatives reforms as the number of capital markets increase, David Wright, secretary general of the International Organization of Securities Commissions, told attendees at the 34th Bürgenstock forum for derivatives markets, in Geneva today.