Derivs - Interest Rate

Regulatory proposals covering over-the-counter derivatives will bring significant costs to end users, while rules surrounding reporting requirements and collateral remain unclear and need further clarification, according to Joel Kim, head of fixed income, Asia Pacific, at BlackRock.

Inconsistent and conflicting final rules for over-the-counter derivatives between the U.S. and Europe cannot be ruled out, according to Ng Nam Sin, assistant managing director in the Monetary Authority of Singapore’s development group.

The International Swaps and Derivatives Association has published a confirmation for a market agreed coupon contract to provide an additional option for market participants that wish to use over-the-counter interest rate swaps with common, pre-agreed terms.

Joseph Vona, U.S. dollar interest rates options trader at BNP Paribas in New York, has left the bank.

Annual turnover in Asia’s over-the-counter derivatives markets grew 2.2% a year between 2008 and 2012, with annual turnover reaching USD186 trillion last year, according to the International Swaps and Derivatives Association.

A lack of progress and co-ordination in developing cross-border rules is fragmenting the over-the-counter derivatives markets, and will in turn dampen liquidity, investment and growth, according to a letter from numerous Finance Ministers addressed to the U.S. Treasury and other U.S. regulators.

Market participants should sell delta-hedged 3mx5y straddles on the Japanese government bond yield as monetary policy undertaken by the Bank of Japan should depress volatility, according to JPMorgan.

Standard Chartered has hired Petter Sternby, the ex-head of the financial institutions group Asia ex-Japan at Nomura in Hong Kong, as head of Southeast Asia financial institutions strategic coverage in Singapore.

Keiran Ramsay, head of Australian dollar rates trading at the Royal Bank of Scotland in Sydney, has left the firm.

Fragmented central clearing in Asia could hit bid/ask spreads and liquidity of cleared over-the-counter derivatives if dealers and end-users are forced to join a number of separate national clearinghouses.

To position for no hikes in Swedish rates, the Royal Bank of Scotland is recommending a 2y forward 2s10s steepener in the Swedish krona.

From 1 April 2013, a new financial regulation framework took effect in the U.K. The Financial Services Authority (FSA) is replaced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the Bank of England is to have overall responsibility for financial stability and a new Financial Policy Committee (FPC) of the Bank of England is being created. However, the Financial Services Act 2012 does more than just give effect to these regulatory reforms.