Derivs - Interest Rate

The bankruptcies of several large institutions have highlighted a potential ambiguity within the International Swaps and Derivatives Association’s Master Agreement relating to Section 2(a)(iii). Specifically, several courts have addressed the issue of whether a party can exercise its rights under Section 2(a)(iii) to withhold payment indefinitely following the bankruptcy of its counterparty without declaring an Early Termination Date. This article compares the recent rulings and offers some negotiating options for counterparties to consider.

The China Banking Regulatory Commission is considering setting risk capital for derivatives on a firm-by-firm basis.

The Securities and Exchange Commission has paved the way for mutual fund firms to use U.K.-based LCH Clearnet Limited to clear interest rate swaps.

JPMorgan Chase dominated the derivatives market in the fourth quarter, holding nearly USD78 trillion, or one-third, of the total USD231 trillion industry, according to a report by the Office of the Comptroller of the Currency.

U.K. pension funds have been ramping up usage during the last six months of forward rate swaps, forward starting gilts and interest rate swaptions to hedge interest rate and inflation.

Barclays Capital has lined up two staffers for its corporate risk solutions group, which pitches interest rate and fx derivatives to corporates hedge their balance sheets.

Some emerging market regulators, including those in Malaysia and Indonesia, have called on major dealers to draft not only local-language versions of International Swaps and Derivatives Association Master Agreements, but simplified, plain language versions in the local language for smaller corporates.

The recently-enacted safe harbor for close-out netting in the revised Malaysia Deposit Insurance Act (PIDM Act) doesn’t go far enough for major dealers.

Tullet Prebon is hopeful that interest in a new index will lead to structured issuances down the line, said Frank Desmond, managing director in London.

The presidency of the Council of the European Union’s has proposed stronger rules segregating assets between central counterparties, clients and other CCPs in the proposed European Market Infrastructure Regulation.

Legg Mason will begin using derivatives on its Global Multi Strategy Bond Fund.

The London Stock Exchange is set to launch its Turquoise Derivatives platform in May.