Derivs - Interest Rate

The Basel III framework required for derivatives capitalisation has forced a shift in current risk management practices and processes. Two non-internal model approaches have been introduced to compute exposures – the current exposure method (CEM) and standardised method (SM), and one internal model approach – the internal model method (IMM) which requires approval from supervisory authorities.

The Singapore Exchange has started clearing non-deliverable interest rate swaps denominated in Malaysian ringgit and Thai baht.

The frontloading requirement under European Markets Infrastructure Regulation may create an unlevel playingfield by subjecting European derivatives traders to stricter rules than in other jurisdictions, market participants say. Hans-Ole Jochumsen, executive vp responsible for global market services as Nasdaq OMX in Stockholm, told GlobalCapital that he questions the need to frontload derivatives trades to clearinghouses before the start of mandatory clearing next year.

Australian dollar-denominated interest rate swaps are set for mandatory clearing, with the contracts to be potentially included in the country’s G20 OTC derivative reform laws.

Westpac expects to roll out G7 interest rate swaps to local investors in China within six months, and will then look to offer US dollar, renminbi fx forwards.

The absence of an exemption for pension funds in Switzerland’s derivatives regulatory proposals within its draft Financial Market Infrastructure Act will drive up costs and staffing pressures for such users, according to lawyers.

ICAP has hired Wendy Phillis, ex-coo for Europe, Middle East and Africa at State Street, as group chief risk officer, based in London. She will replace Colin Smith, who is retiring from the industry.

The five year sector of the CNY swap curve picked up a bid on Thursday as foreign players placed bets on a corrective steepening in the 2s/5s curve slope. Credit Suisse expects the People's Bank of China (PBoC) to alleviate money market stress by delivering a 50bp cut in the reserve requirement ratio (RRR), writes Deirdre Yeung of Total Derivatives.

China wants to further expand its over-the-counter derivatives market, in addition to developing a more accurate benchmark, as it continues to open up its capital account to the outside world.

Regulation in Asia that mimics US swap execution facilities could be between four-to-five years away in some jurisdictions, including those already established in setting up over-the-counter derivatives clearing houses.

The over-the-counter derivatives regulators group has identified the treatment of branches and affiliates and the registration of foreign organised trading platforms as the focus of cross-border concerns in a report to the G20.

Australia has started phase two of its trade reporting regime, which aims to capture the majority of the over-the-counter Australian dollar-denominated interest rate swaps market.