Derivs - Interest Rate
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Last week, Bloomberg’s swap execution facility saw record high volumes in interest rates and credit default swap trading amid concerns about unrest in Ukraine and escalating tensions between Russia and the West.
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The Securities Industry and Financial Markets Association has submitted comments to numerous regulatory agencies surrounding margin requirements for non-centrally cleared swaps and security-based swaps, with one being adopting a weekly initial margin schedule to minimise disruptive margin disputes.
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A month after trade reporting kicked off in Europe on February 12, the European Commission has adopted a delegated regulation that sets out procedure for penalties imposed on trade repositories. The document is intended as a supplement to the European Markets Infrastructure Regulation. -
A central tenet of the Dodd-Frank Act is that standardized swap transactions must be centrally cleared through a Commodity Futures Trading Commission-registered derivatives clearing organization or a clearinghouse that is exempt from DCO registration. Dozens of articles and law firm client alerts have discussed this new clearing requirement and related issues, including the CFTC regulatory provisions governing the protection of cleared swaps customer collateral, commonly known as the LSOC model. Yet relatively little attention has been focused on the rules and regulations governing the basic day-to-day operation of DCOs, even though these provisions have important implications for swap market participants.
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The US Securities and Exchange Commission has proposed new rules to enhance the oversight of clearing agencies which are deemed to be systemically important. The move by the regulator is in a bid to ensure more robust requirements regarding risk management, operations, governance and disclosure.
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Indian authorities may put into place an electronic trading platform for Indian rupee over-the-counter interest rate swaps by September this year, which is dependent on the introduction of central clearing.
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The International Swaps and Derivatives Association has warned that incorporating a stay of execution in the ISDA Master Agreement could create an imbalance of risk across portfolios in the event of a default.
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Many market participants are risking non-compliance with European Markets Infrastructure Regulation by not having registered for a legal entity identifier required to identify counterparties in reported derivatives transactions. So far, according to the website Open LEIs, 223,466 LEIs have been issued in 173 countries, leaving swathes of the market yet to register.
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Expertise in cross-asset products, a concise understanding of cross-border regulatory issues and a proficiency in both local and global market demands are the requirements for any senior executive to succeed in the derivatives markets. Bob Ray, ceo of CME Europe, possessed all of those qualities.
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Pre-trade transparency in Europe could impact liquidity in the over-the-counter swaps market, according to Serge Marston, institutional client group global head of eCommerce sales at Deutsche Bank in London.
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Société Générale is expecting to close three longevity swap deals in Q2 this year with insurance firms, following its first transaction last December.
