Derivs - Regulation

Rating agency officials and traders have questioned the European Commission’s idea to use rolling averages of credit default swap spreads or bond prices instead of ratings to define minimum credit quality for portfolios.

An independent study conducted by the International Swaps and Derivatives Association and Atrevida Partners revealed split-second and accurate pricing of interest rate swaps by the dealers involved.

The Securities and Exchange Commission will look at how circuit breakers work in the equity market, before thinking about adopting them in the over-the-counter derivatives markets, according to Chairman Mary Schapiro.

Senior clearinghouse officials clashed on Thursday morning over how they should be allowed to compete in the derivatives market.

LCH.Clearnet is warning against linking international clearinghouses. Effective risk mitigation systems need to be established before any linking takes place and that’s something industry officials say is not likely to happen soon.

Membership in swaps clearinghouses should be open to non-derivatives dealers, according to Gary Gensler, chairman of the Commodity Futures Trading Commission.

Belgium, which holds the E.U. presidency, has floated a legislative amendment that would allow central counterparty clearing houses the right to refuse to clear derivative trades, which they already provide a clearing service for, that have been executed in a rival location.

U.S. structured finance transactions using interest and currency swaps could become less economical to issue if proposed rules on clearinghouses come into effect, according to a Standard & Poor's analyst.

New rules from the Monetary Authority of Singapore for the issuance and marketing of structured products to retail investors could eventually stymie the market if intermediaries find they can’t be profitable under the new constraints, lawyers say.

The Financial Stability Board issued principles on Friday calling on national regulators to develop “alternative definitions” of creditworthiness and for market participants to boost internal risk management capabilities, with an aim to ensure the industry is not depending solely on credit rating agencies’ ratings.

European Union regulators are just as devoted to the reform of the OTC derivatives market as the U.S., said Michel Barnier, E.U. commissioner for internal market and services.

The unlimited liability model mandated by Japanese law for central counterparties could add systemic risk and lead dealers to take riskier positions, according to bankers and lawyers at the International Swaps and Derivatives Association Annual Regional Meeting in Tokyo.