Derivs - Regulation

European regulators are overreacting in their response to the credit crisis and are subsequently leaving the market with a so-called ‘patchwork quilt of rules,’ according to sellside officials speaking at the International Swaps and Derivatives Association's regional conference in London today.

Smaller hedge funds have reportedly been shopping themselves around to larger firms in order to avoid the regulatory and compliance burdens that will come with the new regulation in the U.S., according to lawyers.

Dealers have been renegotiating the credit rating trigger levels in new master agreements with pension funds over the last quarter.

The CME Group and ICE Trust haven’t ruled out changing the capital criteria they have in place for clearing membership, according to representatives speaking at International Swaps and Derivatives Association Regional Conference in New York on Thursday.

Eric Litvack, coo of global equity flow at Société Générale, told delegates that he is concerned by differences in legislative proposals in Europe and the U.S., particularly regarding reporting requirements and swap execution facilities

The Securities and Exchange Commission and the Commodity Futures Trading Commission are looking at establishing multiple identifiers for transactions as they plot governance of trading on swap execution facilities (SEFs).

Caps on ownership limits for swap dealers on clearinghouses will reduce the interest of dealers in getting involved in creating efficient clearinghouses, Don Thompson, associate general counsel at JPMorgan, told delegates.

Members of the European Parliament’s influential Economic and Monetary Affairs Committee are looking at the possibility of appointing auditors to disclose the hedging activities of corporate end-users to E.U. supervisors, rather than corporates themselves having to submit data to supervisors should they breach a so-called information threshold.

Dealers are preparing changes to their business if single-dealer execution platforms are not included in the Commodity Futures Trading Commission and Securities and Exchange Commission’s definition of a swap execution facility.

Conrad Voldstad predicts that the level of outstanding notional in interest rate swaps and credit default swaps will decrease significantly. The ISDA chief puts this down to the industry focusing on central clearing and compressing economically redundant trades.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are considering requiring the use of three separate identifiers that would be attached to each transaction in an over-the-counter swap sent over an execution facility.

A bill introduced to the New Zealand parliament this week would give expanded powers to the Financial Markets Association, which oversees over-the-counter derivatives.