Derivs - Regulation

The Australian Securities and Investments Commission is set to release a consultation paper proposing new disclosure benchmarks for over-the-counter contracts for difference issuers in the country.

The specter of corporates defaulting on their derivative trades is being raised as lawmaker efforts to grant margin exemptions to the Dodd-Frank Act appear to have lost steam.

The right way to limit mutual funds’ leverage in derivatives investments is to require funds to set up “Risk-Adjusted Segregated Amounts” (“RAS Amounts”) based on the risk profiles of the derivatives a fund owns, said a task force of fund lawyers who have been studying this subject since early 2009.

The stalling of the European Commission’s Alternative Investment Fund Managers Directive is fuelling the creation of new types of fund that are sparking worries among regulators, according to Nick O’Neill, partner at Clifford Chance in London.

The Depository Trust and Clearing Corporation’s Equity Derivatives Reporting Repository will gather information on all open equity derivatives positions of its 16 member firms from July 30. The information will be sent to regulators on August 13.

U.S. Securities and Exchange Commission task force recommendations can only work if investments in life settlements, not in the underlying policies, are defined as securities, according to industry watchers.

Draft proposals in Germany would limit foreign counterparties’ ability to terminate contracts with German institutions at risk of insolvency, which market participants fear will put a damper on trading with them.

The limited development of the derivatives markets in Asia-Pacific helped to reduce the potential losses to counterparties during the credit crisis three years ago, the Bank of International Settlements said today.

Buyside firms are looking for industry-wide standardized clearing documents in coming months as the newly-signed U.S. Dodd-Frank Act pushes much of the over-the-counter market towards central clearing.

The U.K. Financial Services Authority, H.M. Treasury and the Bank of England have given their support to a global framework for reporting information on derivatives to trade repositories, arguing that this would avoid regulatory arbitrage and data fragmentation.

The International Swaps and Derivatives Association is preparing standardized documents for first-to-default-swaps and nth-to-default swaps, which market participants say will cut down the times to trade the swaps and make it possible for trades to be confirmed in a repository.

Industry officials have warned the European Commission that the appointment of independent administrators to chair and participate in a clearinghouse’s risk committee could limit a CCPs ability to establish a stringent risk policy for clearing over-the-counter derivative contracts.