Derivs - Regulation

Growth in the property derivatives market will depend on the level of corporate exemptions in forthcoming E.U. over-the-counter derivatives legislation.

France’s Autorité des Marchés Financiers wants mandatory clearing of fx derivatives.

As legislators from the House and Senate head into conference Thursday morning to nail down the details of financial reform, experts say this final step before the bill becomes law could bring some surprises like a strengthened Volcker Rule and tiny tweaks of language that would have a significant impact on the industry.

Buy-side firms will need new technology and regulatory exemptions before they can effectively access central counterparty clearing (CCP) platforms for over-the-counter derivatives directly, according to Ila Eckhoff, director at BlackRock.

Keeping a handle on clearing houses will be the greatest challenge for the Commodity Futures Trading Commission, according to Michael Dunn, member of the Commission.

Dealers have warned E.U. and U.S. lawmakers that mandating clearing for all over-the-counter derivatives could prevent firms and end-users from offsetting their positions.

Patrick Pearson, head of financial markets infrastructure at the European Commission, this morning quelled industry fears over a political crackdown on speculative derivatives trading.

The recently-formed Swaps and Derivatives Markets Association believes that Nomura’s acceptance as an Intercontinental Exchange Trust U.S. credit default swap clearing member is a positive step towards the group’s goal of more access to clearing for boutique and mid-market banks.

The Ambac Assurance Corp. credit auction landed at 20 this afternoon, meaning investors will receive USD0.80 for every dollar of protection purchased against the company. The auction was run jointly by Markit Partners and Creditex.

Structured notes linked to the stock performance of local companies and sponsors were a standout performer in the run up to the last FIFA World Cup in Germany, but South Africa 2010, which kicks off this week, is a different story. Structurers say there is a lack of investor appetite this time round and new regulations in Europe have blocked some markets entirely.

The first round of bidding on the Ambac Assurance Corp. auction landed at 27.5 this morning, according to a Web site jointly run by Markit Partners and Creditex. This means protection sellers will likely have to pay out around USD0.725 on the dollar for credit default swaps sold on the holding company that triggered the CDS in March.

The European Parliament’s influential Economic and Monetary Affairs Committee this morning backed a rule to require euro denominated derivatives referencing an E.U.-based underlying, that an E.U. financial institution is counterparty to, to be cleared and reported to a European-based clearing house and trade repository.