Derivs - Regulation

Lyxor Asset Management is marketing a capital-guaranteed fund in Hong Kong and Macau that protects investors from a counterparty failure via an equity-linked swap.

The advent of buysider access to over-the-counter clearing, through dealers acting as derivative clearing members, is expected to create a burgeoning revenue stream for investment banks. Much like a prime broker would step between a customer and another dealer, only DCMs will be able to face off against clearinghouses, facilitating a process known as customer segregation.

The International Organization of Securities Commissions has urged issuers to provide investors with greater disclosure on the performance of credit default swaps and securitization markets.

Regulations are being drafted in Indonesia that address sales of structured products by offshore entities into the country. Bankers expect them to be released for public comment within the next two months.

Financial regulators in Taiwan are requiring offshore structured product sellers to demonstrate that the jurisdiction where the product has been registered has equal or better investor protections than Taiwan.

The rationalization of margin requirements emerged as a major concern at joint public meetings on over-the-counter derivatives regulation hosted by the two largest U.S. financial watchdogs this week.

RBC Capital Markets has reportedly halted efforts to market equity-linked products into Korea. The temporary move comes shortly after RBC became a focus of a review by Korea’s Financial Supervisory Service following the alleged mispricing of stocks underpinning structured products (DW Online, 8/24).

The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission are holding meetings today and tomorrow to get feedback on their plan to divvy up regulation of the financial markets, including over-the-counter derivatives.

CME Group and the Options Clearing Corp. are separately considering clearing over-the-counter equity derivatives. The initiatives follow the Obama administration’s plan to have more OTC derivatives centrally cleared or traded on exchange.

The EU Commission’s derivatives group is still waiting on responses from some of the “bigger, important investment banks,” on proposals to standardize the over-the-counter derivatives market, Sebastijan Hrovatin, secretary to the group in Brussels, told Derivatives Week today.

South Korean regulators working to bring about central clearing of over-the-counter trades are initially targeting credit default swaps and interest rate swaps. They are hoping to run draft legislation by the national assembly early next year.

An unidentified Malaysian firm reportedly received a whopping USD3 million stamp duty bill after submitting an over-the-counter contract to the Inland Revenue Board of Malaysia.