Derivs - Regulation

U.S. Treasury Secretary Timothy Geithner is calling on Congress to discourage the use of customized over-the-counter derivatives through conservative capital requirements and to require full pricing transparency. In a hearing this morning before the House Agriculture and Financial Service committees, he said rules were needed to “encourage substantially greater use of standardized OTC derivatives.”

U.S. Treasury Secretary Timothy Geithner is slated to update the House Agricultural Committee and House Financial Services Committee this morning on over-the-counter derivatives regulation. You can watch the hearing from 10am EST here

The U.K. Treasury backs calls for risk-determined capital charges for derivatives that cannot be centrally cleared. In a report today it also revealed it supports U.S. and European Union efforts to require those trades to be reported to a central repository.

Dealers have agreed to standardize credit default swap contracts in Japan, according to a person who attended the first meeting of the Japan CDS Standardization Working Group earlier today.

Off-shore sellsiders are continuing to lobby against the latest proposals from Taiwan’s Financial Supervisory Commission, which would stipulate that all products sold in the country by foreign banks are 100% capital protected.

Credit default swaps on auto parts supplier Lear Corp. have been triggered, after the Americas Determinations Committee of the International Swaps and Derivatives Association met today to decide the fate of contracts on the name. The date on the settlement auction has yet to be set.

Some 25 banks signed China’s National Association of Financial Market Institutional Investors (NAFMII) master agreement at an official ceremony in Beijing earlier today.

Law firm Russin & Vecchi has advised the International Swaps and Derivatives Association to add language within its 1992 and 2002 Master Agreement that would clear up uncertainties surrounding payments in the event of a default.

The International Derivatives Clearing Group has sold a minority stake to a strategic partner, Bank of New York Mellon, and foresees further deals to financial entities that can add value to its clearing service.

A group of industry representatives sent a report to the Fed Supervisory Committee yesterday outlining complex legal analysis targeted at clearing up concerns over buyside access to central counterparties for OTC derivatives. It specifically addresses how to protect customers’ initial margins should an entity in a clearinghouse fail and recommends that swaps be treated as commodities under the Commodity Futures Modernization Act of 2000.

The draft Consumer Financial Protection Agency Act, released last Tuesday by the U.S. Treasury, does not mention structured products, temporarily quelling fears that the proposed agency would be tasked with cracking down on the growing U.S. retail market for complex instruments.

The U.S. Financial Industry Regulatory Authority is investigating a series of credit default swap brokerage staffers in the belief they may have engaged in price collusion, after fining former ICAP Corporates broker Jennifer Joan James yesterday.