Derivs - Regulation

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.

As the wait for the new bullet loan-only credit default swap contracts continues, some market participants have questioned whether debtor in possession loans should be deliverable into LCDS settlement auctions.

Weil, Gotshal & Manges, debtor counsel for Lehman Brothers Holdings Inc., was in U.S. bankruptcy court today seeking a deadline by which derivatives-related claims against Lehman need to be filed.

The U.K. Financial Services Authority is planning to hire specialists in complex financial instruments such as derivatives, collateralized debt obligations and other structured products to help beef up its supervisory team.

Taiwan’s Financial Services Commission floated a proposal that 70% of proceeds from the sale of offshore retail structured products should be held in a local trust over the life of the note.

A decision taken the Federal Court of Australia concerning a contractual dispute has concluded that forwards are not derivatives and therefore financial products, placing doubt as to whether they are now regulated in Australia.

Efforts to combat manipulative short selling will not be effective without regulating the derivatives market, in which credit default swaps are “a powerful device for bear raids,” according to attorneys at Wachtell, Lipton, Rosen & Katz.

TMX Group, which owns the Toronto Stock Exchange and the Montréal Exchange, intends to expand its clearing services into over-the-counter equity derivatives and other asset classes, but not credit derivatives.

The Tokyo Stock Exchange can see a future where clearing platform for over-the-counter derivatives could become the central clearinghouse for Asia.

Representatives from the International Swaps and Derivatives Association and Securities Industry and Financial Markets Association have hit back at model state-based legislation drafted by the National Conference of Insurance Legislators that would see all credit default swaps regulated as insurance, sold only by licensed carriers.

A feasibility study is being conducted into whether it is achievable to make the buyside part of commitments to federal regulators on credit default swap clearing.

The U.S. Treasury’s proposals for reforming the financial regulatory landscape, including stepping up supervision of over-the-counter derivatives, should come as a relief for some industry practitioners who feared the worst.