Derivs - Regulation

Changes to the UCITS directive that have been approved by the European Parliament under UCTIS IV are likely to simplify the registration and cross-border distribution process of compliant funds, according to Karen Anderberg, a partner at law firm Dechert in London.

Credit default swaps on Canadian paper and pulp maker AbitibiBowater Inc. may have been triggered after the company said Friday it was looking to reduce interest payments and term out a loan maturing at the end of this month.

A long-awaited report on the global banking crisis published today by Lord Adair Turner, chairman of the Financial Services Authority, has given some derivatives practitioners comfort that the U.K. regulator will take a measured approach to the notion of regulating credit default swaps.

China’s National Association of Financial Market Institutional Investors published a new master agreement last Tuesday designed to consolidate existing agreements in the marketplace.

Credit officials are beginning to assign a value to keeping modified restructuring (‘Mod R’) as an event trigger in credit default swaps. In a conference call this morning, trading heads at JPMorgan estimated the premium at 5-10% of spreads.

ICE Trust has approval to start clearing and processing index trades. But industry experts note that a key goal of isolating margin funds—via a process called customer segregation—may only be achieved with a new law or a workaround from the superintendent of the New York Banking Department.

A Canadian accounting rule that will force companies to value derivatives more precisely is expected to be fraught with operational and economic challenges. The abstract, known as EIC-173 from Canada’s Emerging Issues Committee, takes effect March 31.

The window for buyers of credit default swaps to adhere to new a auction settlement supplement and protocol for existing trades opened Thursday and, according to Karel Engelen, director and global head of technology solutions at the International Swaps and Derivatives Association in New York, most users are expected to opt in.

Financial lawyers, securities industry lobbyists and other market participants fear momentum is building in the U.S. Congress to find ways to tax equity derivatives, as a partial means to make Wall Street pay for bailouts.

The chairman of the National Conference of Insurance Legislators taskforce on credit default swaps has asked the U.S. Congress to build some flexibility into how it defines covered versus naked CDS before it forces any regulation on the industry.

Market participants are pondering the impact to derivatives contracts of Syncora Guarantee, formerly XL Capital Assurance, becoming insolvent after the monoline insurer stated Thursday that for statutory accounting purposes it has a negative net worth.

The U.S. government’s move to increase its stake in Citigroup has some players pondering the impact a full nationalization might have.