Derivs - Regulation

Bank of New York Mellon formally launched its MarginDIRECT system Monday, a tool that helps derivative dealers manage margin requirements and provides additional liquidity.

Credit default swaps on General Motors have been relatively unmoved since Tuesday, despite mounting uncertainty over further U.S. government aid. “There are a lot of complications around whether the deal gets done,” concluded one New York trader of the mood.

The European Commission’s plans to amend the Capital Requirements Directive, proposed last year, will be on the agenda at next Tuesday’s meeting of banking representatives at the European Central Bank in Frankfurt.

Eurex is looking for any stakeholders buying into its platform for clearing credit default swaps to have a minimum market cap of EUR5 billion.

A report on the future of European financial supervision, ordered by the European Commission, is expected to support tighter regulation of the credit derivatives markets, but unlikely to offer explicit recommendations as to how that should be done.

In response to backlash received overnight, the U.S. House Agricultural Committee voted to keep a provision that would mandate the central clearing of credit default swaps over designated clearinghouses, eliminating terms that might have offered a potentially costly alternative.

The U.S. House of Representatives Committee on Agriculture will hold a meeting tomorrow to consider the latest draft of the Derivatives Markets Transparency and Accountability Act of 2009, following two consecutive days of hearings on Capitol Hill.

A dispute between Lehman Brothers Holdings Inc. and Wells Fargo Bank, concerning payment rights on a collateralized debt obligation where Lehman served as swap counterparty, is set for a pre-trial hearing March 11.

Some end users think the industry committee being established to rule on whether credit default swaps should be triggered following certain credit and succession events and other issues pertaining to the new style of CDS contracts is too heavily weighted toward dealers.

Missouri insurance regulators are waiting for federal government proposals on policing credit default swaps before formally nixing their own plans.

Crédit Agricole Cheuvreux, an equity broker and subsidiary of Calyon, will begin offering institutional investors access to the Saudi Arabian stock market, also known as Tadawul, via equity swaps.

Questions have been raised in Asia as to whether banks have been overvaluing swaps featured in synthetic structured credit deals. The issue is they have reportedly not been incorporating the swap counterparty’s own risk of default.