Derivs - Regulation

Asia corporates are increasingly demanding the services of third-party valuation companies to help evaluate their exposure to derivatives.

Lawyers are seeing interest from banks looking to set up one-off trusts for high net worth retail clients so they can market structured products to investors worried about counterparty credit risk.

The Irish government’s recent pledge to guarantee all bank deposits and bonds has unintentionally thwarted Bank of Ireland’s ability to grow its nascent U.S. structured products business.

Three subsidiaries of LyondellBasell Industries went through post credit event settlement auctions today, with recoveries ranging from 7.125% to 27.5% and the largest movement between the inside market midpoint and the final price ever recorded.

A series of banks are said to be teaming up to launch a structured note—perhaps as big as USD1 billion—in a bid to boost the image of the structured products market as it comes under increasing scrutiny from regulators.

In a bid to stave off regulation and show it can police itself, the structured products industry is planning to develop a proficiency exam for sales associates. It would be similar to the Series 7 exam used by the Financial Industry Regulatory Authority to oversee stockbrokers.

A “standard converter” allowing credit default swap traders to calculate payments under new fixed-coupon CDS contracts is slated for release Feb. 23. Markit revealed the plan this afternoon at a New York forum it hosted to educate market participants.

The prevailing view of representatives from the National Conference of Insurance Legislators who met to discuss state regulation of credit default swaps Saturday was that “naked swaps should be illegal,” according to Susan Nolan, executive director.

Bank of America Credit Strategist Jeffrey Rosenberg has argued credit default swaps would only be triggered in the event a government took over the bulk of any firm’s assets and began running its day-to-day operations.

The International Swaps and Derivatives Association is set to form a working group to revamp certain equity derivative-related definitions as a result of events that called into question what constitutes nationalization, among other things.

An executive committee meeting to be held Monday by the U.S. Structured Products Association will hash out how best to deal with an expected firestorm of government regulation on the industry, and whether it can self-regulate.

Credit default swaps on Liz Claiborne were not triggered after much debate Tuesday, following changes the company made to its credit facility recently.