Derivs - Regulation

China’s CNY4 trillion (USD586 million) economic stimulus package has met with skepticism from equity traders in the region.

A survey by law firm Allen & Overy reveals strong support for a credit default swaps clearing house and disclosure of corporate derivative positions. Respondents were opposed, however, to bonus restrictions and short-selling bans.

Five-year credit default swaps on American International Group Inc. pulled in dramatically yesterday, along with a less pronounced tightening for two-year CDS, after the government renegotiated bailout package was announced.

The Hong Kong government may introduce a cooling off period where buyers of structured products can unconditionally terminate contracts, amid increasing concerns about counterparty risk.

Regulatory reform of the U.S. financial system must move toward a single financial regulator that has the authority to regulate currently unregulated players and opaque financial products, said Sen. Charles Schumer at a Securities Industry and Financial Markets Association summit.

The market is still digesting Circuit City Stores’ decision to file for Chapter 11. Credit default swaps on the name were so sparsely traded and the fact it does not appear in any CDS indices means it is unlikely to lead to a settlement auction.

A proposed amendment to the Hong Kong Securities and Futures Ordinance would raise the minimum portfolio requirement of professional investors to USD2 million from USD1 million.

Some top-tier Chinese banks, including Bank of China and Industrial and Commercial Bank of China, are not immediately stumping up collateral due on out-of-the-money trades, most notably fx trades linked to the dollar/yen.

U.K. authorities are expected to release plans this week aimed at resolving industry concerns that new banking legislation will stop institutions from signing netting agreements.

Ken Li, Barclays Capital’s head of Asia Equity sales to hedge funds, resigned from the position to be replaced by a director in the team, Brenton Battenfeld.

The IntercontinentalExchange’s decision to acquire The Clearing Corp. should pave the way for a speedier launch of a clearing house for credit default swaps.

A proposed rule requiring U.K. companies to disclose to the Financial Services Authority an ownership of greater than 3% in a single stock via contracts for difference is unlikely to help the regulator weed out players seeking to build large positions in a stock to influence voting rights.