Derivs - Regulation

The year started with plenty of excitement, as the RMB gained ground against the dollar in onshore and offshore markets, activity surged in RMB futures in Hong Kong, and the third batch of free trade zones (FTZ) opened for business. Plus, a recap of our coverage.

Timothy Massad, chairman of the US Commodity Futures Trading Commission, has resigned, with J Christopher Giancarlo widely expected to take up the job, fuelling hopes of a more flexible, market friendly approach to regulation.

Timothy Massad, chairman of the US Commodity Futures Trading Commission, has resigned, with Republican commissioner J. Christopher Giancarlo widely expected to take up the job.

Major banks face a tight run-in to meet European initial margin rules on uncleared derivatives, with a January 16 deadline giving little time to make final preparations once market participants return following the Christmas break.

The European Commission has determined that India, Brazil, New Zealand, Japan Commodities, United Arab Emirates and Dubai International Financial Centre have equivalent regulatory regimes for central counterparties (CCPs) to the European Union.

ICE Benchmark Administration, a unit of Intercontinental Exchange, is to assume the secretarial role on the credit derivatives determinations committees previously held by the International Swaps and Derivatives Association.

JP Morgan was hit hardest as the European Commission on Wednesday fined three banks a total of €485m for manipulating markets in a euro interest rate derivatives cartel.

All central counterparties, by their nature, are systemically important. But some are more systemic than others. Regulators should adopt a more tiered, and more technological approach to CCP recovery and resolution.

The European Commission proposed two delegated acts on Wednesday, finalising the regulatory framework of the Markets in Financial Instruments Directive, set to enter in force in January 2018.

Clearing houses, lawyers and derivatives specialists have spent this week poring over Europe’s proposed rules for central counterparty recovery and resolution, with question marks still hanging over how each case will be assessed and how banks should capitalise their exposures.

The European Commission has proposed rules aimed at minimising the systemic risk of recovering and resolving central counterparties that fail, including granting authorities powers to intervene, having projected that 70% of the $500tr over-the-counter derivatives market will move to being cleared.

The European Commission is set to unveil a draft regulation next week aimed at ensuring that central counterparties which fail are resolved in an orderly manner.