Derivs - Regulation

Avox has created a series of web-based applications to give market participants faster access to Legal Entity Data including Legal Entity Identifiers themselves, legal names, addresses, industry classifications and corporate hierarchies for over 1.7m entities.

Market participants in Europe have started to put clauses which tie clearing members to providing services for a certain period of time in their clearing contracts, fearing that more banks will shut down their clearing offerings as regulatory delays put bank balance sheets under increased pressure.

The idea that non-deliverable forwards should be cleared has never been easy to swallow for some in the FX market. So it comes as no surprise that the European Securities and Markets Authority has decided not to introduce clearing for NDFs. To implement that mandate now would mean piling pressure on market participants to clear an unstandardised, infant product at the same time as they are grappling with clearing for credit default swaps and interest rates.

The British Bankers Association (BBA) has suggested that the UK's Prudential Regulatory Authority and Financial Conduct Authority extend their controversial Senior Managers Regime (SMR) to include other firms in the wholesale markets. This move is likely to hit the broker community the hardest.

FX derivatives traders breathed a sigh of relief after the European Securities and Markets Authority scrapped clearing of non-deliverable forwards for the time being. This was bad news for LCH.Clearnet, which is the only European clearing house authorised to clear NDFs, but good news for other third-country central counterparties who are still waiting to be recognised as equivalent to their European counterparts — a problem that has superseded all others in NDF discussions. Hazel Sheffield reports.

Last week, TABB Forum held a conference in New York where senior buysiders, sellsiders, exchanges, clearing houses, lawyers and other market officials met to discuss the trading and regulatory landscape in the fixed income derivatives markets. GlobalCapital reported from the event on hot topics such as liquidity, fragmentation, volatility, Dodd-Frank, trading and execution legislation, and more.

On Wednesday the People's Bank of China (PBoC) cut its reserve requirement ratio (RRR) by 50bp in a move that the market had not expected to happen until after the Chinese New Year holiday. The shift triggered a flurry of receiving in short-end swaps on Thursday morning and short-end outperformance drove some disinversion momentum across the curve, writes Deirdre Yeung of Total Derivatives.

ICAP believes that the fine imposed by the European Commission of €14.96m (£11.3m) on Wednesday for having breached EU antitrust rules by facilitating several cartels in the sector of yen interest rate derivatives is wrong both in fact and in law.

Non-deliverable forwards will not be subject to the clearing obligation for over-the-counter derivatives following a consultation with market participants by the European Securities and Markets Authority, which said Wednesday that more time is needed to discuss market participants’ issues with NDF clearing before an obligation is introduced.

The European Commission has proposed a further two year exemption for pension funds from central clearing requirements for their over-the-counter derivatives transactions.

Issuers are behind the rest of the market in obtaining the legal entity identifiers (LEIs) required by the Markets in Financial Instruments Directive to comply with transaction reporting, according to Mark Davies, general manager of Avox, who said that many issuers are not even aware that they must obtain an LEI.

The UK Structured Products Association has introduced a new set of risk ratings to enable financial advisers to compare different structured products more easily and help select products that match their clients’ risk profiles more closely. Up until now, there has been no numeric risk value assigned to structured products.