Derivs - Regulation

The made-available-to-trade process is not fit for purpose and should be eliminated, according to Christopher Giancarlo, commissioner at the Commodity Futures Trading Commission.

Market liquidity is at stake if a balance is not achieved between rules imposed by regulators and codes of conduct from within firms, according to David Clark, chairman of the Wholesale Markets Brokers Association in London.

The European Securities and Markets Authority has raised concerns over the European Commission’s proposal for a three year exemption from clearing and collateral responsibilities for firms making intragroup interest rate derivatives transactions with third country entities, because such entities are not yet deemed to have regimes equivalent to the European Market Infrastructure Regulation.

Volumes in market adjusted coupon swap trading are increasing due to margin efficiencies, increased liquidity and the ease of trading, according to speakers at the TABB Forum Fixed Income 2015 conference in New York on Thursday.

As buyside firms transact in ever larger volumes, asset managers need to reduce the delta risk, known as DV01, the change in the value of their trades caused by a basis point change in rates. However, this is very difficult as capital requirements for investment banks mean that a dealer’s ability to warehouse risk for its buyside clients is diminished.

Tools that enable firms to reduce the number of line items in a portfolio, while keeping the same risk profile, are changing the way market participants trade derivatives. These tools are becoming the new market norm as users look to optimise their balance sheets as increased regulation envelops the derivatives market. Gabriel Suprise was granted an exclusive interview with Lucio Biase, CEO, and Hilary Park, chief strategy officer at LMRKTS, a new firm that offers a novel type of tool in order to minimise counterparty risk. Topics of discussion included what LMRKTS is, how it works and why it is different from other compression offerings in the derivatives marketplace.

Compression is behind a 3.6% drop in gross notional outstanding of interest rate derivatives between December 2013 and June 2014, according to the International Swaps and Derivatives Association, who said that the growth in services available at central counterparties and other portfolio compression providers combined with regulatory pressure is driving the trend.

The Intercontinental Exchange Benchmark Administration (IBA) is reforming the methodology for the ISDAFIX derivative benchmark calculation, which represents a first ever move from calculating the rate on a submission-based panel of banks to tradable quotes listed on regulated trading venues.

Alberto Pravettoni, managing director and global head of exchanges at LCH.Clearnet in London, has left the firm.

Nasdaq OMX is working on a new model for collateral management at its clearing house, which could revolutionise the way clearing members handle the operational hurdles of individually segregating each client’s cash and collateral.

The revived attempt to pass a financial transaction tax in Europe could end up caught between a rock and a hard place — a relief for market participants who have seen the tax as yet another potential restriction on trading businesses grappling with a raft of other regulatory burdens.

The controversial topic of skin in the game for clearing should focus largely on the contributions that each clearing member must make and not that of the central counterparty, said CME Group, firing back at those who say it is not contributing enough in its US business.