Derivs - Regulation

Global sovereign credit default swap spreads tightened 9.5% in the fourth quarter of last year while stocks continued to rally, according to a report published by S&P Capital IQ on Wednesday.

A survey by the International Swaps and Derivatives Association has found that cross-border trading relationships have broken down since the Commodity Futures Trading Commission’s swap execution facility mandate came into force on Oct. 2, 2013.

James Cawley, ceo of Javelin Capital Markets in New York, has hit back at comments by Scott O’Malia, commissioner at the Commodity Futures Trading Commission in Washington, that the CFTC acted carelessly by certifying some interest rate swaps made available to trade on Javelin SEF last week (DW, 20/01).

Newly created domestic central counterparties in Asia may largely lose out to international CCPs following the introduction of mandatory clearing this year.

DBS Bank in Hong Kong is looking to market equity-linked notes denominated in renminbi that reference an equity underlying in Hong Kong. The issuance is based on the view that there will likely be a relaxation in RMB convertibility, which will spur demand for such structures.

The Commodity Futures Trading Commission has set a dangerous precedent by approving a made available to trade submission for interest rate swaps from swap execution facility Javelin, according to Scott O’Malia, CFTC commissioner.

The Financial Conduct Authority has formally authorized ICE Benchmark Administration, part of the IntercontinentalExchange Group, to take over administration of LIBOR from Feb. 1, 2014.

Hedging corporate balance sheet risks may be a struggle under the Markets in Financial Instruments Directive agreed by E.U. member states and the European Parliament on Tuesday, which introduces a market structure framework to close loopholes and ensure most trading takes place on regulated platforms.

Market participants have rallied against market abuse regulatory proposals arguing the measures on so-called cleansing insider information could force deals to price without the benefit of soundings, which help sellers gauge the pricing, size and structure of a deal by talking to investors prior its announcement.

The Shanghai Clearing House has cleared its first renminbi interest rate swap, a deal between Industrial and Commercial Bank of China and the Shanghai Pudong Development Bank.

The International Swaps and Derivatives Association and China’s National Association of Financial Market Institutional Investors have talked about cooperating on areas of interest. It’s a detente following a period of frosty relations.

Chinese authorities intend to allow the use of cross border renminbi derivatives for hedging purposes by financial institutions operating in the Shanghai free trade zone, according to market officials.