Derivs - Regulation

A string of cases involving structured products and the Tax Effectif Global, or statutory interest rate, in France has lawyers fearing legislation may be needed to tighten the rules governing interest rate agreements.

Changes to proposed rules setting out margin requirements for non-centrally cleared derivatives are to be minimal when final rules are approved later this year, according to an official familiar with the rules.

Buyside firm the D.E. Shaw Group is placing trade restrictions on U.S. counterparties that have not yet registered as swap dealers under the U.S. Commodity Futures Trading Commission’s Dodd-Frank over-the-counter derivatives market reforms.

Swaptions are likely to become a clearable product in the near-future, although further work needs to be done in relation to risk management and default management in the interim, according to senior clearinghouse officials.

Most Asian end-users are ill-prepared for the incoming U.S. Commodity Futures Trading Commission’s over-the-counter derivatives market reforms, with only a small percentage ready to comply with swap dealer, trade reporting and external business conduct standards.

Sotaro Kato, co-cao of global markets for Asia Pacific at Nomura Securities, and Christopher Murphy, global head of rates and credit at UBS, have been elected to the International Swaps and Derivatives Association’s board of directors.

The reporting of collateral information to trade repositories is lagging behind global developments of trade data collection in the over-the-counter derivatives market.

Japanese regulators are unlikely to implement reforms around swap execution facilities, or organised trading facilities, in the near-term, despite such rules currently being pursued in the U.S. and Europe.

Regulatory proposals covering over-the-counter derivatives will bring significant costs to end users, while rules surrounding reporting requirements and collateral remain unclear and need further clarification, according to Joel Kim, head of fixed income, Asia Pacific, at BlackRock.

Inconsistent and conflicting final rules for over-the-counter derivatives between the U.S. and Europe cannot be ruled out, according to Ng Nam Sin, assistant managing director in the Monetary Authority of Singapore’s development group.

The International Swaps and Derivatives Association has published a confirmation for a market agreed coupon contract to provide an additional option for market participants that wish to use over-the-counter interest rate swaps with common, pre-agreed terms.

Annual turnover in Asia’s over-the-counter derivatives markets grew 2.2% a year between 2008 and 2012, with annual turnover reaching USD186 trillion last year, according to the International Swaps and Derivatives Association.