Derivs - Regulation

A lack of progress and co-ordination in developing cross-border rules is fragmenting the over-the-counter derivatives markets, and will in turn dampen liquidity, investment and growth, according to a letter from numerous Finance Ministers addressed to the U.S. Treasury and other U.S. regulators.

DW: Let’s start by discussing proposals for a minimum of five RFQs and look in more detail at the potential scenarios in terms of final rules surrounding SEFs—how would they work?

Fragmented central clearing in Asia could hit bid/ask spreads and liquidity of cleared over-the-counter derivatives if dealers and end-users are forced to join a number of separate national clearinghouses.

From 1 April 2013, a new financial regulation framework took effect in the U.K. The Financial Services Authority (FSA) is replaced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the Bank of England is to have overall responsibility for financial stability and a new Financial Policy Committee (FPC) of the Bank of England is being created. However, the Financial Services Act 2012 does more than just give effect to these regulatory reforms.

The International Organization of Securities Commissions has issued a consultation paper on its proposed Principles for Financial Benchmarks noting that compilation, distribution and governance for financial benchmarks should be undertaken by an administrator.

Margin requirements for non-centrally-cleared derivatives proposed by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions could force traders to choose less effective means of hedging or to leave the underlying risks unhedged entirely, rather than raising or diverting funds to comply.

Foreign synthetic exchange-traded fund providers will not be allowed to directly list or market their ETFs in South Korea’s soon-to-be-launched synthetic market.

Market participants, and particularly buyside firms, are looking to standardize derivatives products which will accelerate the move to electronic trading, according to panelists at the Futures Industry Association’s Expo in New York this morning.

Central counterparties that accept non-cash variation margin are taking on significant risk, according to Daniel Maguire, head of SwapClear U.S at LCH.Clearnet.

Deutsche Bank will list five synthetic exchange-traded funds on the Hong Kong Exchange on Thursday, which will reference country specific indices and a regional Asia ex-Japan index.

Draft accounting rules that limit the continuation of hedge accounting to novation of derivatives resulting from mandated central clearing should be extended to include all contracts cleared through a central counterparty, according to the European Securities and Markets Authority.

Financial transaction tax proposals being drawn up by some European Union member states may force some firms to open subsidiaries outside the tax zone, according to ICAP.