Derivs - Regulation

Market participants in Asia are shifting focus from the extraterritoriality implications of the U.S. Dodd-Frank Act to the European Market Infrastructure Regulation, with concerns that many clearinghouses in the region may not be able to register under the E.U. rules.

Proposals from the British Bankers Association to discontinue nine tenors and five currencies in the London interbank offered rate framework should be delayed until March 2013, according to the International Swaps and Derivatives Association.

A lack of clarity in what U.K. regulatory authorities define as complex in relation to retail structured products is a serious concern for the industry, according to Timothy Hailes, chairman of the Joint Associations Committee.

The Financial Services Authority is seeking comments on its proposed approach to enacting recent government policy for the regulation of interest rate benchmarks, particularly the London interbank offered rate.

The U.S. Commodity Futures Trading Commission is expected to exempt regions from compliance to segments of the Dodd-Frank Act and will issue further no-action letters on the back of international pressure not to move too quickly with implementation of reforms, according to industry lobbyists.

Firms are expected to up their exchange-traded fund issuance in the Philippines in the coming year, as banks prepare deals following recent regulatory guidance from the country’s chief regulator.

The Australian Securities and Investments Commission has found widespread client money handling weaknesses among contracts for difference and margin fx derivatives brokers.

Australia-based funds may not be ready to comply with the Dodd-Frank Act when acting as a counterparty with U.S.-registered swap dealers, cutting off a significant market to U.S. firms, according to market officials.

The South Korean government’s threat to intervene in its currency appreciation and limiting the fx derivative positions of local financial firms will have little impact on volatility in outstanding fx derivative contracts that reference the won, according to Robert Minikin, senior foreign exchange strategist at Standard Chartered in Hong Kong.

E.U. short selling regulation that was introduced earlier this month is putting pressure on the compliance functions of some structured product issuers globally. According to lawyers, those under the most pressure are global financial institutions with multiple affiliates and branches, with it likely that new compliance units will have to be set up to track and match short and long positions across the entire group.

It is difficult to predict whether E.U. regulation will be aligned with the U.S. in exempting fx forwards and swaps from the clearing obligation, Rodrigo Buenaventura, head of markets at the European Securities and Markets Authority, told DI.

Proposals to ring-fence significant market-making activities of European banks would increase funding costs and restrict banks’ ability to offer cost-effective financing and risk management services to clients, according to a letter from the International Swaps and Derivatives Association and the Association for Financial Markets in Europe.