Derivs - Regulation

LCH.Clearnet has been at the forefront of regulatory discussions globally around clearing as well as developing its multi-asset class platforms and range of products it. Rory Cunningham, director in public affairs, spoke to DI on regulatory developments in Europe, while Daniel Maguire, managing director at SwapClear U.S., Charlie Longden, ceo of CDSClear and Gavin Wells, ceo of ForexClear, looked at the developments being made at LCH.Clearnet.

U.S. firms operating in Japan are losing trades to European and domestic counterparties, as complying with Dodd-Frank rules adds an extra 10 minutes to the trading process, according to Hiroki Tomiyasu, executive director at Morgan Stanley MUFG Securities in Tokyo.

The International Swaps and Derivatives Association believes U.S. central counterparty clearing rules do not reflect the Basel Committee on Banking Supervision’s position.

The Japan Financial Services Agency plans to push regulators in the U.S., Europe and other regions to move forward with the implementation of mandatory clearing of over-the-counter derivatives.

Distinguishing or limiting the scope of eligible derivatives used by UCITS funds based on their payoff would be counterproductive as exotic derivatives can be used to mitigate risk or provide capital protection, according to the Joint Associations Committee on Retail Structured Products.

The Singapore Exchange is actively seeking recognition from both European and U.S. regulatory bodies for its over-the-counter clearinghouse, Derivatives Clearing.

The Hong Kong Exchange plans to roll out client clearing within six-to-nine months after its clearinghouse Over-The-Counter Clear Hong Kong begins operations with interdealer trades.

Local Japanese financial institutions are diversifying away from U.S. counterparties when entering into swaps contracts in a bid to sidestep or delay registration as a major swap dealer with the U.S. Commodity Futures Trading Commission, according to market participants.

Electronic equity options trading in North America and Europe is growing, with 20-25% of investors executing trades electronically.

The Singapore Exchange’s proposed lowering of its clearinghouse membership threshold to a SGD50 million (USD40.6 million) minimum share capital value from SGD1 billion (USD1.23 billion) could introduce ill-equipped clients into the nascent CCP.

Proposed changes regarding how U.K. client assets are held by non-bank clearing members may result in significant operational challenges and greater costs in futures clearing.

The International Swaps and Derivatives Association has set out the potential issues that Japanese market participants could face following the adoption of U.S. Commodity Futures Trading Commission guidance and the European Market Infrastructure Regulation in the E.U.