Derivs - Regulation

Obligating clearing members to offer indirect clearing is likely to decrease competition and increase counterparty risk, according to an industry response to the European Securities and Markets Association.

The requirement from the European Securities and Markets Authority to require a central counterparty to deduct at least 50% of its regulatory capital requirements from its regulatory capital resources is not suitable, according to the International Swaps and Derivatives Association.

Smaller hedge funds based in Asia are the least prepared to comply with incoming U.S. over-the-counter derivative rules, which the U.S. Commodity Futures Trading Commission is expected to publish Aug., according to lawyers.

Australia is still lacking clear guidance from regulators on dealer’s use of client money as margin collateral for retail over-the-counter derivatives, the last missing piece in the overhaul of the country’s risk management regime, according to lawyers.

Further clarity is needed in respect to article 25 (1) of the European Market Infrastructure Regulation, according to the International Swaps and Derivatives Association. Article 25 (1) prohibits non-E.U. central counterparties from providing clearing in the E.U. unless recognized by the European Securities and Markets Association, and ISDA has warned European lawmakers that a number of issues still remain to be settled, such as whether non-E.U. CCPs will be able to obtain recognition from the regulatory body before the prohibition comes into effect.

The Australian Treasury is looking to change the country’s main financial law to enhance its oversight of over-the-counter derivatives.

The tight regulatory regime imposed in China on structured products last year may be loosened soon.

The European Securities and Markets Authority has decided against enforcing a requirement to distinguish synthetic from physical UCITS exchange-traded funds following a consultation held earlier this year.

The European Commission intends to make the manipulation of the Libor and Euribor a criminal offence.

The Commodity Futures Trading Commission has proposed rules that will require certain credit default swaps and interest rate swaps to go through clearinghouses.

China’s National Association of Financial Market Institutional Investors has prepared and internally approved changes to its definitions of domestic fx and interest rate swaps, which could be instituted soon, according to lawyers.

Registered financial institutions wanting to clear credit default and interest rate swaps in Japan should have a net market capitalization of not less than JPY100 billion (USD1.28 billion) and maintain a capital-to-risk ratio of between 200-and-250%, depending on credit rating, according to the Japan Securities Clearing Corp.