The week that was (aka Dazzling Derivatives; issue of 17.6.2013)

Dear all, The TOP Stories of last week: 10th June – Category 2 Clearing started Category 2 firms in the US now need to clear eligible OTC derivatives via clearing
June 17, 2013 - Editor
Category: News

Dear all,

The TOP Stories of last week:

10th June – Category 2 Clearing started Category 2 firms in the US now need to clear eligible OTC derivatives via clearing houses ( blog). But numbers of trades and cleared volumes have shrunk over the first days of clearing (, (, (, (, Risk, subs required).
MiFID II on the brink of completion? New compromise text versions version of MiFID and MiFIR have been published by the EU council – but a few sticking points remain ( New compromise versions here ( (Compliancy Services).
Will trade reporting under EMIR be even further delayed ESMA itself has already more or less said that there will be a 2-month delay ( but the industry is even skeptical of that date (, eFN, subs required).
Globally issued LEIs now accepted by CFTC The CFTC has issued an Amended Order expanding, through mutual acceptance by international regulators, the list of Legal Entity Identifiers (LEIs) that can be used by registered entities and swap counterparties in complying with CFTC’s swap data reporting regulations (, ( Further to this, even US lawmakers want to curb the CFTC's cross-border powers (
Obama to nominate new CFTC chief US president Obama is poised to nominate Amanda Renteria as the new head of the CFTC, thus replacing Gary Gensler, who's tenure is already over and who recently was at odds with international regulators over cross-border alignment of new derivatives rules ( On a related note, J. Christopher Giancarlo is being vetted to follow Jill Sommers' post (
ISDA publishes Standard CSA The new SCSA brings with it some crucial changes: OIS discounting, cash-only delivery for variation margin, and five currency buckets for valuation purposes (, (
ISDA & FOA issue swaps clearing template ISDA and FOA launched their Client Cleared OTC derivatives addendum to provide a template to document the relationship between a clearing member and the client when using the principal-to-principal client-clearing model, ie the European clearing model (



(1.1) EUROPE

EU states face showdown over markets overhaul
* EU presidency to put 10th MiFID compromise to states
* Compromise covers clearing houses, trading venues
* Compromise proposes cap on dark trading in EU

EU Seeks to Resolve U.K.-Germany Split on Derivatives Clearing
European Union nations will seek a deal on how far exchanges such as Germany’s Deutsche Boerse AG (DB1) should be forced to open up their derivatives-clearing services to competition as part of an overhaul of the bloc’s financial market rules.

European regulator threatens derivatives reporting delay
Under-resourced regulators and industry resistance could push key European derivatives reporting rules well into 2014, further delaying Europe’s implementation of G20 reforms that will reshape the swaps market.

EMIR derivatives reporting likely delayed to 2014
The expected start date for derivatives reporting has been delayed by the European Securities Markets Authority (ESMA) to at least November – but one potential trade repository says it's now unlikely for reporting to begin before 2014.

Year-end ‘congestion’ looms for European trade reporting
Buy-side must prepare to meet their FX reporting obligations in Europe, which will be more challenging than in the US, webinar participants warn

Are you aware of the challenges for asset managers under EMIR?
"Regulation as such would not be a problem, if only one knew how it looks like“. This is a claim often heard by asset managers.

ISLA chimes in on the FTT: Lots More Doom and Gloom for Sec Lending and Repo
Everyone and their dog are getting in their say on the Financial Transactions Tax (FTT). ISLA, the International Securities Lending Association, just released their analysis of the FTT and it is not good. At. All. Lets take a look at what they said.

EU Parliament Seeks to Light Fire Under Council and Commission
On 11 June 2013, the EU Parliament’s Economic and Monetary Affairs Committee (ECON) published a motion for a resolution concerning the lack of progress in the EU Council and the European Commission in adopting certain financial services proposals.

European Commission Roadmap and EU Banking Reform
The European Commission (EC) has published a roadmap for a legislative proposal for the structural reform of EU banks.

ESMA Publishes Interoperability Guidelines
On 10 June 2013, ESMA published “Guidelines and Recommendations for establishing consistent, efficient and effective assessment of interoperability arrangements” pursuant to Article 54 of EMIR.

European Markets Infrastructure Regulation (EMIR): The 'power steering' for central clearing
In response to the 2008 financial crisis, governments and regulators globally imposed a requirement for transparency around the nonstandard OTC derivatives market.

Esma pledges to fast-track fresh guidance on derivatives rules
The European Securities and Markets Authority has promised to fast-track official guidelines covering new derivatives rules after industry complaints that it was being left in a fog of uncertainty.

Merkel Signals Readiness to Heed Concerns on EU Tax
Chancellor Angela Merkel said that the German government is listening to investor complaints about the proposed financial transactions tax and will take their views into account when designing the levy at a European level.

Further EMIR Delay as Commission Extends Deadlines for Third-Country Equivalence advice
On 14 June 2013, the European Securities and Markets Authority (ESMA) published a letter received from the EU Commission extending again the deadlines for ESMA to deliver technical advice on third-country equivalence under EMIR.

(1.2) US

CFTC Announces that Mandatory Clearing for Category 2 Entities Begins Today
Washington, DC — The second phase of required clearing for certain credit default swaps (CDS) and interest rate swaps begins today. Commodity pools, private funds, and persons predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, are included within the definition of Category 2 Entities. These entities are required to begin clearing swaps executed on or after June 10, 2013.

Mandatory Clearing Looms Even Larger: Resistance is Futile
As scheduled, the CFTC announced the second phase of compliance for mandatory derivatives clearing.

Surf’s Up!
Summer is here and the beaches are open in the US, Europe and elsewhere. How appropriate then that the second wave of mandatory clearing has now hit US shores.

Mandatory Clearing, June 10, the first two days
Category II firms were required to clear Interest Rate Swaps from June 10th. As his deadline impacted a lot more firms than the prior March 11th, I decided to look at the data.

Mandatory Clearing, June 10, Day 3, Cleared Volumes Rise
Following on from yesterdays article, I wanted to provide an update on Day 3, June 12. Firstly that the Cleared trade count has increased substantially on June 12, to 1,302, an increase of 35% from the June 11 figure of 965.

Swap Clearing Deadline Anticlimactic

The Category II swap clearing deadline came and went Monday. But contrary to expectations, swap futures did not see a jump in volume.

OTC volumes shrink as category two clearing begins in US
Clearing volumes dip as hundreds of new firms are caught by US clearing rules, but activity rebounded on June 11

Derivatives clearing kicks off without a hitch
NEW YORK, June 14 (IFR) – The second phase of the Dodd-Frank clearing mandate launched this week without any major hitches, something of a surprise amid market-wide concerns that buyside firms would not be ready in time.

Uncertainty abides amidst a flurry of CFTC activity
It’s a busy – not to mention dramatic and uncertain – time for U.S. derivatives regulation.

CFTC changes tack and accepts agreed LEIs
The Commodity Futures Trading Commission (CFTC) has issued an Amended Order expanding, through mutual acceptance by international regulators, the list of Legal Entity Identifiers (LEIs) that can be used by registered entities and swap counterparties in complying with CFTC’s swap data reporting regulations.

CFTC Provides For Mutual Acceptance of Approved Legal Entity Identifiers
Washington, DC — The Commodity Futures Trading Commission (CFTC) has issued an Amended Order expanding, through mutual acceptance by international regulators, the list of Legal Entity Identifiers (LEIs) that can be used by registered entities and swap counterparties in complying with CFTC’s swap data reporting regulations

US swaps regulator faces leadership shake-up
(Reuters) – The top US derivatives regulatory agency is facing a leadership shake-up just as it deals with some of the thorniest issues in its overhaul of rules for Wall Street, lobbyists and people inside the agency say.

Obama to nominate Amanda Renteria to replace Gary Gensler as Chair of the CFTC?
A breaking story is the potential nomination for Gary Genslers replacement as Chair of the CFTC.

Nomination of Senate aide to replace Gensler far from certain: report
The nomination of Amanda Renteria, a former Senate staffer, to head the Commodity Futures Trading Commission is far from certain.

Giancarlo Said to Be Vetted for Republican CFTC Commissioner Job
J. Christopher Giancarlo, executive vice president at interdealer broker GFI Group Inc. (GFIG), is the top candidate for a Republican appointment this year to the U.S. Commodity Futures Trading Commission, according to three people briefed on the matter.

Hedge Funds Win Collateral Reprieve in SEC Dodd-Frank Shift
Hedge funds and asset managers won relief from Dodd-Frank Act collateral requirements for credit-default swaps under a policy shift disclosed today in letters posted on the U.S. Securities and Exchange Commission’s website.

Bill to Limit CFTC Cross-Border Authority Faces U.S. House Vote
House lawmakers vote today on legislation that would curb the U.S. Commodity Futures Trading Commission’s authority to oversee the $633 trillion global swaps market.

CFTC’s Division of Clearing and Risk Issues Time-Limited No-Action Relief to Banks Having Assets of Less Than $10 Billion from the Board Approval Requirement of the CEA and the End-User Exception to the Clearing Requirement

CFTC Provides No-Action Relief to Small Banks
On 10 June 2013, the CFTC’s Division of Clearing and Risk (DCR) issued a time-limited no-action letter for certain banks having assets of less than $10 billion (“Small Banks”).

House passes bill that would exempt foreign trades
WASHINGTON (AP) — The House passed legislation Wednesday that would exempt the trading of derivatives from federal oversight if it occurs outside the United States.

Waiting for Uniform Derivatives Rules Is a Losing Proposition
Anybody who thinks the Commodity Futures Trading Commission has been dragging its feet in the Dodd-Frank rule writing process should look at how much commissioners' and staff members' time is taken up meeting with visitors.

In Fight Over Bank Rules, Regulator Calls for Compromise
As federal regulators stumble toward a deadline to rein in risky trading overseas, one official has introduced plans that he hopes will salvage the overhaul.

"Cinema of Uncertainty"
Speech of Commissioner Bart Chilton Before the Institute of International Bankers, The Yale Club, New York City

Taking the Time to Get It Right: The Cross-Border Regulatory Framework
Keynote Address by Commissioner Scott D. O’Malia before OpRisk Europe Conference, London, England

Financial industry anxious for clarity on swap-facility rules; business conduct a key compliance issue
WASHINGTON/NEW YORK, June 11 (Thomson Reuters Accelus) – The financial industry is scrambling to understand the Commodity Futures Trading Commission’s final rules for firms trading derivatives on an electronic platform.

3 "Rs" Of Monitoring Dodd-Frank Trade Reporting
The Dodd-Frank deadline for swaps trade reporting is upon the industry and firms can expect even more regulatory change in the next few years.


Good intentions, unintended consequences: Banks still working through the impact of Basel III on their business
Basel III is here to stay. But many banks are still getting to the bottom of the impact of the regulation on their business—especially counterparty risk in OTC derivatives

Do Bankers Care About Regulation?
Important changes in bank reporting under CRD IV, the new Capital Requirements Directive, the European enactment of the Basel III legislation, are due to come into force starting from 1st January 2014.

Pressure mounts on CFTC to extend cross-border exemption
A group of six US sell-side associations has petitioned the Commodity Futures Trading Commission (CFTC) to extend a cross border exemption for swaps rules that expires next month.

DERIVATIVES: ISDA aligns swaps valuation with standard CSA
The International Swaps and Derivatives Association has published a new standardised credit support annex in an effort to align valuation practices in the US$633trn derivatives market.

Standard Credit Support Annex for OTC Derivatives Published by ISDA
ISDA published a new Standard Credit Support Annex (SCSA) for collateralizing over-the-counter (OTC) derivatives contracts. The SCSA aligns the collateral mechanics and economics of bilateral OTC derivatives with collateralization of cleared derivatives transactions.

ASX takes a step forward on OTC derivatives clearing
ASX Group, the owner of the Australian Securities Exchange, has moved ahead with its plans to launch OTC derivatives clearing and a collateral management service.

One repository to rule them all?
Anyone familiar with the progress of trade repositories all over the world will know well that there isn’t a plan by any organisation to aggregate all the data in the many trade repositories into one place.


Citi OpenCollateral gets a win
Citi has delivered collateral management and middle office services to one of Europe’s leading asset managers, enabling it to centrally clear OTC derivatives for the first time.

Brokers support derivatives clearing standard
The International Swaps and Derivatives Association (ISDA) has signed up the first four firms to support its initiative to develop standardised reporting for cleared OTC derivatives.

Single dealer platforms poised to survive
Ralph Achkar, a director at MarketPrizm, looks at why the death of SDPs is greatly exaggerated.


Central counterparties: what are they, why do they matter and how does the Bank supervise them?
Central counterparties, or CCPs, are an important part of the financial system.  They can reduce and ‘mutualise’ (share between their members) counterparty credit risk in the markets in which they operate, by placing themselves between the buyer and seller of an original trade and guaranteeing the performance of that trade

EACH urges regulators to exempt CCPs from the bail-in provisions of the banking recovery & resolution framework proposal
Inclusion of CCP cleared contracts in the bail-in provisions would be counter to a number of the provisions in EMIR

Nasdaq targets fixed income growth
Exchange M&A is back in vogue. However, targeted, strategic deals rather than building scale are emerging as the dominant strategy, finds William Mitting.


Repo flip indicates collateral risks
The key interest rate for the financing of short-term collateral flipped negative last week – a rare occurrence that stands as yet another warning sign that the Federal Reserve’s asset-buying stimulus programme is distorting markets.

Pole Position in the New Swaps Market
Over the years, the value of pole position in NASCAR and Formula One races has been on the decline, as winning has more to do with having the right tools and equipment than where you start. The same can be said about the new swaps market.

Two SWP Themes Going Mainstream – Collateral Management
As changes in financial market regulation like Frankendodd lurch into effect (with phase two of the clearing mandate becoming effective a couple of days ago), it’s interesting to see the dawning realization about some of the implications.  Implications that I’ve discussed for several years here, or in my academic work.

The Finadium Repo Panel and Networking Event: a look at a couple issues we discussed
We want to thank our friends who came to the Finadium Repo Panel and Networking Event in New York on Tuesday.

ISDA/FOA swaps clearing template an “important” step
A standard contract for buy-side firms and their clearing members "will make life easier" when clearing OTC derivatives across central counterparties (CCPs), according to those involved.

Universal banks start to feel the strain
When is a universal bank not a universal bank? When it’s actually called Universal Bank. This is a small community bank in California, which is about as far away as it is possible to imagine from the sort of global financial titan that its name suggests.

‘Big Compliance’ Meets Energy Trading
EMIR, REMIT, MiFiD and more …Trayport, a leading provider of energy trading solutions to traders, brokers and exchanges worldwide, today announced the launch of its European Regulatory Whitepaper: EMIR, REMIT, MiFiD and more. ‘Big Compliance’ Meets Energy Trading.

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