The week that was (issue of 22 April 2013)

Dear all, Highlights of last week include: Swap Futures seem to have some "hidden" risk as more tail risk is exposed by lower initial margin on the same portfolio risk
April 22, 2013 - Editor
Category: AFME

Dear all, Highlights of last week include:

  • Swap Futures seem to have some "hidden" risk as more tail risk is exposed by lower initial margin on the same portfolio risk and the same 10-day margin period of risk under Basel III
  • The trade associations ISDA, IIF, AFME and SIFMA blast proposed margin rules on non-cleared OTC derivative trades as economic suicide
  • FSB Publishes Fifth Progress Report on Implementation of OTC Derivatives Market Reforms
  • Davis Polk have published a neat list of reporting requirements under Dodd Frank that will be phased in throughout 2013:

THE ARTICLES DME’s Oman oil contract flourishes from futurisation of swaps Shift away from swaps trading and recent price reporting agency scandals helping Oman contract, says DME chief Taking Responsibility for Entity Identification With the go-live date for the legal entity identifier system still far off, a growing number of pre-local operating units are set to begin issuing entity identifiers. Nicholas Hamilton finds out why they have taken on the task, what challenges they face and how they plan to leverage their existing capabilities Traiana Launches Swap Data Repository Service Post-trade vendor Traiana has announced the successful launch of Harmony TR, its swap data repository (SDR) service, which aids with compliance for regulations regarding the reporting of over-the-counter (OTC) derivatives trade data. Dealers sceptical of new CDS futures despite market shift * ICE to launch four CDS futures in May * Greater standardisation opens door to listed products * Market players concerned over new contract design Crunch-time for money managers as swaps clearing deadline nears (Reuters) – Asset managers have been slow to set up accounts with clearing houses for over-the-counter derivatives ahead of a mandatory deadline, creating a nearly unmanageable backlog that could leave many firms unable to trade, industry participants said. ISDA Still Swinging in the Fight Over Initial Margin for Non-Centrally Cleared Derivatives On 12 April 2013, the International Swaps and Derivatives Association (ISDA) published a Letter on Margin Requirements for Non-Centrally Cleared Derivatives written jointly with the Institute of International Finance (IIF), the Association of Financial Markets in Europe (AFME) and the Securities Industry and Financial Markets Association (SIFMA). Brokers lose index CDS volumes to new Tradeweb platform Over $600 billion in index CDS volume switches to new venue where dealers guarantee liquidity to each other ESMA repository advice excludes non-core services The European Securities and Markets Authority (ESMA) has excluded turnover derived from ancillary services in the calculation of annual fees trade repositories will pay as new rules governing OTC derivatives in Europe through the European market infrastructure regulation (EMIR) approach. Moody's warns of swap reform risks Moody’s has echoed warnings that the regulatory overhaul of the OTC derivatives markets could lead to increased risks for bond funds that seek alternatives to non-cleared swaps in order to lower costs. Icap: SEFs could lead to ‘sub-optimal hedging’ Moving NDFs to trade on Sefs could mean less hedging at longer end of the curve, says senior executive at Icap REGIS-TR updates its test environment to allow Participants to test in almost live conditions, adhering to ESMA TECHNICAL STANDARDS. EU Banks Face Basel Rule Overhaul That Goes Beyond Bonus Curbs European Union banks will be forced to boost capital, disclose more information on their activities than ever before, and face tougher scrutiny of how they measure risks, after lawmakers formally endorsed a law to overhaul the bloc’s financial rulebook. Europa Parlament beschließt Basel III-Umsetzung (+ Dokumentation CRR + CRD IV) Gestern hat das Europa Parlament über die europäische Umsetzung von Basel III abgestimmt. Das Paket besteht aus einer Eigenkapitalverordnung (Capital Requirements Regulation, CRR) und aus der vierten Auflage der Eigenkapitalrichtlinie (Capital Requirements Directive, CRD IV). CFTC Data Crisis Provides Lessons for Developers of the Global Legal Entity Identifier System The Regulatory Oversight Committee (ROC) of the global legal entity (LEI) initiative has yet to comment publicly on the data crisis at the Commodity Futures Trading Commission (CFTC) involving the use of pre-LEI CFTC Interim Compliant Identifiers, or CICIs, in swaps reporting. But it must be observing the situation – and absorbing valuable lessons learned – as its Committee on Evaluation & Standards (CES) works to develop a failsafe LEI system. Investors ‘over-estimate’ impact of OTC reforms Fears over the likely impact of the restructuring of over-the-counter markets on fixed income revenues could be overblown, according to new research by Morgan Stanley and Oliver Wyman. Report to the G-20 Meeting of Finance Ministers and Central Bank Governors of 18-19 April 2013 Washington, DC — Today, the principals of the authorities with responsibility for the regulation of the over-the-counter (OTC) derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland and the United States, have held four meetings to discuss reform of the OTC derivatives market. FSB Publishes Fifth Progress Report on Implementation of OTC Derivatives Market Reforms On 15 April 2013, the Financial Stability Board (FSB) published its Fifth Progress Report on the implementation by FSB member jurisdictions of the G20 commitment to reform global OTC derivatives markets. BIS Consults on Access to Trade Repository Data On 11 April 2013, the Bank for International Settlements (BIS) published a consultative report on “Authorities’ access to trade repository data”, drafted by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO). Making the CFTC’s Surveillance Work: Efficient Data Management and Clear Rule Implementation Keynote address by Commissioner Scott D. O’Malia Before Financial Times Global Commodities Summit, Consolidating the Industry-Challenges Ahead New regulations require cleaner data LONDON, Apr. 18 (Thomson Reuters Accelus) – Continuing efforts by financial regulators and by firms themselves to monitor and offset risk have affected almost all areas of firms’ operations, including the management and maintenance of data. The overhaul of global systems following the financial crisis has led to an audit of data, and specifically of the information which firms hold about themselves and their counterparties or clients, known as business entity reference data. The Impact of EMIR in Asia An interesting article from Risk Magazine regarding the impact of EMIR Article 25, which requires a central counterparty established in a non-EU country (a “Third Country CCP”) to be recognised by the European Securities and Markets Authority (“ESMA”) if it wishes to provide clearing services to clearing members established in the EU. The Ultimate U.S. Swap Reporting Deadline Cheat Sheet Weighing in at 200,000 words, the CFTC’s final rules governing the reporting of swaps data transactions isn’t the easiest collection of information to digest.  But like it or not, the documents are must-reads for many swaps market participants because they contain dozens of reporting compliance dates that will be phased-in over the course of the year.  Thankfully, now there’s an abridged version of the highlights. The missing futures data repository While we can clearly agree that Bloomberg has a dog in the futures vs. swaps fight, that does not necessarily mean that all of their comments are wrong. Here for instance is an interesting observation by Bloomberg CEO Daniel Doctoroff in the Huffington Post: Standardised OTC swaps to launch within weeks Isda-Sifma working group discussions continue but trueEX prepares to list OTC swaps with standard coupons and IMM dates

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