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April 8, 2013

The week that was (issue of 8th April 2013)

Dear all, Markit Acquires DTCC Stake in MarkitSERV: http://bit.ly/145hboz

The highlights of last week

  • Last minute frenzied activity around the April 10 deadline for Dodd-Frank reporting rules
  • Non-cleared Derivatives Margin Rules could force a re-think of the adoption and usage of the SCSA (Standard CSA)
  • ESMA has published its Technical Advice to the Commission on Fees for Trade Repositories
  • The LCH has laid out its default waterfall im more detail
  • IOSCO publishes comments to Feb 15 Consultative Paper on Margin for Un-cleared Derivatives
  • Clarus FT has updated their DTCC DDR View by adding some nifty charts: http://www.clarusft.com/ddr-views/
  • LCH SwapClear now offers an online checking tool to see if a particular swap is clearable or not: http://www.swapclear.com/what/cftc_mandatory_clearing_tool.html

Tom R.

THE ARTICLES

The Fifth Clearing & Settlement Plenary Meeting We had our fifth plenary meeting of the Clearing & Settlement Working Group (CAS-WG) in March. The meeting covered all the latest issues, news and views, and was kicked off by Greg Caldwell, Chair of the Regulations Subject Group, who outlined the complexity of European and Global Regulations through this slide outlining the Rubik’s Cube of Regulations. http://thefinanser.co.uk/fsclub/2013/04/the-fifth-clearing-settlement-plenary-meeting.html EMIR: UNCOORDINATED, INCOMPLETE AND SURPRISING TO ALL INVOLVED ! Crises occur across the globe on a daily basis and the natural response is adding regulation to prevent them from reoccurring. In most cases regulation that is enforced after a crisis leads to more bureaucracy and shifts the risk instead of mitigating the risk, a result when the root cause of a crisis is not understood. http://treasurypeer.com/2013/03/31/emir-uncoordinated-incomplete-surprising-involved/ “The End-User Bill of Rights” – Statement of Commissioner Bart Chilton We are one week away from an important date in Dodd-Frank implementation:  the April 10 compliance date for Dodd-Frank swap reporting rules for end-users.  This date represents the first major compliance date for the end-user community, a class of market participants that includes many who have not been regulated by the CFTC until now. http://www.cftc.gov/PressRoom/SpeechesTestimony/chiltonstatement040313 Energy firms struggle to meet Dodd-Frank reporting deadline With Dodd-Frank reporting and record-keeping rules set to come into effect on April 10, energy companies worry they won’t be ready in time http://www.risk.net/energy-risk/news/2258455/energy-firms-struggle-to-meet-doddfrank-reporting-deadline LCH hits real-time clearing countdown LCH.Clearnet faces a race against the clock to speed up the process for acceptance or rejection of trades, as a regulatory extension for Dodd-Frank compliance draws to a close at the end of this month. http://www.ifre.com/lch-hits-real-time-clearing-countdown/21077277.article Non-cleared Derivatives Margin Rules could force re-think of SCSA Here is a link to an interesting article in Risk Magazine regarding the potential impact of the “near final” BCBS/IOSCO margin rules for non-cleared derivatives (the “BCBS/IOSCO Rules”) on the adoption of ISDA’s standard credit support annex (SCSA). http://regulatoryreform.wordpress.com/2013/04/04/non-cleared-derivatives-margin-rules-could-force-re-think-of-scsa/ ISDA Publishes March 2013 DF Protocol On 22 March 2013, the ISDA March 2013 Dodd-Frank Protocol (the “DF Protocol 2.0”) opened.  The DF Protocol 2.0 is part of ISDA’s Dodd-Frank Documentation Initiative and attempts to assist the industry in complying with certain CFTC final rulings imposed under Title VII of the Dodd–Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). http://regulatoryreform.wordpress.com/2013/04/04/isda-publishes-march-2013-df-protocol/ ESMA’s Technical Advice to the Commission on Fees for Trade Repositories On 14 January 2013 ESMA received a formal request from the European Commission (the Commission) to provide technical advice to assist the Commission in formulating a Regulation on fees for Trade Repositories (TRs) by a delegated act. http://www.esma.europa.eu/content/ESMA%E2%80%99s-Technical-Advice-Commission-Fees-Trade-Repositories-0 Reg cap clampdown plays to clearing mandate Plans by the Basel Committee for Banking Supervision to crack down on regulatory capital transactions could reduce the options banks have for shoring up capital as they strive to meet more stringent requirements laid down by the same committee. http://www.ifre.com/reg-cap-clampdown-plays-to-clearing-mandate/21077196.article US FCMs to reduce by a third in six years by end-2013 – TABB The number of futures commission merchants (FCMs) serving the US futures markets will continue to decline despite a growing willingness of clients to diversify relationships, according to a recent TABB Group report. http://www.thetradenews.com/news/Regions/Americas/US_FCMs_to_reduce_by_a_third_in_six_years_by_end-2013_%E2%80%93_TABB.aspx The Dodd-Frank End-User Experience: What’s Happening April 10 When it comes to trade reporting, Dodd-Frank cuts some slack for end users, or non-financial companies using swaps to hedge business risks. But inter-affiliate swaps are not exempt from reporting requirements, and firms need to be prepared now. http://www.derivalert.org/blog/bid/88011/The-Dodd-Frank-End-User-Experience-What-s-Happening-April-10 Central Clearing for OTC Derivatives: The FX Edition FX options involve many more variables than vanilla derivatives, creating considerable disparity about how contracts should be valued and actively risk managed. Banks need models that can price exotic instruments, and the buy side needs a means of comparing quotes. But for this to happen, banks, clearinghouses, regulators and technology providers need to work together. http://tabbforum.com/opinions/central-clearing-for-otc-derivatives-the-fx-edition IOSCO publishes responses to consultation on margin requirements for non-cleared derivatives On 2 April 2013, the International Organization of Securities Commissions (IOSCO) published a list of the responses it received to its consultation document on margin requirements for non-centrally cleared derivatives, published on 15 February 2013, a more detailed summary of which can be found here.  Two notable responses were received from ISDA (primarily for the sell-side), and the Investment Management Association (IMA) (for the buy-side). http://regulatoryreform.wordpress.com/2013/04/03/iosco-publishes-responses-to-consultation-on-margin-requirements-for-non-cleared-derivatives/ Dodd-Frank Swaps Trade Reporting Is Live – So Now What? The lead-up to February 28th for Dodd-Frank Parts 43 and 45 swaps trade reporting compliance for FX, Commodities, and Equities was not unlike that of your standard disaster or save-the-world action movie: there is the tick by tick countdown to the “event”, the background music is ominous, the tension has been ratcheted up, and no one is quite sure that they’ll survive through the end. http://cassandrajohn.com/2013/03/08/dodd-frank-swaps-trade-reporting-is-live-so-now-what/ ESMA 2013 Regulatory Work Programme ESMA has published its 2013 Regulatory Work Programme which is based on its 2013 Work Programme, published in October 2012, and provides a detailed breakdown of the of the individual workstreams as outlined in the 2013 Work Programme. http://www.esma.europa.eu/news/ESMA-2013-Regulatory-Work-Programme LCH.Clearnet Unveils Mandatory Clearing Checker and Regulatory Timeline LCH.Clearnet added two new tools to their SwapClear website to help swaps market participants keep up with some of the latest regulatory developments. http://www.derivalert.org/blog/bid/88028/LCH-Clearnet-Unveils-Mandatory-Clearing-Checker-and-Regulatory-Timeline BNY Mellon and Pirum team up on tri-party collateral automation LONDON, April 5, 2013 – BNY Mellon, the global leader in investment management and investment services, has upgraded its AccessEdge collateral management portal via a newly-established link to Pirum’s tri-party automation service to enhance clients’ ability to manage collateral. http://www.secfinmonitor.com/sfm/bny-mellon-and-pirum-team-up-on-tri-party-collateral-automation/ Third of buy-side EMIR-ready Only a third of asset managers are operationally prepared for changes to post-trade processing of OTC derivatives in Europe, and many see costs for compliance rising, new research has shown. http://www.thetradenews.com/news/Regions/Europe/Third_of_buy-side_EMIR-ready.aspx Markit and Traiana prepare for clearing hub showdown Two firms now testing central credit-checking service http://www.risk.net/risk-magazine/news/2258392/markit-and-traiana-prepare-for-clearing-hub-showdown Making the over-the-counter derivatives markets safe: a fresh look In the aftermath of the failure of Lehman Brothers, regulators, especially in the United States and Europe, are focusing on reducing the risks in the overall ove-rthe-counter (OTC) derivatives market. We provide an overview of the OTC derivatives market and the associated drawbacks in the proposed regulatory initiatives that continue to unfold. We propose ane alternative that would make this market safe with relatively few additional collateral costs. Since many OTC derivative users will be exempt from posting collateral, we suggest an appropriate levy on derivative risk at large banks as a more transparent approach than moving OTC derivatives to central counterparties (CCPs). http://www.risk.net/journal-of-financial-market-infrastructures/technical-paper/2255892/making-the-overthecounter-derivatives-markets-safe-a-fresh-look Insurers 'should be exempt from initial margining requirements' on ALM hedges No economic need for initial margin on non-centrally cleared derivatives, argues Insurance Europe http://www.risk.net/insurance-risk/news/2257748/insurers-should-be-exempt-from-initial-margining-requirements-on-alm-hedges SEC forces Ice into single-name CDS clearing U-turn Clearing house has been told its own rules prevent it from shelving buy-side clearing for single-name CDS contracts http://www.risk.net/risk-magazine/news/2259105/sec-forces-ice-into-singlename-cds-clearing-uturn Swaps vs futures: OTC market speaks out Swap futures have been pitched as economically equivalent to over-the-counter swaps, but with a much lighter regulatory burden. But some over-the-counter participants claim the rules create an unfair and unjustified arbitrage opportunity. http://www.risk.net/risk-magazine/feature/2255770/swaps-vs-futures-otc-market-speaks-out Rolling spot faces inclusion in Dodd-Frank Forex spot is expected to be exempt from US clearing and exchange trading rules, but rolling spot could be classified as a CFD and so be included within the scope of Dodd-Frank http://www.risk.net/risk-magazine/news/2258489/rolling-spot-faces-inclusion-in-doddfrank CFTC: O'Malia on a mission to fix Dodd-Frank flaws With the end of the agency's marathon Dodd-Frank Act rulemaking in sight, CFTC commissioner Scott O'Malia wants to go back and fix what he sees as mistakes. http://www.risk.net/risk-magazine/profile/2258015/cftc-omalia-on-a-mission-to-fix-doddfrank-flaws Bloomberg may set up futures exchange Trading venue looks to hedge its bets if it fails to close the margin gap between OTC swaps and futures http://www.risk.net/risk-magazine/news/2258002/bloomberg-may-set-up-futures-exchange “It’s fragmentation, Jim, but not as we know it” – why Dodd-Frank won’t work Interesting last week to see that GFI has applied to the CFTC to become a futures exchange. This follows on from ICAP’s purchase of Plus Markets (now ISDX) and so it surely can’t be too long before the other IDBs follow suit and execute their own regulatory hedges too. http://fragmentation.fidessa.com/2013/04/08/it%E2%80%99s-fragmentation-jim-but-not-as-we-know-it-why-dodd-frank-won%E2%80%99t-work/


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