Weekly Roundup | 21st July 2014
Credit Suisse becomes top swaps clearer in U.S.
Credit Suisse has moved to the top spot as the largest over-the-counter derivatives clearinghouse in the U.S., according to the National Futures Association. With a $7.2 billion client-margin requirement for cleared swaps, Credit Suisse has moved ahead of Barclays, which had been ranked first but has slipped to second. Risk.net (subscription required)
ESMA plans phased-in approach to OTC derivatives clearing
The European Securities and Markets Authority plans to follow the U.S.'s lead by phasing in mandatory clearing of over-the-counter derivatives. Market participants have until late summer to comment on proposed rules during separate consultation periods for credit default swaps and interest-rate swaps. Once the rules are approved, the industry will have varying amounts of time to comply, ranging from six months for clearing firms, to 18-months for non-clearing financial firms, and 3 years for non-financial firms. The Trade
Embedded long-term financing in derivatives is under appreciated, paper says
A paper published in the Journal of Derivatives this summer touts the underappreciated advantages of long-term financing embedded in derivatives. “By virtue of embedded long-term financing, a derivative position has significantly less financing risk than an equivalent levered cash position using existing (i.e. short term) financing arrangements,” writes Bruce Tuckman, professor at New York University’s School University in the paper, citing one of several advantage. “Derivate users often underappreciate embedded financing,” he writes.
Securities Finance Monitor
Europe expected to crack down on trade-reporting violations
European regulators may begin fining firms for breaches in reporting of derivatives trades. Confusion around unique trade identifiers (UTIs), legal entity identifiers (LEI) and the 85 different fields in the reporting process may be contributing to the low level of reporting, but regulators are reportedly becoming frustrated with the reporting breaches and are ready to clamp down.
The Trade News
CFTC’s O’Malia: Rules should first not harm markets, international coordination necessary
Commissioner Scott O’Malia of the Commodities Futures Trading Commission told an audience of financial lawyers last week that he is “deeply concerned” with reports of fracturing US-non-US liquidity. He cautioned that the lack of harmony in international regulations may lead to regulatory arbitrage, and he said it’s critical that international regulators work together to synchronize roles on swap data reporting, exchange trading and CCP clearing before fragmentation between geographic markets “hardens and becomes permanent.” He also called on the CFTC to review rules that might be negatively impacting the market.