European Regulation

The Clock Starts Ticking Towards European Mandatory Clearing | OMX Authorised

If you haven't already heard, Nasdaq OMX announced they are the first European CCP to be authorised under EMIR – something they're quite happy about, you can read the press release here from this page here. Whilst this is good news for OMX, it means the EMIR process now starts moving forward towards mandatory clearing, something the US have already experienced.

• The OTC Space: The Clock Starts Ticking Towards European Mandatory Clearing | OMX Authorised
• DRS: EMIR Clearing Obligation Cleared for Take-Off.

Nasdaq OMX is Authorised. So What Happens Next?

Following confirmation by ESMA of the fact that, on 18 March 2014, Nasdaq OMX was authorised as a CCP under EMIR and of the classes of OTC derivatives that it has been authorised to clear, you might be wondering what happens next.

• DRS: Nasdaq OMX is Authorised. So What Happens Next?
• Simmons & Simmons Elexica: Countdown to EMIR: Frontloading Begins.

European Regulation Roundtable – A Pulse Check

February was a very important month in Europe from a regulatory perspective as EMIR trade reporting finally kicked in on February 12th. CTRM Center: European Regulation Roundtable – A Pulse Check.

What a Difference EMIR Makes. Or Does It?

This week marked the one year anniversary of EMIR’s first implementation deadline.  And what a difference a year makes … or does it? RegTechFS: What a Difference EMIR Makes. Or Does It?

Second Step of EMIR Implementation Now Under Way

As news filtered through that NASDAQ OMX Clearing, the Stockholm-based multi-asset clearing house has received approval for its application as a central counterparty (CCP) under the European Market Infrastructure Regulation (EMIR), it is clear that the all-important second step towards central clearing of most derivatives in EU markets has now been taken. FTSE Global Markets: Second Step of EMIR Implementation Now Under Way.

ESMA Updates EMIR Q&A

On 20 March 2014, ESMA published a further update to its EMIR Q&A document.

• DRS: ESMA Updates EMIR Q&A
• The OTC Space: Updated ESMA Q&A on EMIR 
• CTRM Center: New EMIR Q+A Published by ESMA.

ESMA Mandatory Clearing | Parallel Streams and Arbitrage

ESMA have removed their lovely timeline chart and replaced it with a simplified table. The OTC Space: ESMA Mandatory Clearing | Parallel Streams and Arbitrage.

EC Response on Classification of Financial Instruments

European Commission response to ESMA's letter to Michel Barnier, Commissioner for Internal Market and Services regarding the classificiation of financial instruments as derivatives sent on 14 February.

• ESMA Press Release: EC Response on Classification of Financial Instruments
• DRS: Commission Tells ESMA it's on the Case Over EMIR Reporting
• CTRM Center: Response from European Commission to ESMA on EMIR/MiFID Inclusion of Physical Forwards and FX Forwards.

EMIR RTS on Non-EU Counterparties Published in Official Journal

On 21 March 2014, the delegated regulation specifying the contracts that are considered to have “direct, substantial and foreseeable” effect within the EU or which are necessary to prevent to evasion of rules and obligations for the purposes of EMIR was published in the Official Journal of the EU. DRS: EMIR RTS on Non-EU Counterparties Published in Official Journal.

German-French Plan May Tax Derivatives From Start, Lawmakers Say

Germany and France are moving toward a joint proposal on a European financial-transaction levy and are considering taxing derivatives from the start, German lawmakers said. Bloomberg: German-French Plan May Tax Derivatives From Start, Lawmakers Say.

EU Legal Opinion Opens Door to Tobin Tax on Forex

Deals from the multi-trillion euro a day foreign exchange market could in principle be included in a tax on financial transactions, a legal opinion from European Union lawyers seen by Reuters said. Reuters: EU Legal Opinion Opens Door to Tobin Tax on Forex.

MiFIR: One Little Word with Big Implications for Data Vendors

Once MiFIR is enacted over the coming months, there will no doubt be a lot of concern about one little word that threatens to have a serious impact on the commercial operations of many service providers in Europe. That word is ‘reasonable’. RegTechFS: MiFIR: One Little Word with Big Implications for Data Vendors.

European Legislation Could Possibly Affect the DFM Market

While the RDR has no doubt had a major impact on the discretionary management industry, the majority of the rules themselves do not directly affect DFM firms. FT Adviser: European Legislation Could Possibly Affect the DFM Market.

The EU’s AIFMD: Putting Hedge Fund Risk Management at the Top of the Agenda

The Alternative Investment Fund Managers Directive should help attract investor capital to the alternative investment sector by providing additional assurance to investors. But fund managers must be prepared to implement more robust risk management practices and to disclose information about their risk policies and procedures. Tabb Forum: The EU’s AIFMD: Putting Hedge Fund Risk Management at the Top of the Agenda.

EU Parliament to Thank for Rescuing “Seriously Damaged” SRM

On 20 March 2014, the EU Parliament announced that it had reached agreement with the EU Council over the Single Resolution Mechanism (SRM). DRS: EU Parliament to Thank for Rescuing “Seriously Damaged” SRM.

US Regulation

Clearing Firms Fear Wall Street Regulator's Data Proposal

A proposal by Wall Street's industry-funded watchdog to ramp up oversight of securities brokerages could expose clearing firms to more enforcement actions and lawsuits, lawyers say. Reuters: Clearing Firms Fear Wall Street Regulator's Data Proposal.

CFTC Division of Swap Dealer and Intermediary Oversight Issues No-Action Letter Regarding the De Minimis Threshold for Swaps with Utility Special Entities

The no-action relief allows an entity to deal in utility operations-related swaps, as that term is defined in the letter, and not be required to register as a swap dealer, provided that the aggregate gross notional amount of swap dealing activity does not exceed $8 billion per year.

• CFTC Press Release: CFTC Division of Swap Dealer and Intermediary Oversight Issues No-Action Letter Regarding the De Minimis Threshold for Swaps with Utility Special Entities
• Statement of Commissioner Scott D. O’Malia.

Keynote Address by Commissioner Scott D. O’Malia, 2014 Bank of Canada International Economic Analysis Workshop on Financialization of Commodity Markets

Impact of the Dodd-Frank Act on Commodity Futures and Swaps Markets. CFTC Speech: Keynote Address by Commissioner Scott D. O’Malia, 2014 Bank of Canada International Economic Analysis Workshop on Financialization of Commodity Markets.

Hedge Funds Argue Against Tougher Rules at CFTC Roundtable

Funds that are deemed systemically important could be regulated in much the same way as banks, but hedge fund managers used a CFTC roundtable yesterday to argue regulators should not constrain investor choices. Risk: Hedge Funds Argue Against Tougher Rules at CFTC Roundtable.

CFTC’s O’Malia- SEF Packaged Swaps to be Phased-In

CFTC Commissioner Scott O’Malia has told the mlex news organisation that mandatory SEF trading of packaged swaps will be phased-in. DRS: CFTC’s O’Malia- SEF Packaged Swaps to be Phased-In.

International & Mixed Regulation

European Traders Seek Delay in Overseas Trading Restrictions

The Commodity Futures Trading Commission may be delaying overseas trading restrictions that are set to go into effect next week. CFTC Law: European Traders Seek Delay in Overseas Trading Restrictions.

O’Malia: If OTC Market Has Split, Blame Regulators

If non-US firms are refusing to trade with US persons, it means “we have screwed up in the regulation somewhere,” says CFTC commissioner O’Malia. He hopes arrival of European rules will remove motive for market to fragment. Risk: O’Malia: If OTC Market Has Split, Blame Regulators.

CFTC Weekly Swaps Report: Over $214 Trillion in Interest Rate Swap Volume Cleared From March 3-7

As part of its efforts to encourage transparency in the swaps market, the CFTC developed a Weekly Swaps Report, which provides a detailed view of trading activity in the swaps market. DerivAlert: CFTC Weekly Swaps Report: Over $214 Trillion in Interest Rate Swap Volume Cleared From March 3-7.

Japan FSA Proposes Two Phases for Mandatory Clearing

Insurance companies and pension funds absent from JFSA plans. Risk: Japan FSA Proposes Two Phases for Mandatory Clearing.

CFTC Extends MTF No-Action, Further No-Action Forthcoming

21st March 2014. As previewed in the “path forward“, the CFTC issued a short-term extension to No-action Letter 14-16, exempting EU MTFs from the SEF registration and trade execution mandates.

• DRS: CFTC Extends MTF No-Action, Further No-Action Forthcoming
• Reuters: U.S. Swaps Regulator Gives EU Firms More Time to Meet Rules
• CFTC Press Release: CFTC’s Division of Market Oversight Provides Extension of Temporary No-Action Relief with respect to Swaps Trading on Multilateral Trading Facilities Overseen by Competent Authorities Designated by European Union Member States.

Trading

Credit Trading on SEFs Led By Dealer-to-Client Platforms

A report from consultancy Celent on swap execution facilities (SEFs) has shown credit products are dominated by one venue, while liquidity in rates instruments remains tightly held by inter-dealer brokers (IDBs). The Trade News: Credit Trading on SEFs Led By Dealer-to-Client Platforms.

SEF MAT Week 4 Volumes: Has the Shakeout Begun?

USD IRS volumes continue to rise from the lows of Week 1 and Week 2. But market share among the SEFs remains unchanged from Week 3, with six of the 10 contenders seemingly controlling the race. Tabb Forum: SEF MAT Week 4 Volumes: Has the Shakeout Begun?

Basel III Battleground for Prime Brokers

Liquidity constraints and capital buffers will lead to consolidation among prime brokers, it is claimed. Risk: Basel III Battleground for Prime Brokers.

How to Game a Sef: Banks Fear Arrival of Arbitrageurs

Some banks are scared to make prices on platforms that offer both an order book and request-for-quote trading – other users might be able to game them by using the two approaches in conjunction, the banks claim. The result could be that dealers stop being 24-7 liquidity providers. Risk: How to Game a Sef: Banks Fear Arrival of Arbitrageurs.

Portfolio Compressions: Winners and Losers

This article is part one of my explanation on why new portfolio compression techniques benefit a credit risk manager. The OTC Space: Portfolio Compressions: Winners and Losers.