Posted on May 23, 2013 by Paul Blank
Last week the CFTC passed the key rules that will govern how OTC derivatives will trade under the new Dodd-Frank regulatory framework.
By so doing, the CFTC has in effect devolved/transferred many important decisions regarding ‘where, and when’ swaps will trade over to the new market infrastructure and trading venues themselves, but will this give too much power to new trading venues?
Filed under: CCP, CFTC, Dodd Frank, OTC, Paul Blank, Regulation, SEF | Leave a Comment »
Posted on May 16, 2013 by Paul Blank
Today the CFTC voted on and passed the rules that will govern how OTC derivatives will trade under the new Dodd-Frank regulatory framework.
The key votes were on:
- Block Trade Rule: Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades (Swaps Block Rule) Q&A - passed by 3-2 votes
- available to Trade Rule: Process for a Designated Contract Market or Swap Execution Facility to Make a Swap Available to Trade under Section 2(h)(8) of the Commodity Exchange Act (CEA); Swap Transaction Compliance and Implementation Schedule; Trade Execution Requirement Under Section 2(h) of the CEA Q&A passed by 3-2 votes
- SEF Core Rules: Core Principles and Other Requirements for Swap Execution Facilities (SEFs) Q&A passed by 4-1 votes
- Anti-disruptive Practices Authority – Interpretive Guidance and Policy Statement Q&A passed by 5-0 votes
Regarding the SEF core rules, the RFQ5 rule has been watered down to RFQ3 (although this will start with RFQ2, and be phased in to RFQ3 over a 15mth period)
CFTC Chairman Gary Gensler said in an opening statement that: (more…)
Filed under: CFTC, Paul Blank, Regulation, SEF, SWAPS | 1 Comment »
Posted on May 13, 2013 by Paul Blank
Nearly three years after the introduction of the Dodd-Frank Act (DFA), the CFTC has finally announced that this week (Thursday 16th May) it will vote on how OTC derivatives will trade under the new regulatory framework.
The DFA was designed to bring greater transparency and competition into the OTC derivatives markets, and some of the key rules that will be finalised are:
- Block Trade Rule: Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades (Swaps Block Rule)
- available to Trade Rule: Process for a Designated Contract Market or Swap Execution Facility to Make a Swap Available to Trade under Section 2(h)(8) of the Commodity Exchange Act (CEA); Swap Transaction Compliance and Implementation Schedule; Trade Execution Requirement Under Section 2(h) of the CEA
- SEF Core Rules: Core Principles and Other Requirements for Swap Execution Facilities (SEFs)
- Anti-disruptive Practices Authority – Interpretive Guidance and Policy Statement
Among the more contentious rules is the so-called RFQ5 rule (more…)
Filed under: CFTC, OTC, Paul Blank, Regulation, SEF, SWAPS, Web trading technology | 1 Comment »
Posted on May 2, 2013 by Paul Blank
My thanks to Profit -Loss for quickly posting a correction and clarification to the report they carried yesterday stating that the CFTCs ‘No Action’ letter to Prime Brokers granted exemption for rolling spot trades and thereby releasing firms from their obligations under Dodd-Frank. My Sigh of relief from Prime Brokers post yesterday was partly based on their coverage.
According to Profit-Loss, the CFTC has explicitly told Profit & Loss that yesterday’s letter does not refer to the rolling spot question – bank lawyers are also telling their clients the same thing; however, several sources continue to point out that this does not yet mean rolling spot is included – rather that clarification is still needed. CFTC did not return further calls and emails seeking clarification on the question of rolling spot.
Full article from Profit-Loss here
Confused? Join the club!
Filed under: CFTC, FX, Paul Blank | 2 Comments »
Posted on May 1, 2013 by Paul Blank
It came down to the wire, but sense seems to have prevailed, as the Commodity Futures Trading Commission (CFTC) has issued a time limited ‘No Action’ letter that exempts Prime Brokers and rolling spot trades * from certain aspects of Dodd-Frank rules.
* CORRECTION, CFTC has NOT provided exemption to rolling spot, see clarification here
There had been widespread concern that rolling spot trades (where net open positions are rolled forward) would be classified as swaps, and thus subject to the Dodd-Frank rules, and Prime Brokers who ‘roll the trades’ would be required to comply with additional reporting requirements.
However the CFTC recognises the arguments presented by industry trade bodies, (more…)
Filed under: CFTC, FX, Paul Blank, Regulation, SWAPS | 2 Comments »
Posted on April 28, 2013 by Paul Blank
UniCredit of Italy has become the biggest bank yet to say publicly it was not trading over-the-counter derivatives with US institutions, as industry specialists warned that incoming regulations were breaking the global links between markets and hurting liquidity.
TJ Lim, head of UniCredit’s capital markets business, told an industry gathering in Singapore last week that:
Uncertainty over the rules and concerns about their costs meant his bank had decided not to trade with US-based banks and other institutions. Although it will trade with the US arms of European companies, which are exempt from clearing.
Banks in Europe and Asia are concerned about the high costs and information requirements of reporting trades, and about broader compliance with the US rules if they register as swap dealers. Such costs would be a burden on banks that do not do very large volumes of business on US soil, bankers and lawyers say.
According to Kishore Ramakrishnan, a senior director in Ernst & Young:
“The mindset that’s emerging in this part of the world is number one, ‘I don’t want to do anything with US-facing entities’, which means number two, businesses are refocusing away from global markets to local industry markets.”
Full story is available in FT.com here
(My thanks to The OTC Space for bringing this story to my attention.)
Filed under: CFTC, Dodd Frank, OTC, SWAPS | Leave a Comment »
Posted on April 17, 2013 by Paul Blank
In recent coverage of the arrival of mandatory clearing for swaps we mentioned that Bloomberg was considering suing the CFTC over unfair rules, by setting higher collateral levels for Swaps than for comparable futures.
…… An interesting PS to the post. Bloomberg today announced that it is threatening the CFTC with legal action over what it claims are unfair margin requirements, mandating minimum margin collateral that can cover five days of possible losses for cleared financial swaps. By contrast, margin for futures contracts traded on exchanges presently covers the risks of one day of losses, coverage from FT here
Bloomberg News now confirms that they have indeed filed a complaint in Washington Federal Court, more here
Filed under: CCP, CFTC, OTC, Paul Blank, Regulation | Leave a Comment »
Posted on March 27, 2013 by Paul Blank
A group of banks, together with Etrading Software are developing an open standards protocol for technical integration between broker dealers permissioning systems and swap execution facilities (SEFs).
It is hoped that the Trading Enablement Standardisation Initiative (TESI), could improve operational transparency and control on the financial markets if it attracts enough users and conforms with the US Commodity Futures Trading Commission (CFTC) final rules governing SEFs, which were introduced this quarter.
The first goal of the working group is (more…)
Filed under: CCP, CFTC, OTC, Paul Blank, SEF, SWAPS | Leave a Comment »
Posted on March 21, 2013 by Scott McLeod
In their efforts to implement Dodd-Frank, it would appear that the CTFC are guilty of not thinking about the data they would receive as part of the SDR requirements. Commissioner Scott O’Malia gave a speech to the SIFMA Compliance and Legal Society on March 19 where he said:
“Since the beginning of 2013, certain market participants have been required to report their interest rate and credit index swap trades to an SDR.
Unfortunately, I must report that the Commission’s progress in understanding and utilizing the data in its current form and with its current technology is not going well.
Specifically, the data submitted to SDRs and, in turn, to the Commission is not usable in its current form. The problem is so bad that staff have indicated that they currently cannot find the London Whale in the current data files. Why is that? (more…)
Filed under: CCP, CFTC, Dodd Frank, OTC, Regulation, Scott McLeod, SEF, Web trading technology | Leave a Comment »
Posted on March 12, 2013 by Paul Blank
The Dodd-Frank clearing mandate for swaps came into effect yesterday on 11th March 2013.
The mandate as implemented by the CFTC, requires swap dealers, major swap participants and active users of swaps to clear new trades in certain index CDS and IRS from 11th March onwards.
The move to clearing means (more…)
Filed under: CCP, CFTC, Dodd Frank, OTC, Paul Blank | 5 Comments »