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 | 7 Comments »
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 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 23, 2013 by randyhebert
A number of foreign government officials signed a letter drafted by Japan’s FSA and delivered to the U.S. Secretary of Treasury regarding cross border OTC derivatives reform. The letter highlighted evidence of fragmentation in the financial markets due to the lack of regulatory coordination.
It appears the consensus among the foreign officials is local regulations should not be extended beyond national borders. As well, one sole national regulator should not presume they can set the agenda for a global industry
Perhaps the U.S should consult other global regulators first? What a novel idea…..
Read the article here – http://forexmagnates.com/japanese-fsa-releases-letter-to-us-secretary-of-treasury-on-cross-border-otc-derivatives-reform/
Filed under: OTC, Randy Hebert, Regulation, Web trading technology | 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 April 16, 2013 by Paul Blank
Risk.Net article about TradeWeb’s new Derivatives platform for Credit Default Swaps (CDS) indices, which has captured as much as 80% of the Inter Dealer Broker market (IDB).
The platform was launched in February in advance of the new SEF derivatives regulations has quickly captured much of the traditional IDB market.
According to an unnamed US Credit Trader:
“Tradeweb launched dealer-to-dealer index CDS trading in the fourth quarter of 2012 and quickly attracted about 80% of the interdealer broker-executed traded CDX volume to its platform.
I would characterise Tradeweb as the dominant dealer-to-dealer trading platform for CDS indexes over the last six months,” says one New York-based credit trader.
Bloomberg has also launched their OTC platform. According to Ben Macdonald, Global Head of Fixed Income at Bloomberg, the company is building a cross asset class SEF, which will generate revenue by ‘driving terminal sales’, which will offset the high regulatory cost of becoming a SEF.
Full Risk.Net story here behind pay wall, or try this link and select first story
Thanks also to OTC Space for alerting me to story!
Filed under: OTC, Paul Blank, SEF, SWAPS | Leave a Comment »
Posted on April 3, 2013 by Paul Blank
Interesting move by Nasdaq to buy eSpeeds US Treasury business from BGC Partners (the old Cantor Fitzgerald IDB).
The move does not include other products, but only the fully electronic segment for the liquid or ‘on the run’ US Treasuries (2, 3, 5, 7, 10 and 30yr notes and bonds)
According to Bob Greifeld, chief executive officer at Nasdaq OMX..
“It’s important to recognise that the US Treasury market is the most similar to the US equity market in its construction and operation,” said Bob Greifeld, chief executive officer at Nasdaq OMX.
“The under-pining of technology is something we are familiar with and we believe is in our power zone.”
eSpeed gives it a strong entry point in the electronic fixed income business – one of the largest and most liquid cash markets in the world – as it looks to diversify beyond its core of stock trading, where volumes are depressed.
Press release from BGC Partners here
More coverage here and here and here
Filed under: OTC, Paul Blank, Web trading technology | 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 25, 2013 by Paul Blank
Asian Investor has an interesting article regarding the rise of fixed income trading on SDPs.
Although Bloomberg is still the dominant FI platform in the region (trading up to 70% of volumes), Asian Investors are starting to migrate flows to Single-Dealer Platforms for US Treasuries and Sovereign bonds.
According to Gavin Ottery, head of fixed income e-commerce sales at UBS in Hong Kong.
Hundreds of clients in Asia-Pacific have migrated from voice to electronic for both regional and global cash products, and electronic fixed income trading volumes in the region continue to increase year-on-year, with 2012 being a record year. (more…)
Filed under: Dodd Frank, MDP, OTC, Paul Blank, Single-Dealer Platforms | 1 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 »