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 | 1 Comment »
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:
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 »
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:
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 »
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 »
BlackRock and MarketAxess today announced a strategic alliance to create a unified, open trading solution in the U.S. credit markets.
“This partnership enables Aladdin clients to tap into a deeper liquidity pool without ever having to leave Aladdin, while maintaining their existing trade workflow”
The alliance between BlackRock’s Aladdin Trading Network (ATN) and MarketAxess, the industry leader in electronic credit trading, is designed to help reduce liquidity fragmentation and improve pricing across credit markets, while expanding both firms’ open trading efforts. (more…)
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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 »
The SGX reported very good news in their recent quarterly earnings announcement with the majority of the rise in revenue attributable to derivatives.
The interesting part of the derivatives growth is the fact that SGX lists many non-Singapore equity index futures contracts. In fact, the fastest growing contract in the quarterly report is the future on the Nikkei 225.
I read an interesting post back in January (here) that claimed the SGX Nifty contract had 68% of the total open interest of all available Nifty futures contracts. My thought at the time was “why would the majority of interest in a future on an Indian domestic equity index be offshore?” Time for more research!
And a key driver of that growth appears to be the comparative trading costs of Singapore vs the domestic market for the specific contract. As an example, this article shows that the cost of trading the Nifty on the SGX is less than half that on the NSE!
The Securities and Exchange Board of India (SEBI) banned participatory notes (p-note) in October 2007 (a p-note allows an investor to trade without registering with the SEBI) which led to a marked increase in trading in the SGX contract.
Even though the SEBI then lifted the p-note ban a year later, a significant share of trading stayed on the SGX. Additional uncertainty exists from an investor’s perspective w.r.t. the general anti-avoidance rules in India as well. Some commentators have suggested that the FX component is also of importance as the NSE Nifty contract is delivered in INR whereas the SGX contract is delivered in USD.
Exposure to the Indian equity market. To be able to trade efficiently – quickly & in a cost efficient way. To be able to enter & exit positions quickly. To know that the regulations are not going to change in a way that will add costs to the trade process.
For markets, once a significant amount of liquidity (measured by open interest & traded volume) moves to a venue then that liquidity becomes (1) self-generating & (2) sticky as long as the regulatory regime for that venue is stable. When the markets are electronic, that move can happen very quickly. Which is what happened when the Bund contract moved from LIFFE to the DTB (a good summary is here).
This dynamic should be understood by regulators when they view the global financial marketplace and is not limited to their efforts to avoid regulatory arbitrage. The individual market participants, whether buy-side, sell-side or execution venues will compete to provide the most efficient service possible. When that service is electronic, the competitive force is instantaneous and the successful participants will adjust to that force in the same time frame.
Filed under: AsiaPac, Regulation, Scott McLeod, Web trading technology | Leave a Comment »
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 »
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 »
Our man in Singapore, Randy Hebert, and I were among the 700 or so delegates that attended the 52nd ACI World Congress which was held in the Marina Bay Sands Conference Centre, Singapore from March 14-16.
Much has changed since the ACI World Congress was last held in Singapore in 2001, when Singapore also had the unique privilege of hosting the first World Congress of the new millennia, in particular the growth and increased significance of Asia to the World economy. It is now estimated that Asia, and especially the People’s Republic of China accounts for over 60% of global growth.
Caplin clients at the ACI event included Standard Bank and Citi Velocity. Caplin Trader was featured at the Progress Apama booth giving delegates the opportunity to see a complete e-commerce solution with Apama providing aggregation & rate management with Caplin Trader for client distribution.
The conference featured presentations on topics such as the future of banking in Asia, financial regulation, and the impact of China and the rest of Asia on the financial markets. (more…)
Filed under: Regulation, Rich Internet Applications, Scott McLeod, Single-Dealer Platforms, Web trading technology | Leave a Comment »
