CFTC Passes SEF Rules

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 »

CFTC to finalise SEF rules this week?

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 »

Sigh of relief from Prime Brokers

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 »

UniCredit will not trade OTC derivs with US Institutions

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 »

TradeWeb grabs CDS market from IDBs

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 »

Banks work on global standard for SEFs and OTC markets

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 »

US Bank Trading Revenues up 73% in 4th Qtr, driven by derivatives

Posted on March 21, 2013 by Paul Blank

The report, released yesterday by the Office of the Comptroller of the Currency (OCC) shows US commercial bank trading revenues were $4.4bln in 4th quarter, 73pct higher than the $2.5bln in Q4, 2011.

Summary of the report:

  • U.S. commercial banks trading revenues of $4.4 bln in the fourth quarter, 73% higher than $2.5 bln in the fourth quarter of 2011.
  • Trading revenues in Q4 of 2012 were 17% lower than Q3 of 2012 revenues of $5.3 bln.
  • Credit exposure from derivatives decreased in the Q4.  Net current credit exposure fell 3%, or $13 billion, to $386 billion. (more…)

Filed under: OTC, Paul Blank, Survey Results, SWAPS, Web trading technology | Leave a Comment »

Watering down SEF rules?

Posted on March 4, 2013 by Paul Blank

The FT ran a story late last week that the CFTC could be poised to weaken its position on SEF trading rules.

Mark Wetjen, seen as the swing vote on the five-person Commodity Futures Trading Commission, recommended in a confidential agency memorandum that the CFTC alter its proposed rule regarding derivatives marketplaces, or “swap execution facilities”, according to people who have seen the document. (more…)

Filed under: CFTC, Paul Blank, Regulation, SEF, SWAPS | 1 Comment »

US Treasury finally exempts FX Forwards and Swaps from Dodd-Frank

Posted on November 17, 2012 by Paul Blank

The US Treasury has now issued a final determination to exempt FX Forwards and FX Swaps from the narrow definition of Swap under Dodd-Frank Act (DFA).

Whilst FX Forwards and Swaps will be exempt from the DFAs execution and clearing requirements, they will however remain subject to mandatory reporting of trades to recognised Trade Repositories such as DTCC.

Other FX derivatives including (more…)

Filed under: CCP, Dodd Frank, FX, OTC, Paul Blank, Regulation, SWAPS | Leave a Comment »

UBS PIN CDS platform named ’2012 Electronic Trading Platform of the Year’

Posted on October 5, 2012 by Paul Blank

UBS’s recently launched Price Improvement Network (PIN) for trading Credit Default Swaps (CDS) has been named 2012 Electronic Trading Platform of the Year by Derivatives Intelligence.

Single-dealer platforms were assessed in terms (more…)

Filed under: Paul Blank, Single-Dealer Platforms, SWAPS, Technology Trends, Web trading technology | 3 Comments »

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