SEF Industry Barometer from Tabb Group


An excellent update to Tabb Group’s SEF barometer has just been published, which was based on a survey of over 150 participants (from dealers, buy-side and vendors).

Key findings are:

  • Discontent is high on the final outcome of the swap rules, but consensus is low on the reasons why
  • Exchanges are perceived to benefit the most from the new rules, as product standardization drives the swaps market closer to order book trading and accelerates the migration to swap futures Continue reading

Has CFTC given too much power to SEFs?


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?

Continue reading

Bloomberg sues CFTC over Swaps Collateral rules


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

Banks work on global standard for SEFs and OTC markets


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 Continue reading

CFTC cannot cope with SDR data


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? Continue reading

Mandatory Clearing of Swaps has arrived!


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  Continue reading

Quick thoughts on AFME Conference


Unsurprisingly, regulatory impact, market readiness and new business models tended to dominate last week’s AFME conference.

With many participants in ‘build phase’, re-engineering businesses to support regional introduction of regulatory reforms, variously covering pre-trade transparency, execution mandates, post trade reporting and clearing.

However, there were concerns raised that Continue reading

ICAP sells stake in Traiana to banks


The FT carries news that ICAP has sold an initial 12% stake (plus option on further 20%) in its post-trade processing unit Traiana to seven of its largest bank customers.

We have noted before in our white paper on SDPs in a cleared world and also here and here, new regulatory mandates around execution, reporting and clearing will see the value proposition and profitability for many of the largest banks move downstream, from execution through to post trade processing (and infrastructure) capability. Scale, efficiency and connectivity being key components, which helps explain the interest in Traiana

As the article says:

The sale illustrates the growing importance to banks of a raft of new market infrastructure that are intended to improve market efficiency and cut counterparty risk and rising IT costs.

Full FT article here and ICAP Press release here

CCP implementation timelines in Europe from EMIR


My thanks to The OTC Space for bringing this chart to my attention.

European Market Infrastructure Regulation (EMIR)

Below are the updated timelines for implementing OTC derivatives regulations in Europe with regard to central counterparties (CCPs) and trade repositories (TRs).

Main obligations are shown below

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


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 Continue reading