UniCredit will not trade OTC derivs with US Institutions

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.)

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

EuroMoney 2013 Rates Survey Results

For a second year running, Barclays has demonstrated its strength in the rates business by taking top place in the EuroMoney 2013 Global Rates Survey.

Whilst a number of banks continue to scale back their FICC activities on the back of tougher regulation from Dodd Frank and higher Basel III capital requirements, banks like Barclays are continuing to invest in their e-trading, portfolio pricing models, and clearing capabilities. Continue reading

Buy-Side concern over CFTC SEF rules for RFQs

As the CFTC moves closer to finalising the Swap Execution Facility (SEF) rules, SIFMA’s Asset Management Group (SIFMA -AMG) has released results of a Buy-Side only survey on the impact of the requirement to go out to five or more liquidity providers for a request-for-quote (RFQ) platform to qualify as a SEF.

Participants of the survey were mainly asset managers that manage mutual funds, hedge funds and other institutional accounts, representing over $12.1 trillion of assets under management.

According to  Robert Pickel, ISDA Chief Executive Officer, the conclusions of the survey were Continue reading

Watering down SEF rules?

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. Continue reading

UBS to route client IRS trades through toTrueEX

Single-Dealer Platforms continue building SEF aggregation and client routing capabilities for mandated products.

UBS are in discussions to route client IRS orders through to new SEF compliant IRS platform TrueEX.

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