Risk Is Out, Safety Is In: Central Clearing for Credit Derivatives
Author: Stephen Bruel, analyst from the Securities and Investments Practice
A reevaluation of counterparty risk in credit default swaps is occurring at both the industry and the institutional levels. Regulators have decided a fundamental requirement for managing counterparty risk needs to be implemented quickly to clear credit default swaps (CDSs) via a central counterparty clearer (CCP). Discussions on implementing clearing have been ongoing, but the failure of Lehman Brothers catapulted this risk exposure to the top of the regulatory agenda. This TowerGroup ViewPoint discusses the ramifications of central clearing on users of CDSs and examines how CDS clearing will evolv
How Global Are US Asset Managers? Not Much!
Author: Dushyant Shahrawat, CFA and analyst from the Securities and Investments Practice
With the passage of the Emergency Economic Stabilization Act, US broker-dealers will be required, beginning in 2011, to report capital gains information on their clients’ 1099 forms. This Research Note discusses the challenges faced by broker-dealers in complying with the cost basis provisions of the new law. The report explores some of the key issues faced by brokerage firms and helps evaluate the pros and cons of building a system internally, fully outsourcing to a third-party vendor, and choosing some combination of the two approaches.
Let’s Get Physical: Challenges of Trading Physical Energy Commodities
Author: Stephen Bruel, analyst from the Securities and Investments Practice
Energy trading has been a strong revenue generator for broker-dealers and has helped the bottom line during the recent turbulent markets. The paper trading of energy derivatives has long been a staple of energy desks, but this strategy will give way to a new approach for broker-dealers to earn revenues, improve their information advantage, and identify new arbitrage opportunities – trading of the underlying physical commodity. This TowerGroup Research Note describes the evolution of energy trading to the present point, when brokers own barrels of oil; it discusses the technology challenges that then arise and highlights technology that will help manage this complex business.
