A quick recap of the ISDA AGM & Noteworthy New Industry Research to Read
End users participants in the OTC derivatives market were centre stage at the ISDA AGM this week in Munich. This focus is a departure from previous ISDA AGMs of late where the conference sessions focused more heavily on the dealer community. Unsurprisingly, end users are concerned about how regulatory reform will impact their access to OTC derivatives and the cost of using these instruments, however; the degree of this possible impact is still unknown.
The AGM kicked off with discussion on the economic value of derivatives with much talk about how the media and general public need better education on how these instruments are used for risk management purposes (particularly for end users) and to debunk the perception that these instruments are ‘evil”. To reinforce this message, ISDA published a paper this week on “The Value of OTC Derivatives: Case Study Analyses of Hedges by Publicly Traded Non-Financial Firms” and also published an end user survey at the beginning of the week.
A bigger issue that persists is the lack of communication between the end user community, which is vast and diverse, and regulators to bridge the education gap between the two groups and better inform regulatory change. This is a theme often discussed at other events (recent conferences I’ve attended in London) so I’m curious how any end users among DerivSource readership are trying to reach out (or not) to get their voice heard? Clearly there are groups and associations, such as the IMA, EFAMA and ISDA end user working group that can drive this communication from a more collective basis.
Something more noteworthy for DerivSource readers in the collateral management space is the publication this week of the annual ISDA Margin Survey. This would be a good research paper to read this weekend. Some highlights of the report are:
• 90% of non-cleared derivatives trades are now collateralised
• of this 90% most of the collateral is still cash or government securities
• the collateral in circulation for non-cleared OTCs dropped by 14% and this is largely due to the CCP clearing mandate
Also this week Eurex received EMIR CCP authorisation so central clearing has officially kicked off. Those who have been on notice for frontloading in anticipation of the rumoured possibility of a change to this requirement, which would reduce or eliminate the burden, might not be able to hold back preparations much longer.
To read more about ISDA news see our dedicated ISDA page.
