A synopsis of the headlines in the derivatives industry from the last week.
Asia clearinghouses get EU seal of approval
In a long awaited move, clearing houses in Australia, Hong Kong, Japan, and Singapore were given the green light from the European Commission to clear standardised OTC derivatives for EU-based banks and other market participants under the European Market Infrastructure Regulation (EMIR).
The move will help European banks avoid higher capital costs against exposures although concerns continue to persist over swap trades with US participants. Clearers across the pond were not granted approval by the Commission.
Source: www.efinancialnews.com/story/2014-10-30/eu-swap-rules-green-light-asia-pacific
Collateral management news
DTCC-Euroclear Global Collateral is targeting Q4 2015 to introduce its Margin Transit Utility (MTU), a new service which aims to provide straight-through processing of margin obligation settlement. This will enable users to track and monitor their margin and collateral positions.
The other offering being developed is the Collateral Management Utility (CMU), which is slated for a Q4 2015/ Q1 2016 launch. It intends to support the mobilisation and allocation of high-grade assets for use as collateral by market participants and builds on the Euroclear’s existing Collateral Highway service.
To date, eight custodian banks have agreed to participate in the project, and buy-side working groups are being established to help ensure the MTU is developed in line with client demand.
Across the pond
More industry groups push for deadline extension
Industry groups International Swaps Derivatives Association (ISDA) and the Managed Funds Association (MFA) have both submitted requests for the Commodity Futures Trading Commission to extend no-action relief beyond November 15.
Swaps users are concerned because execution platforms have said they will not be able to offer transactions pairing interest rate swaps with certain other derivatives after the cut off of regulatory relief in mid-November. Traders hoping to package US Treasury futures, corporate bonds, credit options, mortgage-backed securities, interest rate options, and equity total return swaps with a comparable or offsetting vanilla interest rate swap could find themselves with no place to trade.
Swap execution facilities are working to build out functionality to allow such “packaged transactions” to continue to trade as normal following the relief expiry, but in many cases this will not be ready until next year at the earliest.
Source: http://www.ifre.com/swap-market-fears-cftc-deadline/21170528.fullarticle
CME reports switch to futures
Traders took cover in the futures markets as volatility hit bond, equity and currency markets due to fears of slowing growth. The result was that volumes in CME’s listed interest rate contracts reached a record 25.1m on 15 October while the notional amount of cleared interest rate swaps in the OTC markets was well below average.
Source: http://www.ft.com/cms/s/0/c51db9ba-6049-11e4-98e6-00144feabdc0.html#axzz3I0G0K1qj
