A synopsis of the headlines in the derivatives industry from the last week.
European news
Regulators hoping to extend margin deadline
Bankers are heaving a sigh of relief after the European Securities and Markets Authority (ESMA) announced that it is aiming to agree a new deadline with other regulators for the introduction of margin requirements for non-cleared swaps transactions.
It is unclear though whether the new time lime will cover all or just some margin requirements. The negotiations follow complaints from global banks who were concerned that the December 2015 target date does not give them enough time to do the operational and legal work necessary to implement the post-crisis rules that may add $800 bn to the international financial industry’s cost of doing business.
It had been reported last summer that the International Swaps and Derivatives Association (ISDA), had written to the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO), requesting a delay to rules that aim to make trading OTC derivatives safer.
Source:
http://uk.reuters.com/article/2015/01/19/uk-derivatives-eu-idUKKBN0KS10F20150119
SNB fallout
The surprise move by the Swiss National Bank (SNB) to lift its currency ceiling has left a number of casualties in its wake. UK-based foreign exchange broker Alpari filed for administration while US counterpart FXCM had to accept a $300m lifeline from Leucadia National after concerns that it would breach capital requirements.
Other brokers such as IG Group, CMC Markets, Swissquote, Oanda and Interactive Brokers, survived the 15% surge against all 150 currencies tracked by Bloomberg but sustained losses. To better assess the situation, the UK based Financial Conduct Authority (FCA) has written to about 90 brokers asking them to update the regulator about any impact the Swiss move could have had on their balance sheets.
Sources:
http://www.ft.com/cms/s0/0d9a514a-9fb9-11e4-9a74-00144feab7de.html#axzz3PSELdb1y
Asia news
Eurex gets green light for Singapore clearing house
Deutsche Börse Group has received regulatory clearance for its futures exchange, Eurex, to launch a clearing house in Singapore. Slated for 2016, activity will initially cover certain European benchmark derivatives listed at Eurex Exchange before expanding into listed derivatives based on Asian underlying assets.
Eurex is no stranger to the region, having struck cross-listing and co-operation agreements with exchanges such as the Taiwan Futures Exchange, Bombay Stock Exchange and Korea Exchange. However, the German based group is not alone in its hope to tap into the region’s lucrative growth prospects. Competition has been intensifying for a number of years with its rival Intercontinental Exchange being one of the latest with its recent plans to introduce a central counterparty (CCPs) and exchange in Singapore.
Sources:
Nasdaq strikes deal with JPX
Nasdaq, the world’s largest exchange company, has signed an agreement with the Japan Exchange Group (JPX) to provide a new trading platform, real-time market surveillance and pre-trade risk-management technology for the group’s derivatives bourse, the Osaka Exchange. The system will begin operations sometime after 2015.
The deal which could help lower the costs of entry by foreign firms – because they wouldn’t have to work with completely different technology in Japan – is part of the exchange operators’ efforts to bolster the country’s position as a global financial centre.
JPX was ranked 14th globally in derivatives trading volume with more than 366m contracts in 2013, according to the latest figures from the Futures Industry Association (FIA). That represents only about one-tenth the trading on CME Group, the world’s largest exchange, and trails other Asian exchanges such as the Korea Exchange and the Shanghai Futures Exchange.
Source:
http://www.efinancialnews.com/story/2015-01-19/nasdaq-provide-trading-platform-for-osaka-exchange
US news
House to ease Dodd Frank rules
The House of Representatives passed a bill to ease nearly a dozen Wall Street regulations embedded in the Dodd Frank legislation. The 271 to 154 vote reflects ongoing clashes between the two political parties over government regulation of financial markets.
Republicans, who now control Congress, want to roll back or overhaul large portions of the Dodd-Frank law. However, Democrats are increasingly objecting to even minor changes in an effort to draw a solid line against future attempts to amend the rules.
Democrats have been most vocal over the proposal to delay until 2019 a portion of the Volcker rule prohibiting banks from making risky bets with their own money in collateralised loan obligations (CLOs). Regulators have already granted banks a reprieve from the provision until 2017 and the White House as well as congressional Democrats argue that the additional suspension would push back important taxpayer protections. Republicans though believe that a further extension is needed to prevent a “fire sale” of the securities.
Source:
http://www.wsj.com/articles/house-passes-bill-to-ease-some-wall-street-regulations-1421264429
