A synopsis of the headlines in the derivatives industry from the last week.
UK
LCH.Clearnet set to launch cross margining service
LCH.Clearnet, the clearing house majority-owned by the London Stock Exchange, is set to launch an interest rate portfolio margining capability which could significantly reduce the cost of holding contracts.
Under the new offering, participants using SwapClear, the largest interest rate derivatives liquidity pool and LCH.Clearnet’s listed rates service will be able to maximise their margin offsets between OTC and listed interest rate derivatives. This will enable them to more efficiently manage their collateral obligations.
Portfolio margining will be available on an open access basis, to regulated venues that list suitable interest rate derivatives. The initiative is expected to go-live within 12 months, subject to regulatory approval.
Source:
Press release: http://development.derivsource.com/articles/lchclearnet-launch-interest-rate-portfolio-margining-capability
www.efinancialnews.com/story/2015-03-03/lch-cross-margining-to-ease-collateral-crunch-nasdaq-nlx
Ex-Goldman executive director debuts new bitcoin platform
Crypto Facilities, a London-based broker run by former Goldman Sachs executive director Timo Schlaefer, has introduced its bitcoin derivatives trading platform.
The platform, which is geared towards sophisticated investors, will initially host a forward contract on the US dollar price of bitcoin. The forward serves to hedge against bitcoin volatility or to benefit from future swings in the bitcoin price.
Crypto plans to expand its range of services over time. It has already developed an integrated risk management, margining and settlement framework tailored to the high volatility of the digital currency.
Source:
Europe
Nasdaq OMX Clearing gets ESMA green light
Nasdaq OMX Clearing, the firm’s Sweden-based central counterparty, received re-authorisation from European Securities and Markets Authority (ESMA) to clear both exchange-traded and OTC FX derivatives. These include non-deliverable forwards and options, and cash-settled forwards in a variety of currency pairs.
There is hope that this is a sign that ESMA will reverse its decision taken last month not to introduce a clearing obligation for NDFs, a form of currency futures. The authorisation of London Stock Exchange Group-owned LCH.Clearnet to clear the instruments in mid-2014 triggered a public consultation that met with negative feedback from the industry.
ESMA has not commented on whether this means it will change direction but the regulator had said that while it did not intend to pursue an NDF clearing obligation at this time, it reserved the right to do so in the future, although it could not give a timeframe as to when that would be.
Source:
http://www.efinancialnews.com/story/2015-03-03/nasdaq-fx-clearing-esma
Transatlantic
LSE and CBOE strike a deal
The London Stock Exchange and Chicago Board Options Exchange (CBOE) signed a licensing agreement whereby CBOE will develop and list options based on existing FTSE and Russell Indices.
Under the terms of the agreement, CBOE will offer options trading on more than two dozen FTSE and Russell indices including the FTSE Global Equity Index Series and the Russell 1000 index family. The new service will be available to trade in the US within the coming months, although a fixed date has not yet been announced.
The deal builds upon an existing working relationship between the two firms, which has been in existence since 1992. The LSE, which owns FTSE, bought Frank Russell last year in a deal worth $2.7 bn and recently announced it was putting the asset management arm of the firm, Russell Investments, up for sale, in a deal expected to reach around $1.4 bn.
Source:
http://www.efinancialnews.com/story/2015-02-26/cboe-russell-ftse-index
Press release: http://www.lseg.com/resources/media-centre/press-releases/cboe-signs-licensing-agreement-list-options-ftse-and-russell-indices
Asia
IOSCO review confirms Japan’s progress on derivatives
Japan is making satisfactory steps with the implementation of arrangements for central counterparties and trade repositories, according to the progress report published by the International Organization of Securities Commissions (IOSCO) and the Committee on Payments and Market Infrastructures (CPMI).
The report notes that the principles have been implemented in a complete and consistent manner in Japan, and all relevant policies have been adopted by the Financial Services Agency (FSA) and the Bank of Japan (BOJ), the two authorities responsible for the supervision and oversight.
However, there have been some issues. For example, the FSA has gone beyond the basic requirements and incorporated the principles into its supervisory framework. However, the report noted that the guidelines do not always reflect those of the principles and there were gaps. This was down to the idiosyncrasies of the Japanese regulatory regime and the structure and practices of the country’s financial markets. The concern was that this may result in ambiguous supervisory expectations for central counterparties and trade repositories.
The report recommended that the FSA should address that – which the regulator subsequently has promised to do.
Source:
Press release: http://www.iosco.org/news/pdf/IOSCONEWS370.pdf
