Dodd-Frank Trade Reporting isn’t coming … it’s here. February 28, 2013 was the date that Major Swap Participants (MSPs) were required to begin reporting equity, foreign exchange and other commodity swaps. And this is just the beginning of a series of milestones in the regulation that was designed to prevent future “too big to fail scenarios,” such as what occurred during the Global Financial Crisis of 2008. But, there is a bigger story here around regulation and compliance and how IT is used to ensure transparency, accuracy and accountability in reporting.
Regulation, Regulation and more Regulation
While Dodd-Frank is a U.S. regulation under the supervision of the Commodities Futures Trading Commission (CFTC), any financial institution doing business with a U.S. bank will need to comply. Continue reading “The Dodd-Frank Reporting”
Single Dealer platform a financial forum asked a very logical question to CFTC Has CFTC given too much power to SEFs ?
Last week the CFTC passed the key rules that will govern how OTC derivatives will trade under the new Dodd-Frank regulatory framework.
By so doing, the CFTC has in effect devolved/transferred many important decisions regarding ‘where, and when’ swaps will trade over to the new market infrastructure and trading venues themselves, but will this give too much power to new trading venues?
One of the major rules that was passed, govern when a swap is ‘made available to trade’, or (MAT). This rule will determine which swaps are required to trade on Swap Execution Facilities (SEFs) or Designated Contract Markets (DCM). Continue reading “SEF Swap Execution Facilities or SEFbitrage”
Regulators of several countries, including the United States Commodity Futures Trading Commission (CFTC), have
introduced or proposed rules requiring clearing of over-the-counter (OTC) derivatives through central counterparties. Clearing requirements in turn affect margin requirements, which are one key mechanism used by parties to mitigate counterparty risk. Although clearing rules help shield collateral from the insolvency of the secured party, they also may substantially increase financial and operational costs for the users of cleared derivatives because of the higher margin delivery requirements applicable to such transactions. Continue reading “MARGIN COSTS OF OTC SWAP”
The Bank of England has just released a new paper titled “High-frequency trading behaviour and its impact on market quality: Evidence from the UK equity market” . The paper is similar to the recent Kirilenko study in that it separates ‘aggressive” and “passive” high frequency traders and it uses data which identifies the counterparties of each transaction.
Before we get into some of the specifics of the paper, it’s important to note how the Bank of England defines HFT:
“The term “HFT” is generally used Continue reading “High Frequency Trading”
Few days back I did the post on OTC Derivatives Market And Reform with the intentions that over-the-counter (OTC)
derivatives market is like a rigged poker game. They picture a smoke-filled room, in which unsuspecting clients are mastered by skilful opponents at investment banks known, perhaps appropriately, as dealers. Now regulators are trying to move more of the game into the open, by shifting OTC derivatives trades onto exchanges or electronic platforms by the end of this year, a target agreed on by G20 leaders in 2009.The dead line is unlikely tobe met Continue reading “Derivatives Known and Unknowns plus Regulators”