The Global rules for the OTC derivatives have been implemented in the US and are imminent in Europe that will have significant long-term implications for how hedge funds, asset managers and regional banks execute, clear, and report their swap positions.
Jack Callahan Executive Director of OTC products and services at CME Group shared some of his views reading between the lines as second phase of the OTC clearing mandate that is required under the Dodd-Frank legislation. This means that those firms defined as part of Category 2 (hedge funds, asset managers and regional banks) that trade swaps must move very quickly to finalize central clearing arrangements. Continue reading “PHASE – 2 SWAPS CLEARING FOR DODD-FRANK”
At the annual general meeting of the International Swaps and Derivatives Association in Singapore concluded
yesterday,a group of panelists highlighted the lack of clarity over resolution for failed Central counterparty (CCPs) as a significant concern for the G20 objectives of eliminating systemic risk.
Central counterparty clearers stand to be the next “too-big-to-fail” institutions and could pose an acute threat to the
financial system if regulators stall on plans to manage the potential failure of a clearing entity.
There are two main processes that are carried out by CCPs: Continue reading “Derivates : The Risk is shifting to CCPs”
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”
Looking at the current market scenario and the past these are very common lines from the sales team of the various
Financial firms and let’s try to observe what is the reality behind those statements :-
Statement: As a Leading dealer with a global platform, we are the major player in the market.
Translation: We have spent a fortune to build this business and are now prepared to spend millions more subsidizing your requirements.
Statement: We have one of the most talented teams in this space.
Translation: Our staff are vastly overpaid and on huge guaranteed bonuses. Continue reading “More from the World of Derivatives”
The straightforward strategy of buying companies that have recently been spun off from their parent has generated very
good results. The forces of divestiture and conglomeratization eternally wrestling with each other like gravity and energy in the cosmos.
How about this for a rational explanation:
Spin-offs generally result in more “pure play” stocks which then become more accurately valued in the marketplace. When the pre-spun-off business are tied Continue reading “Spin-offs and value creation”