Well some of the Big banks granted two-year phase in to meet Dodd-Frank rule to wall off swaps, as the phase 2 commenced from June 10th 2013.
The shift towards OTC clearing is a huge collective undertaking for clearing houses, clearing firms and buy-side clients. The use of a CCP is a mutualised risk model that shifts the market away from what were exclusively bilateral arrangements – under master agreement and credit support annex (CSA) – to one where both the FCM (as a clearing house member) and the client will be required to post margin into the CCP. It is a radical departure. Many are still coming to terms with the concept that all derivative contracts like IRS and CDS (and not only interdealer ones) will now have to be cleared with initial margins and variation margins based on the mark-to-market’s daily fluctuations, just like exchange-traded derivatives. Continue reading “Collateral Management will take Paradigm shift under Dodd Frank & EMIR”
SimCorp Survey -released the findings of a poll conducted in March. Respondents included nearly 60 executives from 34 capital market firms from around the world.Results show that 53% of capital markets respondents are not ready to centrally clear interest rate and credit default swaps.
With regulations like Dodd-Frank and EMIR aiming to increase transparency and market efficiency in over-the-counter (OTC) derivatives trading, the poll asked respondents whether or not their firms are ready to centrally clear interest rate swaps (IRS) and credit default swaps (CDS). While 41% answered yes, a 53% majority answered no. Continue reading “The Capital Markets are not ready for Central Clearing”
In a recently concluding submit at Risk‘s OTC Derivatives Clearing Summit in New York. Representatives from Goldman Sachs argued that :
“Regulators want capital and margin rules to encourage central clearing, but analysis suggests costs may currently be higher in the cleared world”
So what does he mean let’s try to look at the existing capital and margin rules may not encourage market participants to centrally clear their over-the-counter derivatives trades. The capital regime for both cleared and uncleared trades is still unsettled, as is the margin regime for transactions that remain bilateral, but regulators are keen to ensure the framework pushes trades towards central counterparties (CCPs). As things stand,costs may be higher in the cleared world, particularly for market participants that have a directional book of trades. Continue reading “Central Counterparties Banks argues Clearing incentives – are not there :”
Have done a series of post on the US regulations Dodd Frank time now to share some thoughts on the EUROPE region.
The “European Market Infrastructure Regulation,” known as EMIR, was adopted on July 4, 2012, as the Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (EU 648/2012), and took effect in all EU Member States on August 16, 2012. As an EU Regulation, EMIR is effective in EU Member States without the need for national regulations or legislation.
The EMIR regulatory framework is made up of Regulation EU 648/2012 (the “Regulation”) and several European Commission Implementing Regulations and Delegated Regulations which set out technical standards addressing matters of detail under the Regulation. The Implementing Regulations and Delegated Regulations were published in the Official Journal of the European Union on February 23, 2013, and became effective on March 15, 2013. Continue reading “OTC Derivatives Regulations – Focus Europe”
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”