Tag: margin rules

margin rules

CFTC Votes to Provide Greater Brexit Certainty

The Commodity Futures Trading Commission (CFTC) has passed by unanimous vote, a provision to provide greater certainty to the global marketplace in the event of a “no-deal Brexit” precipitated by the withdrawal of the UK from the European Union without a negotiated withdrawal agreement.
“At a time of heightened market uncertainty caused by Brexit, this Commission has worked over the past several weeks to bring clarity to participants in global derivatives markets by a series of separate actions and statements with its regulatory counterparts in London, Brussels and Singapore,” says CFTC chairman Christopher Giancarlo.

Regulation Forces FXPBs to Reinvent

It’s no secret that recent regulatory requirements have put FXPB business models under increased pressure. But some firms also see regulation as an opportunity to change how their businesses operate in order to win new business, as Galen Stops reports.

When questioned about the extent to which a combination of the Basel III regulations and the SNB
event had caused a contraction in the FXPB space, there was some pushback from certain service providers.

“I think that there’s a misperception that there has been a wholesale contraction in the FXPB space,” says John O’Hara, global head of FXPB and FX clearing at Societe Generale.

ISDA: Time Ticking on Margin Deadlines

The new variation margin deadlines still pose a substantial challenge to financial services firms, despite the “substantial progress” that many of these firms have made in their compliance efforts, according to Scott O’Malia, CEO of the International Swaps and Derivatives Association (ISDA).

The variation margin requirements came into effect for swap dealers on March 1, 2017, but the Commodity Futures Trading Commission (CFTC) issued a no-action letter in February, which stated that it would not enforce the new rules for the first six months after this date.

TriOptima Responds to Rules with New Analytics Service

TriOptima has added margin valuation adjustment (MVA) analytics to its triCalculate X-Value Adjustment (XVA) service.

MVA calculations determine the lifetime costs of posting initial margin as part of the pricing of an OTC derivative.

TriOptima says that the introduction of an MVA service addresses the needs of firms subject to new initial margin rules for OTC derivatives, which affect both cleared and non-cleared trades.

Pricing trades correctly is critical to ensuring accurate credit risk, counterparty exposure and funding management. While the posting of initial margin has always been a part of the central clearing process, the new rules mandating the posting of initial margin for non-cleared OTC derivative trades are being phased in from this year through 2020 and will affect a wide range of market participants.

Firms will be able to use triCalculate in order to generate independent trade and netting, set level XVA calculations, as well as risk sensitivities. They can access the platform to check the MVA implications of a trade before execution without delaying trading activity.

CFTC Extends the Runway for Margin Rule Compliance

The US Commodity Futures Trading Commission (CFTC) has issued a no action letter stating that it will not enforce the variation margin requirements that come into effect for swap dealers (SD) on March 1 for six months.

The CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) has issued a time-limited no-action letter stating that, from March 1, 2017 to September 1, 2017, it will not recommend an enforcement action against an SD for failure to comply with the variation margin requirements for swaps.

CFTC Offers Extension for Margin Rule Compliance

The US Commodity Futures Trading Commission (CFTC) has issued a no-action letter, providing relief for swap dealers from having to comply with margin rules due to go into effect on February 4.

The CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) says that it will not recommend enforcement action against swap dealers (SDs) that are subject to the margin requirements for non-centrally cleared OTC derivatives in the European Union (EMIR RTS) or for failure to comply with the CFTC’s final margin rule (Final Margin Rule).

Margin Deadline Could Lead to Swaps Market Disruption

The swaps market could suffer disruption if buy side trading firms aren’t ready for the March 1 deadline for the implementation of new margin requirement rules, speakers at SefCon VII warned.

Although buy side firms will not have to post initial margin for uncleared swaps transactions until 2019 or 2020, from March 1, 2017 they will be required to post variation margin when trading these products.

The main challenge highlighted by buy side speakers at the SefCon VII conference in New York on January 18 was the administrative burden of having the correct paperwork and documentation agreed with various counterparties.

Giancarlo Pledges to Ease Margin Deadline

Christopher Giancarlo, soon to be acting chairman of the US Commodity Futures Trading Commission (CFTC), says that the commission will look at ways to ease the March 1 deadline for the new margin requirements for uncleared swaps.

These requirements will make posting variation margin compulsory for all non-cleared derivatives, and set strict requirements on the type of collateral that can be posted, the frequency of the margin calls, and the required timing for settlement.

When current chairman of the CFTC, Timothy Massad, steps down from his role on January 20, Giancarlo will become acting chair and, speaking at the SefCon VII event, which was organised by Profit & Loss, in New York yesterday, he was critical of the March 1 deadline for the new margin rules.

FX Industry to Face Deadline Challenges in 2017

FX market participants face numerous challenges next year in adhering to regulatory deadlines, according to experts on a recent Profit & Loss webinar.

One of the more immediate regulatory deadlines that firms are currently preparing for is on March 1, 2017, when the new variation margin requirements for non-cleared derivatives come into force.

But as Gabriel Rosenberg, a partner at Davis Polk pointed out, there are a number of factors within these requirements that are making them difficult for firms to comply with, even in instances where they are already exchanging variation margin with their counterparties.

FX Regulation: What Traders Need to Know

As 2016 comes to a close the regulatory agenda shows no signs of slowing. While the FX market itself has largely not been directly addressed by new regulations, it has been swept up in many of the broader OTC market reforms.

March 1 will mark the implementation of the variation margin requirements for non-cleared derivatives, meaning that thousands of counterparties – including asset managers, pension funds, insurance companies and hedge funds – will need to change their existing collateral support agreements, or set up new ones, before this date.