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CFTC

IM calculation change imminent-ish

There is mounting pressure to revisit a fundamental aspect of the IM calculation methodology. The BCBS-IOSCO 2015 framework mandates an IM determination based on a 99% VAR over a fixed 10 day liquidation horizon[1]. ISDA have published a paper by Professor Rama Cont, Chair of Mathematical Finance at Imperial College London, which advocates for a […]

The blog post at DRS comments on the paper from the CFTC that fundamentally revisits how risk is measured and managed in the uncleared market. Worth a read, Bill.

The OTC Derivatives Market Size is about to shrink via a CFTC proposal

We all know using notionals to measure the size of the OTC market leads to crazy headlines, so the CFTC has a cunning plan for that

The CFTC Roadmap and Christmas 2019

On Monday the 10th of July the CFTC published this roadmap that gives a view of the trail leading to Christmas 2019. It might only be the start of Q3, 2017 but this ten-page document means we can take a sneak peek under the tree and see what the 2019 Christmas pressies contain.

The CFTC Grants a No-action Letter Giving 6 Months to Comply with Uncleared Margin Rules

Six months to comply for US regulated firms

Cross-border Overreach

Those of you who have come to an ISDA conference, read our comment letters or, indeed, read this blog over the past several years know that cross-border harmonization matters a lot to us and our members. The derivatives markets are global, and end users have been able to benefit from tapping into a single, global liquidity pool when putting on their hedges. Split that single pool into multiple liquidity puddles, each distinct from the other, and end users face less choice, higher costs, and a lower chance of executing large-sized trades, particularly in stressed markets.

The CFTC Argues With Itself Over the Bilateral Margin Rules

It amuses me that the CFTC Commissioners publicly criticize their own organisation, on their own website. Sort of like kicking yourself up the backside shouting "idiots idiots" at the same time. Anyway, read the update from Commissioner Giancarlo below who expresses the mismatch in regulatory timing on the bilateral margin rules, original here.

Chaos to Clarity - The CFTC STP 10 Minute Rule

In keeping with my passion and theme of 'Chaos to Clarity', I want to decode CFTC's Straight Through Processing (STP) 10 minutes rule which has gone into effect on August 1, 2016.

OTC Derivatives Regulatory Reforms and the changing role of Middleware platforms

In response to the financial crisis that began in 2008, the leaders of the Group of Twenty (G20) nations agreed to a series of measures following concerns about systemic risks in over-the-counter (OTC) derivatives markets. The financial Stability Board (FSB) tasked with revamping the system initiated steps ranging from transparency of the over-the-counter (OTC) derivatives market, protecting against market abuse and mitigating systemic risk.

Targeted clearing mandate exemptions could reduce systemic counterparty risk

With regard to systemic counterparty risk reduction the bank regulators' minimum capital, liquidity reserve and margin levels are a major incentive.  The current fine-tuning debate and regulatory rule adjustment are understandable given the financial implications.  

By contrast the lack of discussion of clearing mandates might imply they are a straight systemic counterparty risk win through promotion of consolidation, netting and margining in CCP facing portfolios.  Unfortunately it is not that simple - clearing mandates also entrenching bilateral counterparty risk by limiting key risk reduction techniques.

Here I explore these limitations and suggest some solutions.

The Swiss franc blip: time FX leverage limits moved from flat percentage to risk-based?

The dust has settled from the initial fall out from retail brokerages going out of business as a result of the SNB's abrupt removal of the CHF vs EUR peg several weeks ago.  

So I think it's time to ask a deeper question - does it make sense to use risk-based margins in retail FX proprietary trading?   After a quick review I can't see a good reason why not.

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