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Advancing on Netting

Last week at our Annual General Meeting (AGM) in Hong Kong, we published the results of a new ISDA survey that highlighted the potential for growth in Asia’s derivatives markets. The region’s share of global trading in both FX and interest rate derivatives is widely expected to increase, with Singapore and Hong Kong being the largest regional hubs.

An Important Milestone

Last week, we published a proposal to amend the ISDA Credit Derivatives Definitions to address narrowly tailored credit events, often referred to as manufactured defaults. No matter what you call them, we think this behavior is not healthy for the credit default swaps (CDS) market.

Tackling the IM Challenge

Let’s start with the good news. The Basel Committee on Banking Supervision (BCBS) and the International Organization of Securities Commissions (IOSCO) last week published a statement highlighting that counterparty relationships that fall below an initial margin (IM) exchange threshold aren’t obliged to meet documentation, custodial or operational requirements.

A Solution for the IM Big Bang

With everything else going on, it’s tempting to shove something with a September 2020 deadline to the back of the line. That’s not an option when it comes to initial margin (IM) requirements. With over 1,100 small firms expected to come into scope, each needing to put IM documentation and systems in place, an early start on compliance efforts will be critical. Even then, the industry faces a very real capacity challenge.

Our Solutions to Fragmentation

Despite all of the accomplishments in making derivatives markets, safer, more robust and more efficient over the past 10 years, there’s one important area that still needs a lot of work: avoiding fragmentation of markets. That’s because the regulatory reform efforts have too often differed in scope, substance and timing across jurisdictions.

It’s All About the Risk

If you want proof that big changes have occurred in the derivatives market, look no further than our regular SwapsInfo trading statistics. The latest figures show that 88% of interest rate derivatives trading volume reported to US swap data repositories was cleared in 2018.

A Predictable Regulatory Framework

Over the past 10 years, a remarkable event has occurred in the world’s political and financial capitals. Policy-makers embarked on a largely consistent agenda of regulatory reform to make derivatives markets more robust and resilient. That global reform initiative is now mostly in place, but there are a number of challenges on the horizon, including Brexit, which must be overcome before all the pieces fall into place.

Hard Brexit Relief Welcome, But Detail Needed

There have been some recent positive signals from European Union (EU) authorities that action will be taken to mitigate disruption to EU 27 participants in the event of a hard Brexit. In particular, European officials have indicated that EU 27 firms will be temporarily able to continue accessing UK central counterparties (CCPs) following a no-deal scenario.

A Solution for Consistency

Earlier this year, when testifying to a US Congressional committee, I proposed a holistic solution to the lack of harmonization between Commodity Futures Trading Commission (CFTC) and Securities and Exchange Committee (SEC) rules.

A Solution for Consistency

Earlier this year, when testifying to a US Congressional committee, I proposed a holistic solution to the lack of harmonization between Commodity Futures Trading Commission (CFTC) and Securities and Exchange Committee (SEC) rules.

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