New guidance from the main US regulator of privately negotiated derivatives is set to test the business models of interdealer brokers, who have long played a crucial intermediary role between global banks. FT: CFTC to Shake Up US Swaps Trading Market.
Though it seemed for a while that the US/EU’s ‘path forward’ agreement on substituted compliance might have simplified OTC compliance for the markets, when it came to writing the rules the SEC and CFTC have somehow managed to make the definition murkier than ever. This is fuelling concern on an international level, and bringing huge uncertainty to global markets. So what do we know, and what do we not know?
In recent speeches at the Yale Club in NYC (Bart Chilton) and the OpRisk Europe Conference in London (Scott O'Malia) gave a very different view on how they see the cross-border derivatives rules guidance progressing.
Things are moving fast in US and the first FCM has completed its production testing with CreditLink. One of the fundamental points of CFTC regulation 1.7 provides that clearing firms and buy-side firms should be able to ensure certainty of clearing acceptance by their clearing member at the time of execution and this service offers them the ability to manage trading and clearing limits in low latency for interest rate, credit and foreign exchange (FX) swaps.
A dual track system to pave the way for a new benchmark tied more closely to objective data? At least this is what Martin Wheatley, the UK regulator leading efforts to reform the London Interbank Offered Rate, has told the Financial Times. On the other side of the Atlantic however, this idea would not seem that appealing as US regulators push for “prompt” switch to transaction-based rates.