Editor's Note It's getting complicated out there. The methodical pace of global capital markets regulation is getting a jolt of adrenaline as we head into the last few weeks of 2011 with the Eurozone in full-fledged crisis mode. Will the ECB step in more aggressively to shore up sovereign debt? What's in store for the European Union and the Euro?
As we all wait on pins and needles for a resolution of some kind, regulatory reform is in the crosshairs of virtually every market participant, legislator and regulator around the world. In the US, the Senate Banking, Housing and Urban Affairs Committee metTuesday to evaluate the progress of the Wall Street Reform Act. In Europe, fund managers have started to lobby against MiFID II suggesting that the new directive will reduce liquidity and increase trading costs. And pretty much everyone has an opinion on the impact of ongoing reforms on market structure.
In the news and commentaries below, we share the latest perspectives from around the industry as we head into what is sure to be an interesting 2012. |
   | Dealers Fret Over Who Pays CCP Default TabDec. 5, 2011 (Financial News) -- The rise of mega clearing silos amid new regulation has raised issues about the mutualisation of risk, and the extent to which dealers will be liable following a major default. Last week, the Bank of England's UK Financial Stability report warned that the increasing use of central clearing counterparties is increasing financial stability risks in the event that a clearing house should fail. MORE >> Good Intentions, Bad Results in Europe?Dec. 2, 2011 (Securities Technology Monitor) -- The second iteration of the European Markets in Financial Instruments Directive is supposed to fix what was wrong with the first version, adopted in 2007. The first edition was intended to increase competition among trading venues and visibility into prices. It accomplished the first goal by generating a whole lot of alternative trading platforms to rival incumbent exchanges. But it didn't exactly accomplish the second and there are lots of new players following disparate policies. MORE >> Senate Committee to Assess Progress of Wall Street Reform LegislationDec. 2, 2011 (The Hill) -- The Senate Banking, Housing and Urban Affairs Committee on Tuesday will continue assessment of progress on the implementation of Democrats' Wall Street Reform Act 18 months after President Obama signed it into law. Chairman of the Securities and Exchange Commission Mary Schapiro will act as a key witness of that hearing. Expect Republicans on the committee to argue that regulations resulting from of the legislation are impeding economic progress and prolonging the recession. MORE >> Wall Street, CFTC Face OffDec. 2, 2011 (Wall Street Journal) -- Critics of last year's Dodd-Frank financial-overhaul law are taking their fight to the courts, after first lobbying lawmakers and then regulators to push back a rule aimed at curtailing bets in commodities markets. Two Wall Street trade groups-the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association-on Friday filed joint lawsuits against the Commodity Futures Trading Commission. The groups are seeking to throw out the rules creating new limits on traders' speculative positions or for regulators to be forced to justify the necessity of the rules before they go into effect. MORE >> What If a Clearing House Failed?Dec. 2, 2011 (Wall Street Journal) -- Clearing houses may be the next too-big-to-fail institutions. These circuit-breakers of the financial system weathered the collapse of MF Global and Lehman Brothers, and clear trillions of dollars of transactions every day. But they are about to take on a lot more risk, and there is no plan in place to deal with a big player failing. That should set alarm bells ringing. Clearing houses play a crucial role in markets from equities to derivatives, stepping in between two parties in a trade to guarantee payment if either side reneges. To protect themselves against the risk of default, they require their members-banks and brokers-to be well-capitalized, to deposit collateral and to pay into a default fund. LCH Clearnet, Europe's largest independent clearer, notes its fund has never been tapped. U.S. clearer FICC estimates its government debt arm could withstand the failure of its largest member. MORE >> Futures Firms Face Tougher RulesDec. 2, 2011 (Wall Street Journal) -- Futures firms would be sharply restricted in how they treat their customers' cash under new rules a federal agency is expected to approve Monday, marking the first regulatory shift in response to the recent collapse of MF Global Holdings Ltd. If approved, the changes would represent a change in course for the Commodity Futures Trading Commission, which set aside the proposal earlier this year amid heavy lobbying by MF Global's then-chairman, Jon S. Corzine, and others in the futures industry. MORE >>  Posted on Mon, Dec 05, 2011 @ 11:01 AM Swap Execution Facilities: Road to NowhereWho said that a philosophy degree would be useless in the real world? A new report from Aite Group showcases the merits of a liberal arts education while also tackling the shortcomings of Dodd-Frank's prescriptions for OTC derivatives. In summarizing the report findings, Aite senior analyst and co-author of the report John Jay explains: MORE >> Posted on Fri, Dec 02, 2011 @ 09:23 AM Europe's Financial Transaction Tax: Viable Solution or Hubris?The debate over the financial transaction tax in Europe has become a war of words and half-truths steeped in politics and nationalism. In conversations with market participants, we have heard everything from evacuation planning to the occasional brush-off to belief that a small tax of some sort to help regulate the markets would be beneficial. MORE >> Posted on Tue, Nov 29, 2011 @ 08:14 AM The Bullishness of the Ongoing Onslaught of RegulationRumors continue to emanate from Brussels that European regulators intend to parse out legislation in their attempt to seal off market abuse. Meanwhile, in the U.S., regulators fear they will be so starved of money that they won't be able to do their job under the expanded scope of Dodd-Frank. MORE >> We have compiled a directory of thought leaders playing important roles in the OTC derivatives regulation debate. The list includes US and EU regulators and legislators who have submitted bills or influenced their direction, academics who have published articles about the industry and analysts who have commented in the press or written reports about OTC derivative regulatory reform. We believe that these industry leaders are many of the people to watch for input and opinion on the market. MORE >>January 24th 2012 New York City
Much like the regulatory framework, DerivAlert will continue to evolve in 2012. We're interested in learning which topics you are most interested in, please send content suggestions toinfo@derivalert.org.
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