Category Archives: OTC Derivatives

Countdown Begins for SEC Swap Reform Implementation

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For any of you veteran Dodd Frankers out there – drum roll! – the SEC have just published their Final Rules for the ‘Cross-Border Application of Certain Security-Based Swap Requirements’ in the Federal Register.

Five years or so ago everyone would have been all over this but I wouldn’t be surprised now if folks have completely forgotten this was ever coming and that one day they might need to register to be a Security-Based Swap Dealer and so let me explain.

Wind back the clock to 2010 when the Dodd Frank Act was signed into legislation (yes, it really was that long ago) and you may recall that Dodd Frank divides regulatory authority of swap reform between the CFTC and the SEC – unhelpfully, there is no one-stop-shop like there largely is with ESMA and EMIR. Continue reading →

‘Equivalence’ – The Key To Global OTC Swap Reform

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When I first delved into EMIR back in 2012, the importance of ‘equivalence’ didn’t even cross my mind, least of all how the global bit of all this OTC swap reform was going to play out.

Given the complexity of what had just landed in your lap, why would it?!

A year or so down the road, being older and wiser, the penny dropped about the global bit and I wrote about it in a blog in October 2013 that considered the true scale of global OTC swap reform.

Gloabl Equivalence Continue reading →

EMIR – Aren’t We Done Yet?

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“Haven’t we finished EMIR?”

“I mean, 2012, that stuff is 3 years old right?”

And so my meaningful conversation in the pub went on, but the truth is, in terms of what’s in place and actually up and running, we’ve really only just scratched the surface and I felt compelled to explain why.

As a Consultant, your high-level analysis doesn’t get much higher than a Road Map (other than your pub analysis of course! 🙂 ) but for EMIR and European OTC derivative reform, we can go one step better and wind back the clock to the September 2009 G20 Summit in Pittsburgh, where one short statement changed the World forever for OTC derivatives:

“All standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest. OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements.” Continue reading →

The True Scale of Global OTC Swap Reform

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When the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank) was passed back in July 2010, you could be forgiven for thinking that this was the regulation for global OTC swap reform. The US really were ‘first-to-market’ on this one, by a long margin, and we didn’t hear about OTC swap reform from other parts of the globe for the best part of another two years.

Skip forward to August 2012 when the European Market Infrastructure Regulation (EMIR) was passed – the European equivalent of Dodd Frank’s Title VII – and the penny started to drop that this was unfolding to be a far bigger initiative than many folks had first thought.

Now, if you had asked me earlier this year “was there life outside of Dodd Frank and EMIR”, I would have said yes and I could have told you that Canada and Australia had their own OTC swap reform programs, and that Hong Kong and Singapore were also looking to do something.

But that was about it.

It was only when I started digging deeper, that I realised how far off the mark I was. I mean, I only forgot Japan – the third biggest economy in the world – and I know they trade swaps out there for sure! Continue reading →

Extraterritoriwhat?!

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“Extraterritoriality”.

When I first came across this term last year, I couldn’t even spell it, let alone tell you what it meant, but in today’s complex world of regulatory change and OTC swap reform it’s kind of important to understand.

So what’s it all about?

If you look it up in the dictionary, you get “the right or privilege of a state to exercise authority in certain circumstances beyond the limits of its territory”.

And that pretty much sums it up.

In the context of financial regulations, it means that if a country thinks that your firm or business should fall in-scope of a particular regulation, even though your firm or business may not be based in that country, then the regulatory scope to comply will be extended to include you.

The basis behind extraterritoriality is straightforward – if it wasn’t applied, the entire global financial services sector would simply relocate to a jurisdiction that didn’t bother with regulations. Continue reading →

MiFIR is Part of EMIR, Right?

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OK, second time this month I have had this “isn’t MiFIR part of EMIR” conversation, least of all the number of times I have had it this year, so let’s have a go at clearing this up.

It’s probably easier to understand how this all came about if you wind back the clock to April 2010 when CESR issued technical advice to the Commission recommending possible revisions to the Markets in Financial Instruments Directive (MiFID) that was implemented way back in November 2007.

This formed the basis of what was to be known as the ‘MiFID Review’.

The primary objective of the MiFID Review was to bring areas of the market that had escaped the MiFID net, such as broker crossing networks and dark pools, into scope, as well as update the regulation to capture market advancements in technology, such as automated trading and high frequency trading.

Now wind forward the clock, and in stumbles EMIR, which clearly had some overlap with what was trying to be achieved with the MiFID Review. Continue reading →