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EMIR’s burning question: How risky are OTC derivatives CCPs?
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19 Aug
2013

EMIR’s burning question: How risky are OTC derivatives CCPs?

  • 19th August 2013
  • RegTechFS

By Dr David Murphy No financial institution likes to remind its clients that it might fail, so it is no surprise that OTC derivatives clearing houses don’t heavily advertise their risks.  But they are risky.  A clearing house could fail in at least three different ways: 1) One or more clearing members could default, and Read More

15 Aug
2013

Banking divorce: Are you preparing for the UK’s Banking Reform Bill?

  • 15th August 2013
  • RegTechFS

The implementation of the UK’s Banking Reform Bill (BRB), covering the ring-fencing of retail banks, is taking shape, and it looks like we are headed to the family courts, dear.  We see three main kinds of requirements: 1) KYC and due diligence requirements, linked to identification and transfer of core and non-core deposits; 2) restructuring Read More

15 Aug
2013

Dodd-Frank vs. EMIR: The reality of substituted compliance

Millions of hours have already been spent aligning Dodd-Frank and EMIR implementation in the OTC space.  However, in July, regulators changed the game.  By declaring certain sections of Dodd-Frank and EMIR to be equivalent, they broke a worrying stalemate between the EU and US which threatened to leave US entities unable to clear through European Read More

14 Aug
2013

Spot the difference: Beware the lure of substituted compliance

On Tuesday, 13 August, the CFTC made a U-turn on a controversial issue: dual disclosure, reporting and record-keeping requirements for funds.  Having beaten legal challenges brought against plans to impose two sets of rules on funds, one set by the CFTC and one set by the SEC, the CFTC in the end backed down, saying Read More

13 Aug
2013

The domino effect: The snowballing cost of getting EMIR wrong

  • 13th August 2013
  • RegTechFS

As more EMIR deadlines approach, some regulatory positions are being reinforced, giving firms more reason to fear penalties and the growing legal stakes.  However, a delay to a reporting deadline because ‘ESMA realised that more guidance was needed given the complexity of the issue’ begs the question:  Can regulators say for certain that more unknown Read More

12 Aug
2013

The next generation: CCP waterfalls and mutuality

by Dr David Murphy. The key protection which CCPs have against counterparty credit risk is their default waterfall.  They take margin from clearing members and their clients, and default fund contributions from clearing members, and use these amounts as a bulwark against losses should a clearing member default. The different levels in the default waterfall Read More

07 Aug
2013

27 days left: We need EMIRacle to save our bacon!

  • 7th August 2013
  • RegTechFS

We are close to shutting down EU OTC trading.  A mere five work weeks from the EMIR deadline, by which banks must have classified their counterparties in order to reconcile portfolios with them, we have almost reached an impasse. Will the industry mobilise and help your local pig farmer to stay in business by enabling Read More

18 Jul
2013

The Faulty Riskometer: The IMF’s flawed risk toolkit

The IMF has released a working paper on Systemic Risk Monitoring detailing the policy options and methodologies available to regulators to accurately measure systemic risk. The problem is that, although touted as being a practical guide, none of the options given are a solution to the problem of “how can we measure systemic risk?” “The Read More

11 Jul
2013

EMIR vs. Dodd-Frank: Just choose one?

US and EU regulators have announced a ‘path forward‘ on approaching cross-border derivatives regulation that will allow firms operating internationally to comply with only one set of OTC trading requirements, rather than implementing both Dodd-Frank and EMIR. For a long time it seemed that there would be no agreement on the ‘equivalency’ between Dodd-Frank and Read More

09 Jul
2013

Here algo again: MiFID II will require your attention in 2014

  • 9th July 2013
  • RegTechFS

The new legislative package contains some surprises for those engaged in ‘risky’ trading MiFID II is almost upon us.  This month, the Council of the EU agreed their general approach, meaning that the draft of MiFID II/MiFIR is free to advance to the European Parliament.  If all goes according to the current plan, the new Read More