Welcome to the Cleared Swaps World – Sign Here, Please

Welcome to the Cleared Swaps World – Sign Here, Please

http://tabbforum.com/opinions/welcome-to-the-cleared-swaps-world-sign-here-please?utm_source=TabbFORUM+Alerts&utm_campaign=1bcb918626-UA-12160392-1&utm_medium=email&utm_term=0_29f4b8f8f1-1bcb918626-271568421

The final wave of the swaps clearing mandate will hit in September. But entering into a clearing agreement doesn’t mean swaps trading will be risk-free, as CCPs hold the potential to be an extraordinarily risky part of the market.
As the last customer types prepare for the clearing of swaps in September, people are becoming more aware of the implications of clearing agreements and the relationships among the customer, his FCM and the CCP. However, there are a few reasons to be particularly careful in executing clearing agreements.

As a bit of background, the requirement to use CCPs actually serves to concentrate counterparty risk, at least for large players. Imagine a swap dealer (SD) that has $100 billion in exposure to 1,000 separate counterparties, converting that to $50 billion in exposure with each of two CCPs. Clearly, there has been a significant concentration of risk. Not a problem if the CCP is risk free; but a potential problem if it isn’t.

[Related: “A Familiar Model Emerges for Swaps”]

Now let’s look at the market – not the market for swaps or even clearing services, but the market for CCPs themselves. If a significant number of CCPs are chasing a finite volume of clearing, we might expect them to find ways to compete. One of those ways might be in initial margin, particularly on bespoke products. This “race to the bottom,” if it surfaces, could easily make CCPs an extraordinarily risky part of the market.

Finally, we need to understand the nature of financial panics. They always begin as muffled rumblings in the distance – trouble for someone else but not for us. Then the trouble spreads, and the market starts buzzing with rumors. At some point, the trouble reaches a tipping point, and everyone rushes to get out. At that point, it may be too late to save anyone’s bacon, no matter whom they clear through.

What IOSCO/CPSS Says

In light of all this, the International Organization of Securities Commissioners (IOSCO) and the BIS Committee on Payment and Settlement Systems (CPSS) have jointly issued a consultation document they call “Recovery of Financial Market Infrastructures.” In the introduction they say, “‘Recovery’ concerns the ability of a Financial Market Infrastructure (FMI) to recover from a threat to its viability and financial strength so that it can continue to provide its critical services without requiring the use of resolution powers by authorities. Recovery therefore takes place in the shadow of resolution.” In other words, this document addresses the worst of all worlds for market participants.

The report spends the first 10 of its 23 pages talking about recovery planning, certainly an important requirement. But then the report gets into recovery tools, and here’s where it really gets interesting. In Section 3.2 the report says, “FMIs can be exposed to legal, credit, liquidity, general business, custody, investment and operational risks. … The manifestation of the risks may have different causes and may also result in different types of failure scenarios.”

But the most startling section of the report is Section 3.5, “Tools to allocate uncovered losses caused by participant default.” This gets into the very difficult subject of who pays when a large default exhausts the CCP’s resources. Things get really interesting in Section 3.5.14, where the report says:

“An important example of a position-based loss allocation recovery tool is variation margin haircutting by CCPs. When haircutting variation margin, the CCP reduces pro rata the amount it is due to pay participants with in-the-money (net) positions, while continuing to collect in full from those participants with out-of-the-money (net) positions… Where a CCP does not have a direct contractual relationship with indirect participants (ie clients of direct participants [or customers of FCMs]), the impact on such indirect participants will depend upon their contractual arrangements with their respective direct participants.”

So if you have a winning position with the wrong CCP – one that might clear for a big loser or two – you might not get some of your winnings.

The final wave of the swaps clearing mandate will hit in September. But entering into a clearing agreement doesn’t mean swaps trading will be risk-free, as CCPs hold the potential to be an extraordinarily risky part of the market.
And this vulnerability isn’t restricted to VM. In a paragraph that has garnered lots of publicity, Section 3.5.19 says:

“Initial margin haircutting could be limited to the initial margin of direct participants. On the other hand, the tool could be applied to the margin of all participants (direct and indirect) providing this is consistent with the laws and regulations to which the CCP is subject and the rest of the CCP’s rules. Like variation margin haircutting, even where the CCP applies margin haircuts only to direct participants, the contractual arrangements between direct participants and indirect participants may cause the haircutting to have an impact on indirect participants.” (Emphasis added)

So if a market participant has a winning position, but clears at a CCP that is in trouble, not only could the market participant’s VM be withheld, its IM could also disappear into the financial black hole. Not a pretty thought!

Some Legal Advice

So it is especially welcome that attorney Sherri Venocur has written an informative article called, “What Customers Should Look Out For in FCM Clearing Agreements.” In one section, she cautions:

“Section 724(a) of Dodd-Frank restricts an FCM’s use of its customer’s collateral and specifies the instruments into which an FCM may invest its customer’s collateral. Nonetheless, most Clearing Agreements give the FCM the right to rehypothecate collateral and otherwise to deal with it as though it were the FCM’s own property… Thus, customers should push for the inclusion in the Clearing Agreement of a provision containing language similar to that in the proposed rule, and it would seem unreasonable for an FCM not to agree to include it.”

Another point Ms. Venocur makes is that banks that are FCMs often have many affiliated entities that perform related functions, such as trading, lending, or money transfer. A clearing customer may have relationships with some of those affiliates, so, she says:

“It is most important for the customer to understand the possible consequences of [any] cross-affiliate provisions in light of the customer’s particular circumstances. To that end, the customer should: (i) review the customer’s existing relationships with the Bank and inquire about anticipated future relationships; (ii) review all documents relating to such relationships; and (iii) based on this review, (A) understand what actions the Bank can take with respect to the customer or its property in the event the customer defaults or another circumstance occurs that gives the Bank the right to take certain actions (either specified or described broadly in the documents) and (B) understand what remedies are available to the customer in the event the Bank breaches its obligations under its various agreements with the customer or the customer otherwise wishes to terminate one or more relationships with the Bank.”

In conclusion, Ms. Venocur says:

“The implementation of Dodd-Frank and the regulations promulgated thereunder marks a radical change in the way OTC derivatives are executed, documented and implemented. While ISDA Master Agreements continue to be required, customers also need to execute Clearing Agreements with FCMs so that they can enter into derivative transactions that are subject to the mandatory clearing requirement. It is essential that customers understand the risks within Clearing Agreements and negotiate these agreements with their FCMs in order to reduce or at the very least, to manage, such risks.”

Technology, Transparency and Choice Drive Buy Side’s Investment in U.S. Options

Technology, Transparency and Choice Drive Buy Side’s Investment in U.S. Options

Technology, Transparency and Choice Drive Buy Side’s Investment in U.S. Options

Volumes in the options market are estimated to increase by more than 5 percent as electronic trading fuels access to the U.S. marketplace.
The U.S. market for exchange-traded options took off during the past decade. The buy side is increasingly looking at options as instruments to hedge risk exposure and generate alpha, according to TABB Group’s recent report on the state of the U.S. options markets. In fact, TABB estimates that volumes will increase by more than 5 percent by year-end, even as market volatility wanes. So what is continuing to fuel growth in the options markets?

[Related: “Buy Side Is Getting Smarter at Trading Options”]

Market transparency and growing adoption of electronic trading technologies are key contributing factors. The changes in regulation and increasing use of electronic trading helped raise volume an average of 21 percent a year from 2000 to 2010 on seven U.S. options exchanges. Today, the options markets are supported by 12 exchanges and electronic venues where traders can access legitimate, reliable prices and order information so they can confidently and quickly execute a trade.

While the increase in trading venues has increased competition and lowered transaction costs for investors, fragmentation has also forced continued investment in technology on both the sell side and buy side. One area of investment on the buy side is platforms that help aggregate liquidity across multiple counterparties and exchanges. To access liquidity and capitalize on momentary market opportunities, institutional investors are adopting electronic platforms that offer integrated pricing monitors, trade analytics, risk monitors, and other tools. For the second year in a row, TABB’s study found Bloomberg Execution Management System (EMSX) is the most popular electronic trading platform for U.S. options. Now, I may be biased, but what I believe this reveals is that options market participants value unparalleled technology and transparency – but they also value choice.

With trading volumes stagnant in the past few years, the buy side has also sought to balance technology and commission spend with necessary efficiency drivers. Especially among hedge funds, the desire for un-conflicted choice has fueled growth in broker-neutral electronic platforms that connect to a broad network of brokers, functionality algorithms and counterparties.

From hedge fund traders looking for an edge, to long-only asset managers that use options to manage risk, electronic trading is fueling access to the U.S. options marketplace. As the industry evolves and trading options becomes even more commonplace for the institutional investor, platforms that offer the buy side choice, access and sophisticated trading tools will succeed along with the market itself.

OTC Client Clearing – new market

OTC Client Clearing – new market
Posted on July 11, 2013 by Ravikanth Borra
With the new regulations, clearing is mandatory for OTC derivatives. Not every bank and financial and non-financial institution will become direct member of CCP clearing house because of high fees (default fund fees). So the small banks and financial/non financial participants in OTC market will be looking out and will opt for Clearing Member/Bank who will provide OTC Clearing as service, without the high membership fees.

Ultimately the banks will be looking for clearing members who can help them sail through the regulations, and not let them bother with all the additional rules. They are not looking for price arbitration, or choose a product off the shelf. Clients are buying something that is brand new and they want to know how it works, how the regulatory environment is changing, and how they’ll be affected

Thus Client clearing the new business is born, which is provided by big banks who are direct members of clearing house and who will be providing OTC clearing as service. As of today the market is in its very early stages. There is only probably max 10 firms in Europe who has the capability to provide client clearing service, but this number will grow, how large, depends on the market.

The OTC derivatives market is clearly very big (in trillions or more) and the margin requirements (will be in billions) if have to be met, the required collateral margin acceptable by CCP i.e cash/treasury if has to match with the market size will be very difficult. This will add a very tight squeeze on liquid cash available in the market to the extent that market can no longer function.

This is where the client clearing can come to help. The clearing members can be more lenient than the CCP in terms of acceptable collateral. Also clearing members can theoretically reduce the margin needs by cross netting the cleared and uncleared products. This market is very much still on paper and will be driven by the regulatory needs and the market reaction

The regulations are put on to standardize the OTC markets. The size of market dictates that all the regulations could not be implemented as desired, so either the size of market has to reduce or the market itself should find ways which is the usual case.

Client clearing market can help the OTC market to find a way to implement the regulations and at the same time allow the market to function in its operative ways. Well this is still starting and so wait and watch .

Cross-product margining arrangements

Clearing members could also charge clients less than the CCP’s minimum – an area in which some dealers are hoping to put clear water between themselves and the competition. Although CCPs will break-up offsets between cleared and uncleared products, some dealers promise to continue calculating client margin as though cross-product netting was still achievable.

There could be offsets across cleared products and uncleared products done bilaterally where the clearing broker is also acting as prime broker on bilateral trade. This is possible theoretically and so wait until market dictates the needs.

As the competition heats up over the days, probably there would be difference in the views from European banks and non European (US/Japanese). The European banks are known to conservative in their approach, and US banks may come up with new and interesting products/services.

Collateral for Margin
One more aspect where clearing brokers can help is if the clients dont have the right kind of assets required by CCP to be posted for Initial Margin purposes, probably clearing member can be more lenient, to allow collateral other than cash/government bonds.

CCP Central Clearing – Credit Risk

CCP Central Clearing – Credit Risk

Posted on July 10, 2013 by Ravikanth Borra
The basic premise of ccp central clearing is to “eliminate” the counterparty risk of the individual banks or financial entities participating in the transaction. So on the outset this looks like central clearing should make life easier for credit risk manager

However in reality we are “shifting” the credit risk from banks and non-bank financial entities to CCPs. So instead of eliminating we have created new type of risk CCP Risk concentrated with CCPs

CCPs are not central banks, neither non-profit organisations. CCPs are private-sector, profit making entities operating in competitive environment. The default of CCP is probably almost next to impossible with the kind of controls kept in place, but still there is a possibility and should be considered by credit risk team. So exposures to CCP should be measured and monitored

CCP Exposure Measures
1. Net market value of open positions
2. Initial and variation margins posted to CCP
3. Default fund contributions (funded and unfunded)

Exposure to bilateral counterparty
One important aspect that should be monitored is the the possibility of transaction to be rejected by CCP , in which case the transaction remains bilateral despite the initial intention to clear. If the rejection is because of higher exposure you have against the bilateral party, then the trade cannot be cleared. By adding checks before submitting to CCP novation would be of no help, we cannot back-out of the transaction legally now. The necessary checks should be done in pre-deal or before signing the deal with the bilateral party

Therefore it is a very important step to be added in the operational processes of banks to monitor and ensure the exposures to the different bilateral counter-parties exists under the CCP Limits, even though the trade is novated

CCP Solvency – CDO
Assessment of CCP solvency is compared similar to CDO (Collateral Debt Obligation) problem with several tranches of protection akin to CCP default “waterfall” model

Javelin OTC Derivatives Establishes Presence in Telx’s Chicago Data Center

Javelin OTC Derivatives Establishes Presence in Telx’s Chicago Data Center

http://low-latency.com/article/javelin-otc-derivatives-establishes-presence-telxs-chicago-data-center/?utm_source=weekly&utm_medium=email&utm_campaign=ll_13-06-20

Telx, a leading provider of global interconnectivity, cloud enablement services and datacenter solutions, today announced at SIFMA Tech 2013 that Javelin Capital Markets, an OTC derivatives execution platform, has leveraged Telx’s network & interconnection rich Cloud Connection Center, “CHI1” at 350 East Cermak Road, Chicago, Illinois, providing Javelin with access to Telx’s extensive Financial Services community. As a colocation and interconnection client in Telx’s strategically located data center in downtown Chicago, Javelin can now offer Telx’s financial community high-performance connectivity to derivatives execution platforms for Interest Rate Swaps and Credit Default Swaps. Javelin offers both anonymous electronic and voice-hybrid methodologies for trade execution.

Newly formed Swaps Execution Facilities (SEFs), that have emerged as aspects of Dodd-Frank become implemented, are incorporating their services in secure data center environments. Low-latency connectivity is a critical component for the OTC Derivatives market linking SEFs and Central Counterparty Clearing (CCPs). With CCPs being located in Chicago, the proximity of Telx’s CHI1 facility at 350 East Cermak provides financial customers with high-performance and flexible connectivity to Javelin as well as to other SEF engines from a single location.

“As aspects of Dodd-Frank become cemented in the financial community, the need to establish SEFs in secure environments is a crucial step for our eventual classification as a Swap Exchange Facility,” said Michael Black, MD of Infrastructure of Javelin. “Telx’s ability to provide us with access in their premier Chicago facility, and their proximity to the clearing venues, swaps execution facilities, and buy-side participants put us in a strong market-leading position to service current and future clients.”

“We are excited to have Javelin join the expanding Telx financial ecosystem in our CHI1 facility. Javelin’s secure exchange platform with a state of the art user interface is well positioned in the rapidly changing OTC Derivatives market,” said Shawn Kaplan, general manager of Financial Services for Telx. “In recent months we have seen an increasing number of trading systems turn to Telx and our CHI1 facility, most recently with the announcement of Sky Road joining Telx’s financial community. Javelin and other industry leading financial institutions at 350 East Cermak benefit by connecting with other financial institutions in the facility, which allows them to offer their full suite of services with flexible connectivity to current and future clients.”

Telx’s CHI1 facility, located in the South Loop of the Chicago Central Business District, provides customers with the financial eco-system at 350 Cermak, one of the leading financial eco-systems in the world. As the operators of the “Meet-Me-Room,” and one of the largest colocation providers at the CHI1 facility at 350 Cermak, Telx provides industry leading data center and connectivity services for the global financial community.

Attendees at SIFMA Tech 2013 in New York City can register to attend Telx’s grand opening event of its new flagship data center, NJR3 in Clifton, New Jersey on June 19, 2013 from 3:00 p.m. to 7:00 p.m. Round-trip transportation will be provided by Telx for all registered guests. The event will feature a keynote address by NFL Legend Phil Simms, along with public remarks Clifton Mayor James Anzaldi, State Senator Nia Gill, and Telx’s Executive Vice President of Engineering and Construction Michael Terlizzi. Cocktails and refreshments will be served, and tours of the new data center will be given.

 

Quadriserv, Inc. Announces Expansion Of Relationship With SunGard In Support Of Securities Lending Initiatives : SunGard To Assume Key Operational And Technological Functions : Senior SunGard Executive Joins Quadriserv’s Reconstituted Board Of Directors

Quadriserv, Inc., founded with a mission to bring efficiency, price transparency, and innovation to the equity finance markets, today announced that it has expanded its relationship with SunGard, one of the world’s leading software and technology services companies.

via Pocket http://www.mondovisione.com/media-and-resources/news/quadriserv-inc-announces-expansion-of-relationship-with-sungard-in-support-of/ May 12, 2013 at 04:00PM

Legal Segregation with Operational Commingling”, or LSOC.. Important Market Surveillance necessity

Legal Segregation with Operational Commingling”, or LSOC. – came as Directive from CFTC for FCM Clearing Members to comply with Part 22 of the CFTC Rules.

The primary goals of LSOC is to ensure Clearing Organisation (DCO) may not use the collateral of one customer to pay for an obligation of another customer. Full details of LSOC are expalined and can be read here. LSOC is definitely a boon for Clearing houses.

One consequence is that as a result of this rule FCMs now need to be liable for intraday margin calls. Regulatory requirement for FCMs to fund the margin for client positions intraday, and that is leading dealers to consider raising fees or requiring clients to pre-fund trades so FCMs do not have to post their own cash.

Intraday margin calls puts funding strain on member firms, to fund positions of the client trades they have cleared. In case the member firm is FCM, the client trades will definitely be more. Dealers estimates of the one-day funding obligation range from $4 billion to $20 billion for a single futures commission merchant. Article posted on Risk.net can be read here

This is stopping FCMs to function in regular manner and while the market is playing to rules of CCP and ensuring stability on the CCP, the funding strain added as result of this is definitely making everyone wary and market as such is stagnant.

While all this is happening on one side, on the other side “Swap Futures” the new futures created to mimic swap products will gain more clientele and even FCMs will as well try to adopt similar tactics leading to different new products. In the end the market will find its way around regulations and directives.

It would have been good if the regulation and implementation by regulatory agencies (CFTC alike) can be done in a manner so that market can adopt the rules without causing breakdown in the regular affairs.

Swap Reporting (Summary Chart of Reporting Compliance): Who and When? – courtesy of FIA

http://www.futuresindustry.org/futures-industry.asp?iss=210&a=1558

One key provision of the Dodd-Frank Act requires reporting of over-the-counter swap transactions. The Commodity Futures Trading Commission has finalized detailed regulations in this area that are being implemented in phases. This article outlines the CFTC’s OTC reporting compliance timeline.

In late 2011 and early 2012, the CFTC finalized a series of regulations related to the reporting of swap transactions: rules governing reporting to the public, rules governing reporting to data repositories and the CFTC itself, and rules governing reporting of “historical swaps.” For all their complexity—these rules and their corresponding releases total more than 200,000 words—one aspect was relatively simple: the dates on which reporting was set to begin. Specifically, the reporting rules set three “compliance dates” for reporting:

Starting on Compliance Date One, reporting would be required for interest rate swaps and credit default swaps where at least one of the counterparties was a swap dealer or a major swap participant;

• Ninety days later, on Compliance Date Two, reporting would be required for all other swap transactions where at least one of the counterparties was a swap dealer or MSP; and
• Ninety days later, on Compliance Date Three, reporting would be required for all other swaps—those for which neither counterparty was a swap dealer or MSP.
• The exact dates of Compliance Dates One, Two and Three were tied to the publication of key swaps definitional rules.

In the intervening year, these simple rules transformed into the complex timeline summarized in the accompanying chart. Below, as a supplement to the chart, we attempt to rationalize the resulting reporting structure by dividing the characteristics that establish when a particular swap must be reported along three lines: the type of reporting, the type of counterparties, and the type of swap.

Type of Reporting

Dodd-Frank requires three types of reporting of swap transactions:

 
• SDR Reporting. Under these requirements, swap counterparties must report a host of information about swaps to new “swap data repositories” registered with the CFTC, both upon creation and throughout the life of the swap. The CFTC, but not the public, will have access to the full complement of information stored at SDRs. Mandatory SDR reporting began on Dec. 31, 2012.
• Real-Time Reporting. Under the “real-time reporting” requirements, key information about swaps must be publicly disseminated via SDRs. This information is rendered anonymous to protect the identity of the counterparties. Delays in reporting are allowed for large “block” transactions. Until “block” is more fully defined, all swaps are subject to the “block” delay. Mandatory real-time reporting began on Dec. 31, 2012.
• Historical Swap Reporting. SDR reporting upon execution and real-time reporting are only required for new swaps and, in some cases, material amendments to existing swaps entered into after the relevant compliance date. However, counterparties to “historical swaps” entered into before those compliance dates are required to report information to SDRs. The scope of the information reported depends on when the swap was entered into and terminated, but at a minimum, some information is required for any swap that was in existence on or after July 21, 2010. Mandatory historical swap reporting began on Jan. 30, 2013.

Under the CFTC’s final reporting rules, all three types of reporting were to begin on the same date for any given swap type and counterparty pair. Over the past year, that paradigm has changed in two key ways. First, based on input from market participants, the CFTC decided to delay historical swap reporting until 30 days after SDR reporting is required for the particular swap type and counterparty pair. Second, as discussed further below, the CFTC chose to separate SDR reporting and real-time reporting in the context of the cross-border application of swap requirements. As a result, market participants must now consider each of these three types of reporting separately when determining which requirements must be complied with and by when.

Type of Counterparties

The CFTC’s final swap reporting rules divide transactions into those where at least one counterparty is a swap dealer or MSP, and those where neither counterparty is a swap dealer or MSP, for purposes of determining compliance timing. While transactions between affiliates will generally be subject to reporting requirements, the real-time reporting release includes a limited exception for certain types of inter-affiliate trades.

In June 2012, the CFTC proposed cross-border guidance, and a related proposed exemptive order, that describe the application of swap rules, including reporting rules, to transactions. The CFTC has since adopted a final exemptive order that applies until July 2013, but has not yet adopted final guidance. While the full details of these cross-border releases are beyond the scope of this article, they generally divide counterparties into five groups for purposes of reporting:

 
• swap dealers and MSPs that are “U.S. persons;”
• swap dealers and MSPs that are not “U.S. persons,” which are further subdivided into those that do and do not have U.S. person parents with certain regulatory statuses;
• non-U.S. branches of swap dealers and MSPs that are “U.S. persons;”
• “U.S. persons” that are not swap dealers or MSPs (i.e., U.S. end-users); and
• non-“U.S. persons” that are not swap dealers or MSPs (i.e., non-U.S. end-users).

Under the final exemptive order, the extent to which, and the date on which, the three types of reporting apply depends on how the counterparties are categorized and which type of reporting is in question.

Type of Swap

The CFTC’s final swap reporting rules established different reporting dates for CDS and IRS, on one hand, and commodity, equity, foreign exchange or other swaps, on the other, where at least one counterparty is a swap dealer or MSP.

In November 2012, as permitted by the Dodd-Frank Act, Treasury Secretary Timothy Geithner exempted “foreign exchange forwards” and “foreign exchange swaps,” as defined in Dodd-Frank, from the vast majority of Dodd-Frank swaps rules. In the reporting arena, these instruments remain subject to SDR and historical reporting, but are exempt from real-time reporting. Other foreign exchange derivatives, including non-deliverable forwards and foreign exchange options, remain subject to all swap rules, including real-time reporting.

Over the course of the past several months, the CFTC staff has issued a series of no-action letters providing specific relief meant to solve a number of reporting concerns. This includes relief related to bespoke and complex swaps, swaps in emerging market jurisdictions, cleared swaps, and swap reporting that implicates privacy concerns for counterparties in certain non-U.S. jurisdictions. The specific contours of this relief is beyond the scope of this article, but market participants should carefully consider whether any specific relief is applicable to their swap transactions or the reporting of certain data elements.

Finally, though not specific to reporting, the CFTC has announced that it does not intend to bring an enforcement action against a swap dealer or MSP for failing to fully comply with Dodd-Frank swaps requirements before July 12, 2013 if that failure stems from a practical or technical impediment to compliance or uncertainty interpreting Dodd-Frank requirements. The market participant must act reasonably and in good faith to fully comply with the requirement, including demonstrating progress towards compliance, identification of issues as soon as reasonably possible, elevation of issues to senior management and, to the extent necessary, timely consultation with the CFTC and other industry participants. It seems likely that market participants will benefit from such an enforcement posture for some of the highly technical problems currently faced with respect to swap reporting.

 

Summary Chart of Reporting Compliance
Dates as of Feb. 20, 20131
One party is:	The other party is:	Interest Rate Swaps / Credit Default Swaps	“Foreign Exchange Swaps” and “Foreign Exchange Forwards”	Other Foreign Exchange Derivatives, Equity Swaps, Commodity Swaps and Other Swaps
A U.S. person that is a swap dealer or MSP2	Any counterparty	SDR Reporting: 12/31/12   Real-Time Reporting: 12/31/12 Historical Swap Reporting: 1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: 2/28/13 Historical Swap Reporting:  3/30/13
A non-U.S. branch of U.S. swap dealer or MSP (“Non-U.S. Branch”)	A U.S. person (other than another Non-U.S. Branch)	SDR Reporting: 12/31/12 Real-Time Reporting: 12/31/12 Historical Swap Reporting:  1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: 2/28/13 Historical Swap Reporting:  3/30/13
	A non-U.S. person or Non-U.S. Branch	SDR Reporting: 12/31/12 Real-Time Reporting: Not currently required under the cross-border exemptive order3 Historical Swap Reporting:  1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting:  3/30/13
A non-U.S. swap dealer or MSP with a U.S. ultimate parent4	A U.S. person (other than a Non-U.S. Branch)	SDR Reporting: 12/31/12 Real-Time Reporting: 12/31/12 Historical Swap Reporting:  1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: 2/28/13 Historical Swap Reporting:  3/30/13
	A non-U.S. person or Non-U.S. Branch	SDR Reporting: 12/31/12 Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting:  1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting:  3/30/13
A non-U.S. swap dealer or MSP without a U.S. ultimate parent	A U.S. person	SDR Reporting: 12/31/12 Real-Time Reporting: 12/31/12 Historical Swap Reporting:  1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: 2/28/13 Historical Swap Reporting:  3/30/13
	A non-U.S. Branch	SDR Reporting: 12/31/12 Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting:  1/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  3/30/13	SDR Reporting: 2/28/13 Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting:  3/30/13
	A non-U.S. person	SDR Reporting: Not currently required under the cross-border exemptive order Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting: Not currently required under the cross-border exemptive order	SDR Reporting: Not currently required under the cross-border exemptive order Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting: Not currently required under the cross-border exemptive order	SDR Reporting: Not currently required under the cross-border exemptive order Real-Time Reporting: Not currently required under the cross-border exemptive order Historical Swap Reporting: Not currently required under the cross-border exemptive order
A U.S. end user	A U.S. end user	SDR Reporting: 4/10/13 Real-Time Reporting: 4/10/13 Historical Swap Reporting: 4/10/13	SDR Reporting: 4/10/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting: 4/10/13	SDR Reporting: 4/10/13 Real-Time Reporting: 4/10/13 Historical Swap Reporting: 4/10/13
	A non-U.S. end user	SDR Reporting: 4/10/13 Real-Time Reporting: 4/10/13 Historical Swap Reporting: 4/10/13	SDR Reporting: 4/10/13 Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  4/10/13	SDR Reporting: 4/10/13 Real-Time Reporting: 4/10/13 Historical Swap Reporting:  4/10/13
A non-U.S. end user	A non-U.S. end user	SDR Reporting: Not required Real-Time Reporting: Not required Historical Swap Reporting: Not required	SDR Reporting: Not required Real-Time Reporting: Not required under the Treasury Exemption Historical Swap Reporting:  Not required	SDR Reporting: Not required Real-Time Reporting: Not required Historical Swap Reporting: Not required

 
1. This chart is a general summary of applicable reporting deadlines and is not meant as legal advice.  The dates cited are subject to change.  In addition, a number of specific exceptions are not reflected in this chart, including for certain trades between affiliates. 
2. For the purposes of this chart, we assume that a person that will register as a swap dealer or MSP has registered by Dec. 31, 2012.  A person who registers after such date will be subject to the SDR and real-time reporting requirements applicable to a swap dealer on the earlier of (i) the date they would be required to register and (ii) April 10, 2013.  The same person will be subject to historical swap reporting requirements on the earlier of (i) 30 days after becoming subject to SDR and real-time reporting requirements and (ii) April 10, 2013. 
3. The cross-border exemptive order expires on July 12, 2013, absent further action by the CFTC. 
4. Specifically, an ultimate parent that is a U.S. swap dealer, MSP, bank, financial holding company or bank holding company.

Annette L. Nazareth is a partner and Gabriel D. Rosenberg is an associate at Davis Polk in the firm’s financial institutions group.

BNY upgrades collateral management service

http://thetradenews.com/news/Asset_Classes/Derivatives/BNY_upgrades_collateral_management_service.aspx

Apr 10, 2013

BNY upgrades collateral management service

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Citi includes segregated accounts to collateral offering

http://thetradenews.com/USA_news/Asset_Classes/Citi_includes_segregated_accounts_to_collateral_offering.aspx

Apr 09, 2013

Citi includes segregated accounts to collateral offering

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Global banking house Citi will expand its custody offering to include segregated collateral accounts as central counterparties (CCPs) prepare to offer such accounts in line with new regulations.

Citi has expanded its OpenInvestor suite to include segregated collateral custody accounts to help clients mitigate counterparty risk and drive greater collateral efficiency, it announced today.

Both Title VII of the US Dodd-Frank Act and the European markets infrastructure regulation (EMIR) require buy-side firms seeking the safest collateral options to establish segregated accounts with CCPs for OTC derivatives trades.

“The possibility that every OTC relationship may need collateral accounts under new regulations has driven client demand for more efficient solutions,” said Chandresh Iyer, managing director, investor services, at Citi.

“These services draw upon our deep understanding of relevant business issues to streamline the technical and operational challenges of managing all types of collateral assets across multiple counterparties,” he said.

Under the new offering, Citi will act as an intermediary between investor and secured party for tri-party collateral account control arrangements, holding collateral in a segregated custody account. Daily collateral monitoring and the ability to reinvest cash collateral into money market funds through a central online portal will also be available.

In the UK, buy-side firms are keen to establish segregated accounts with CCPs as they prepare to meet EMIR rules, but clearing houses have been slow to develop the accounts.

Jane Lowe, director of markets for UK buy-side trade body the Investment Management Association  in December told theTRADEnews.com that UK institutional investors wanted more progress on segregated accounts.

“Clearing houses have been working on a client account that offers the highest level of security for assets and positions since last year, but none are ready yet,” Lowe said. “Some on the buy-side want to adapt to the new clearing regime now, but CCPs have not yet established the details of these fully segregated accounts.”