Tullett Prebon Announces Filing of SEF Application With CFTC

Tullett Prebon Announces Filing of SEF Application With CFTC


Tullett Prebon, one of the world’s leading interdealer brokers, today announces the filing of its Swap Execution Facility (“SEF”) application with the Commodities Futures Trading Commission (“CFTC”).

The SEF, registered as tpSEF Inc. and headquartered in New Jersey, is a wholly owned subsidiary of Tullett Prebon. It has been established to ensure the Company’s compliance with Dodd-Frank legislation, enacted on July 21, 2010.

Shawn Bernardo, Tullett Prebon’s Senior Managing Director of e-broking and member of Tullett Prebon’s North American Executive Committee and Chairman of the Wholesale Markets Brokers’ Association (WMBA), is named Chief Executive Officer of the SEF.

The SEF Board also consists of Public Directors, David Clark, John Spencer, and James Quaille, and Directors, John Abularrage and Christian Pezeu.

John Abularrage, Chief Executive Officer and President the Americas at Tullett Prebon, said: “Tullett Prebon’s SEF forms an important part of the development of our existing businesses as we continue to grow our global market leading offering in those areas regulated by the CFTC and SEC. Tullett Prebon will provide SEF compliant platforms for our customers to access liquidity and meet the demands of the new legislation.”

Shawn Bernardo, Chief Executive Officer of Tullett Prebon’s SEF, said: “Over the past three years we have provided regulators with industry insight into the interdealer broker marketplace and have testified before Congress as the new regulations were being considered. Tullett Prebon looks forward to working with the CFTC to ensure that the Company is able to continue offering its customers swap execution services in accordance with the new regulations.”

Very interesting-CDS report courtesy of Donald R. van Deventer Kamakura Corporation

Non-Bank Corporate Credit Default Swap Trading Volume for the 155 Weeks Ended June 28, 2013
8/20/2013 11:01 PM
This note is the last in a series analyzing the trading volume in single name credit default swaps for the 155 weeks ended June 28, 2013. In this analysis, we focus on trading in 961 non-bank corporate reference names. We find that only one corporate averaged more than five non-dealer trades per day over the 155 week period studied.

The ten most heavily traded non-bank corporate reference names over the period ended June 28, 2013 were led by MBIA Insurance Corporation:






CLEAR CHANNEL COMMUNICATIONS, INC. [Subsidiary of Clear Channel Outdoor Holdings, Inc. (CCO)]





The conclusions of this study have major implications for the profitability of the major credit default swap dealers and their ability to tie loan and bond pricing to credit default swap quotes and traded levels. The major single name credit default swap dealers include the following firms:

Bank of America (BAC)

Barclays (BCS)

BNP Paribas (BNPZY.OB)

Citigroup (C)

Credit Suisse (CS)

Deutsche Bank (DB)

Goldman Sachs (GS)

JPMorgan Chase (JP)


Morgan Stanley (MS)

Royal Bank of Scotland (RBS)


In this note, we analyze credit default swap trading volume for the 961 non-bank corporate reference names among the 1,144 reference names for which CDS trades were reported by the Depository Trust & Clearing Corporation during the 155 week period ending June 28, 2013. The weekly trade information is from the Section IV reports from DTCC. The data is described this way in the DTCC document “Explanation of Trade Information Warehouse Data” (May, 2011):

“Section IV (Weekly Transaction Activity) provides weekly activity where market participants were engaging in market risk transfer activity. The transaction types include new trades between two parties, a termination of an existing transaction, or the assignment of an existing transaction to a third party. Section IV excludes transactions which did not result in a change in the market risk position of the market participants, and are not market activity. For example, central counterparty clearing, and portfolio compression both terminate existing transactions and re-book new transactions or amend existing transactions. These transactions still maintain the same risk profile and consequently are not included as ‘market risk transfer activity.’”

We again confirm that our emphasis is not on gross trading volume. As of July 5, 2013, dealer-dealer trading volume made up 75.16% of all single name credit default swaps that were live in the DTCC trade warehouse at that point in time. It would be nearly costless for dealers to inflate gross trading volume by trading among themselves. Instead, we focus on “end user” trading where at least one of the parties to a trade is not a dealer, as defined by the DTCC. Accordingly, we make the following adjustments to the weekly number of trades reported by DTCC for each non-bank corporate reference name:

We divide each weekly number of trades by 5 to convert weekly trading volume to an average daily volume for that week.

From that gross daily average number of trades, we classify 75.16% of trades as “dealer-dealer” trades, using the average “dealer-dealer” share of trades in the DTCC trade warehouse as of July 05, 2013.

The remaining 24.84% is classified as daily average “non-dealer” volume, the focus of the reporting below.

Daily Non-Dealer Trading Volume for Non-Bank Corporate Reference Names

Of the 1,144 reference names for which DTCC reported credit default swap trades in the 155 week period ending June 28, 2013, 961 were non-bank corporations. We first analyze the 155 week averages for the 961 non-bank corporations. The daily average non-dealer trading volume, calculated as described above, was distributed as follows:

The conclusions that can be drawn from this table are summarized here:

70.9% of the non-bank corporations had trading volume that averaged less than one non-dealer CDS contract per day over the 155 weeks ending June 28, 2013.

92.8% of the non-bank corporations had trading volume that averaged less than two non-dealer CDS contracts per day over the 155 weeks ending June 28, 2013.

None of the 961 non-bank corporations had trading volume that averaged more than 8 non-dealer trades per day in the 155 weeks ended June 28, 2013.

The average number of non-dealer trades per day over the period studied was 0.79 trades.

The median number of non-dealer trades per day over the period studied was 0.54 trades.

We conclude that, like the 1,144 reference names overall, trading volume for the 961 non-bank corporations with CDS traded during the 155 weeks ending June 28, 2013 is minimal when analyzed on a non-dealer daily average basis.

Analyzing Trading Volume in Aggregate

We now analyze all 155 weeks of data, not just the average over that period, for all 961 non-bank corporations for which DTCC reported non-zero trade volume. There were 148,955 = 961 x 155 observations on CDS trading volume for these non-bank corporations, and there were no trades for 36,012 observations, 24.2% of the total. The distribution of non-dealer trades per day over these 148,955 observations is summarized in the following chart:

One can draw the following conclusions over 148,955 weekly observations:

75.17% of the observations showed 1 non-dealer trade per day or less.

98.30% of the observations showed 5 non-dealer trades per day or less.

99.85% of the observations showed 10 non-dealer trades per day or less.

Only 0.15% of the observations were for more than 10 non-dealer trades per day.

The highest volume week featured 959 gross trades per week, 191.8 gross trades per day, and 47.6 average non-dealer trades per day. This volume was during the week ended May 10, 2013 for MBIA Insurance Corporation.

As we stated above, this confirms that there is minimal trading volume in the 961 non-bank corporations on which CDS trades were reported by DTCC in the 155 weeks ended June 28, 2013. The 25 non-bank corporates with the highest daily average non-dealer trading volume are listed here:

Weekly gross trading volume for MBIA Insurance Corporation is shown below:

Detailed Information on CDS Trading Volume by Individual Reference Name

Kamakura is pleased to provide the listing of trading volume by non-bank corporate reference name to those Kamakura clients and friends of the firm who e-mail info@kamakuraco.com and certify that they have read and agreed to the DTCC terms of use agreement:

Donald R. van Deventer
Kamakura Corporation
Honolulu, August 21, 2013

© Donald R. van Deventer, 2013. All rights reserved



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Nasdaq OMX’s European derivatives subsidiary eyes new products

Nasdaq OMX’s European derivatives subsidiary eyes new products


23 Aug 2013 Updated at 12:40 GMT


As Nasdaq OMX’s US securities market deals with the fallout from a three-hour outage on its platform yesterday, across the Atlantic its new European derivatives subsidiary is looking for ways to build its business, potentially through the listing of new third-party contracts.

NLX, which launched in June and offers trading in popular long and short-term interest rate derivatives, said it would be willing to consider listing instruments developed by external providers.

Charlotte Crosswell, chief executive of NLX, told Financial News earlier this week: “At NLX, we have the infrastructure, vendors and route to clearing already in place. It’s relatively easy for us to list new products quickly. This gives us the flexibility in how we approach listing new types of products. You might have a new product that works well, but then you need to have the industry backing and bring it to market at the right time – it can be challenging.”

The move comes as US-based Eris Exchange is considering ways to bring its interest rate contracts to Europe and as GMEX Group, a new derivatives venture run by former Chi-X Europe chief operating officer Hirander Misra, is looking at creating new methodologies for developing products across multiple asset classes.

The emerging regulatory environment for swaps trading is presenting opportunities for firms to develop new types of derivatives that offer alternatives to over-the-counter derivatives.

The rules will push OTC derivatives that can be standardised onto electronic trading platforms and through clearing houses. This has led some to look to products that replicate OTC exposures through an exchange-traded contract.

Under the Dodd-Frank Act, the obligation to clear swaps has already kicked in for most US market participants. Exchanges including Eris and CME Group have launched swap futures that mimic interest rate swap contracts in an exchange-traded environment. Mandated trading of OTC derivatives contracts on trading platforms known as swap execution facilities will start in the US from October 2.

The swap futures from Eris and CME are still gaining traction, say market participants.

Nasdaq-listed stocks were halted for almost three hours on Thursday because of a problem with the Securities Information Processor, a system that consolidates and disseminates prices to US markets, according to a statement from Nasdaq OMX.

The glitch impacted the data feed that distributes pricing information for securities listed on Nasdaq and is not believed to be linked to the exchange’s core technology. The bourse said it had resolved the issue within 30 minutes and spent the remainder of the time coordinating with other market participants and regulators to ensure the orderly resumption of trading.

NLX runs on Genium Inet technology, which incorporates the platform that Nasdaq acquired when it purchased the OMX Group of Nordic exchanges in 2007. Nasdaq’s US markets run on Inet, which it bought from agency broker Instinet in 2005.

–write to anish.puaar@dowjones.com and follow on Twitter @anishpuaar

Eurex squares up to CME as swaps battle moves to FX (from efinancialnews.com)

Eurex squares up to CME as swaps battle moves to FX


22 Aug 2013 Updated at 12:49 GMT

With much of the debate around new opportunities for European market operators in swaps currently surrounding interest rate products, CME Group must have thought its strategy of targeting foreign exchange was a relatively safe bet.

Eurex squares up to CME as swaps battle moves to FX

But plans announced yesterday by Deutsche Börse-owned derivatives exchange Eurex to launch FX derivatives on October 7, just under a month after the prospective launch of CME Europe, have given the Chicago-based futures exchange something to think about.

CME Group already has a large FX franchise in the US and wants to bolster its European presence with the launch of CME Europe, a London-based market that will initially offer trading in 30 currency pairs.

The futures bourse took the unusual step of announcing a launch date of September 9 before obtaining regulatory approval from the UK’s Financial Conduct Authority. According to Bob Ray, chief executive of CME Europe, the move was designed to offer a degree of certainty to help customer readiness.

CME’s plans were partly a response to a G20-led regulatory push to trade more derivatives on exchange and through central clearing. The rules created new opportunities for market operators to expand by offering new products that have traditionally been traded privately between banks. The rules will hit the majority of the FX derivatives market, which was worth $67.35 trillion at the end of 2012, according to the Bank for International Settlements.


By avoiding the fierce competition that will play out in the interest rate derivatives market for the time being, CME’s FX play made perfect sense. The exchange group already offers over 60 futures and more than 30 options in foreign exchange and has a ready-made European clearing house from which it has been clearing over-the-counter derivatives in Europe since 2011.

Ray told Financial News: “Around 23% of our total volume already comes from Europe and we already have over 40 years of experience in the FX market. We will be looking at ways to make changes to the contracts we offer on CME Europe that are more aligned with the region’s existing trading conventions.”

So what will Eurex bring to the table?

If CME has the asset class expertise, Eurex has the regional expertise.


FX represents new territory for Eurex, but its main strength is the dominant presence it already has in Europe, not just with its trading platform, but also with its integrated clearing house, Eurex Clearing.

During the last year, the German futures exchange has responded to the regulatory overhaul by encroaching on the turf of its biggest competitors.

A spokesperson for Eurex said: “One of the drivers for our FX derivatives plans was the desire to offer trading services in as many asset classes as possible in light of the OTC derivatives reforms.”

Last November, Eurex started clearing interest rate swaps, directly targeting the dominance of LCH.Clearnet, the clearing house majority-owned by the London Stock Exchange Group that processes the vast majority of cleared interest rate swaps.


Then in June, Eurex renewed efforts to grab market share in short-term interest rates futures based on the Euribor benchmark, a product that has historically been dominated by NYSE Euronext’s Liffe.

In addition to the direct challenge to NYSE Liffe, Eurex’s push into short-term Euribor derivatives and interest rate swap clearing came at the same time as the launch of Nasdaq OMX’s NLX, the US exchange operator’s latest European foray. NLX offers the most popular long and short-term interest rate derivatives offered by both Liffe and Eurex, with the promise of post-trade cost savings by giving members the ability to offset collateral payments that are required under the new swaps rules.

Steve Grob, director of group strategy at trading technology vendor Fidessa, said: “We are entering a really interesting time in the European derivatives market and the regulations could finally spur some genuine competition in this space. However, I do wonder whether Eurex is simply testing the water by bringing the challenge to the CME. It’s a shame that we are seeing more lookalike products, as opposed to real innovation in the European derivatives market.”

Many believe the battle between Eurex and the CME will be won and lost at the clearing level, which is likely to comprise the biggest proportion of derivatives trading costs.

 Anecdotal evidence suggests market participants will want to spread their risk by connecting to more than one clearing house but that the need to manage costs will mean one is likely to be dominant.

One head of dealing said: “We ideally want three clearing houses per asset class to diversify risk and will play them off against each other to a certain extent, which will keep them on their toes.”

The Eurex spokesman added: “Ultimately, the market will decide who comes out on top but we are confident of being able to gain enough traction with our new FX service.”

–write to anish.puaar@dowjones.com and follow on Twitter @anishpuaar


Vega Chi set to widen FIXED INCOME product slate (efinancialnews.com)

Vega Chi set to widen FIXED INCOME product slate (efinancialnews.com)


Vega Chi set to widen product slate

Tim Cave

22 Aug 2013

Vega Chi, a three-year-old electronic bond platform operator set up by former Goldman Sachs executives, is set to expand into new fixed income products as it looks to capitalise on a regulatory environment which is promoting greater transparency around bond trading.

Vega Chi set to widen product slate

The London-based platform is “consistently examining various segments of the fixed income market…for potentially launching additional products and platforms”, according to its chief executive Constantinos Antoniades.

Vega Chi, which currently operates platforms for high-yield and convertible bonds in Europe and the US, is set to launch a new platform next year, according to Antoniades, though he would not provide details on the nature of the products to be traded.

Antoniades was previously head of European convertible bond trading at Goldman Sachs, and set up Vega Chi in 2009 along with former colleagues from the US bank. Venture capital firm Octopus Investments acquired a stake in February 2011, but Antoniades remains Vega Chi’s majority owner.

The firm launched a multi-lateral trading facility for European convertible bonds in February 2010, enabling institutional investors to trade directly with each other without having to go via brokers. It added European high-yield and subordinated bank debt to that platform in February 2012 and in October last year launched a new US high-yield bond venue.


Vega Chi only accounts for a small proportion of bond trading: the wide variety of bonds available make them ill-suited to electronic trading, while dealers are reluctant to give up profitable, voice-driven bond desks. However, G20-led reforms being enacted in Europe via the European Market Infrastructure Regulation and a revised version of the Market in Financial Instruments Directive — as well as tougher capital requirements — are conspiring to move fixed income trading away from OTC markets and onto electronic platforms.

The new rules have already led to a liquidity slump as dealers increasingly wind down their inventories — the stockpile of securities they hold in order to make markets. In the US, corporate-bond inventory held by banks had fallen from $218 million at the end of 2007 to $57.5 million at the end of 2012, according to data from the Federal Reserve Bank of New York.

Antoniades said: “We believe that the market place has come a long way in the last 12 months in terms of engaging in electronic trading platforms. In the last six months especially, we have seen strong interest in all our platforms from clients that traditionally have been on the sidelines as they seek the maximize their access to liquidity.”

The structural shift over the past year has seen a crop of new bond trading platforms, including BlackRock’s Aladdin platform, and revamped single dealer offerings such as Goldman’s GSessions and Morgan Stanley’s Bond Pool.

 Antoniades said he expects “sell-side firms to play a very big role” on Vega Chi platforms going forward.

–write to timothy.cave@dowjones.com and follow on Twitter @TimCaveFN


From theOTC Space – CDS Futures | Can This Pig Sing?


CDS Futures | Can This Pig Sing?

August 14, 2013 by pttmonitor 0 Comments

The $24.7 trillion Credit Default Swap market (2012 Gross Market Value, According to ISDA and BIS) is one of the last untapped exchange-traded derivatives markets.  The question remains is the market ripe for a CDS futures contract, or as Mark Twain famously put it, “Never Try To Teach A Pig To Sing.  It Wastes Your Time And Annoys The Pig.”  So, can this pig finally sing?

The InterContinentalExchange (ICE) believes it is the right time and launched a CDS Futures contract (Ticker: WIG) on June 17, 2013.  The contract is based on Markit’s liquid CDX.NA.IG 5Y series.  The contract is complementary to the current “on the run” OTC traded CDX.NA.IG 5Y swap as the futures contract is priced on the theoretical value of the next CDX.NA.IG series.  This “When Issued” structure creates an option valued on the next CDS series.  In other words, it is a vehicle to hedge near term macro-economic credit risk (as opposed to immediate term credit risk with an OTC swap).

The chart below shows trading in the Sep 13 CDS future.  Although less than impressive, it is important to look back to the introduction on US Treasury futures in 1976/1977 as a point of reference.


Initially, Treasury futures (and a sister GNMA future) were not a success.  When they finally launched, volumes were only a few hundred contracts per day.

Low volume on this new contract is not a surprise, given the “when issued” impact of the CDS future and the effect on final settlement.  Many counterparties may be on the sidelines until the new contract goes through the first final settlement.

Is Dodd-Frank & EMIR Equal To The End of Britton Woods?

OTC swaps and specifically CDS’ do not have a “Nixon Shock/end of gold standard” fracture with currency and inflationary volatility.  These waves of volatility served as the “tipping point” for currency and interest rate futures.  Like the currency markets of the early 1970’s, OTC CDS swaps are a custom forward market.  Thus, the CDS future is in many ways similar to currency futures as both vehicles create standard models for the exchange of counterparty risk.

As market forces will not drive the adoption of a CDS future, will regulation and regulatory pressures do it?  Title VII of Dodd Frank changed the execution, clearing, and capital structures of the CDS swap market.  Let’s take a look at changes in the OTC market as compared to the ICE futures.  First and foremost, margin and transaction costs are now highest for customized products and lowest for standardized exchange-traded products.

Category Bilateral Swaps OTC Cleared Futures
Liquidity Liquid Highest Liquidity Illiquid
Margin Highest, TBD Higher Lowest
Margin Calculations 10-day VaR 5-day VaR 2-day VaR
Transaction Costs Basel III Capital Requirements FCM and associated LSOC costs FCM Margin/Cost of Carry
Termination/Compression Intra-party and Compression Intra-party and Compression Exchange
Valuation and Reporting Intra-party Intra-party  & SEF Exchange

Dodd Frank, EMIR, and Basel III changed the rules but internal momentum is still hard to overcome.  Any OTC CDS futures development must be co-dependent with the existing OTC swap market.  Exchanges are the ultimate networked organization where liquidity begets liquidity.  Therefore, for the futures to gain liquidity, the following Tipping Point actions must occur simultaneously.

  1.  Outstanding rules and margins for non-cleared bi-lateral swaps must be completed and implemented.  This includes implementation of Category 3 participants in centralized swap clearing.
  2. Banks must decide (or be convinced as part of increased CDS market scrutiny) to utilize CDS futures.  This benefits banks on the Basel III capital requirements side and the overall CDS market in terms of transparency.
  3. For parties interested in hedging credit risk on a macro-level, substitution value of the CDS future must be greater than the disincentive of a new, riskier product.  In other words, the perceived opportunity cost of trading CDS futures is very high.

June 2013 was a volatile period.  Volatility was not just related to central bank intervention and QEIII discussions.  Operational volatility in the OTC market was the result of new rules and margins for Category 1 and 2 participants.  In hindsight, given the confusion around central clearing, market participants are still trying to adjust to the fluidity of new swap rules rather than eyeing a complementary credit risk solution.

In this context, it is important to not underestimate the gravitational pull of the existing swap market.  Traders, banks, and counterparties have underlying relationships with swap desks (and not necessarily with a futures counterpart).  Transacting with two desks lowers your relative importance in a market that depends on relationships.

So, can this pig sing?  Well, we don’t know yet.  Once the music director finishes writing the final score and the band makes an entrance, then we’ll know whether this little piggy has a market or this little piggy gets none.

Seth Berlin, Principal, Performance and Thinking Technologies

Seth Berlin is a Principal Strategist at Performance Thinking & Technologies (PTT).  PTT focuses on risk modeling, compliance, and investment operations for private funds.

Reuters – Swaps clients plan US bank exodus



NEW YORK, Aug 12 (IFR) – US banks are at risk of losing overseas swaps market share as European clients have begun making every effort to avoid getting caught up in costly cross-border derivatives rules that were finalised by the CFTC last month, and come into effect this October.

European hedge fund and asset managers are threatening to transfer their swaps trading activities away from branches of US banks and towards European competitor houses to ensure they avoid the reaches of Dodd-Frank, which mandates an array of costly compliance measures, including the central clearing of standardised over-the-counter derivatives.

Many European clients would rather ditch their US bank relationships than bear that cost – just one of the unintended consequences of bad rule-writing according to dealers.

“It’s the one rule that risks the most competitive disadvantage,” said a lawyer at a US dealer. “There’s no way these clients are going to clear with us at this stage.”

Swaps executed by a European client with the foreign branch of a US bank will be required to clear through a central counterparty starting on October 9 – the date that an exemption from compliance with the CFTC’s recently finalised cross-border guidance will expire.

US banks say the deadline is unreasonable and compliance will be near-impossible. And at least one of the CFTC commissioners sympathises.

“My frustration has consistently been with the Commission establishing arbitrary dates that we pluck out of thin air to establish compliance without asking, ‘is this possible?'” said CFTC commissioner Scott O’Malia.

“The cross-border guidance should have required notice and a comment period to find out if the time periods for compliance are adequate. We claim to be having a comment period but I suspect that anyone who does so will have their comments completely ignored.”

Conversely, the October clearing deadline comes two months before the CFTC forces US branches to comply with the rest of the agency’s transaction-level requirements, such as trade execution, documentation, and real-time public reporting.

“The CFTC is asking us to pull a rabbit out of a hat,” said an executive at the London branch of a US bank. “They have offered ‘substituted compliance’ but the European rules are not even done yet. Nobody in their right mind thinks we can demonstrate substituted compliance by the deadline.”



For end-user clients, mandatory clearing can be a costly business. Clients must negotiate and document relationships with clearing houses and clearing member banks, and are required to post initial margin against all swaps that are passed through the system.

The CFTC guidance provides that foreign branches of US banks could apply to substitute their home country compliance for US rules in cases such as these if the rules were considered “comparable and comprehensive”.

It is likely to be the longer-term answer for most European branches of US houses, but the European rules for clearing are not yet finalised, leaving nothing concrete for comparison.

Some banks are moving to plan B, which involves transferring all client relationships from their foreign branches to affiliates – a separate legal entity that would protect European funds from the clearing mandate.

But that would not be easy, considering that firms such as JP Morgan have more than 10,000 clients booked through their UK branches.

“There are a number of impediments; it’s very difficult to move clients to another legal entity. Plus, many of those affiliates have regulators of their own who will raise concerns about wholesale transfers of clients,” said the lawyer.



US banks say they have sent the Commission requests for an extension to the deadline, by way of no-action relief or some other format. Given the Commission’s penchant for issuing no-action relief – the agency has issued more than 100 in connection with Dodd-Frank to date, a pushback of the compliance date seems possible – if not likely.

If history is anything to go by, the CFTC is likely to keep the industry in suspense until the eleventh hour.

“There’s no rhyme or reason for how the no-actions are issued,” said O’Malia. “It creates a confusing ad hoc process that leaves a lot of people trying to understand a lot of moving parts when we are not following the Administrative Procedure Act. We’re using and abusing the no-action relief system.”

The development represents another trough in the often tumultuous process of aligning cross-border implementation of new rules for the OTC derivatives market between Europe and the US.

For the past two years, US banks have been warning that the CFTC’s hurried pace in implementing the rules of Dodd-Frank would put US dealers at a competitive disadvantage.

Just over a year ago, the agency issued proposals that would have forced branches of US banks to comply with all transaction-level requirements in July of this year.

But European entities and US lawmakers levied heavy criticism of CFTC chairman Gary Gensler’s approach to international harmonisation of derivatives rules.

In response, Gensler pledged closer co-ordination with European regulators in a joint statement with the EC’s internal market and services commissioner Michel Barnier just before the original proposals were due to take effect.

The scaled-back proposal reduced the CFTC’s powers in determining whether foreign regulations could be substituted for US rules and issued no-action relief for most requirements until European regulators could catch up.

But the proposal may still have over-reached, according to banks. Whether the US banks are able to move their clients over to affiliates in time or the agency issues a no-action relief remains to be seen, but for the moment banks are facing a significant cross-border dislocation.

CloudMargin – How Does it Work?


CloudMargin – How Does it Work?

When joining CloudMargin, Collateral agreements (e.g. an ISDA CSA) together with counterparty details are entered into CloudMargin either by the client or CloudMargin’s onboarding team.

Each day, clients either electronically transmit or securely upload their portfolio of derivatives and available inventory (if they want to make use of non-cash collateral) to CloudMargin. Within seconds, CloudMargin’s dashboard is updated to show the number of calls or recalls that need to be issued, the number of calls/recalls expected from counterparties and those portfolios that require no action. Reporting is instantly available to give that day’s funding predictions.

Calls and recalls are sent to counterparties with a click either by email or via one of the margin messaging platforms.

Incoming calls and recalls are validated against CloudMargin’s calculations, disputes are quickly identified.

Eligible cash or non-cash collateral to satisfy incoming calls are selected and valued.

After counterparty notification and agreement the movement is instructed either by email (e.g. to a custodian), XML (e.g. to an internal settlements system) or SWIFT MT2xx / MT5xx messages to the client’s own SWIFT gateway or bureau.

End of day reporting documents the activity and the final status of all portfolios or agreements.

Throughout the day, the CloudMargin dashboard gives very clear and real-time status information


From cloudmargin.com – CloudMargin – The future of collateral management?


CloudMargin is an OTC derivatives collateral management solution built for derivatives end users. Clients are typically hedge funds, asset managers, insurance firms, pension funds, corporate treasury functions in non-financial companies and smaller banks trading derivatives to hedge proprietary risk. 

Cloudmargin’s clients are looking for a stable, future-proof and scalable platform to cope with increasing volumes, the Dodd-Frank and EMIR/MiFIR push towards CCP, and greater scrutiny from risk managers, auditors, regulators and investors.


Secure web-based platform

CloudMargin is 100% web based so there is no requirement for any hardware or software other than an internet browser. Implementation is very quick and easy. CloudMargin’s infrastructure providers are ISO 27001 certified – the benchmark in information security.

Full-cycle collateral and margin management

From modelling CSAs, issuing and responding to margin calls, managing disputes, valuing non-cash collateral, highlighting eligible collateral and issuing market instructions through to end of day and historical MIS reporting CloudMargin does it all. The full life-cycle of OTC derivatives collateral management is covered including managing interest accruals on cash collateral and processing substitutions on non-cash collateral.

Complete asset coverage

CloudMargin covers the end-to-end collateral and margin management processes for all OTC derivatives – from simple IRS/CDS/TRS through FX forwards and NDFs on to more exotic credit, rates, currency, commodity, equity derivatives and hybrids. Futures/options/listed derivatives are managed as are other collateral agreements such as repo and reinsurance contracts.


Controls are key to CloudMargin. Full automation removes the risk of accidental errors in key areas and dual-control capabilities further reduce the risks of unintentional or deliberate mistakes.


Standard and bespoke reporting compliments the unique dashboard to give unparalleled levels of visibility.


Easy, quick integration

CloudMargin can accept almost any machine readable data files which are either securely uploaded to our website or automated via FTP/SFTP. Our experienced team can create the mapping rules to normalise your data and help with the front loading of agreements and other static information. Typically an integration should take just a couple of days.

3rd party data

CloudMargin can independently source market data such as FX rates, market holidays, credit ratings, asset prices and static to save you time and money or you can submit your own if you prefer.

Central Clearing and Dodd-Frank/EMIR

The requirement to begin central clearing of OTC derivatives under Dodd-Frank/EMIR and others is catered for. CloudMargin harmonises the operational processes for bilateral and cleared derivatives into a single workflow allowing our clients to spend less time managing the detail and get more done earlier in the day.

Cost effective

CloudMargin is surprisingly affordable, even for the smallest derivatives users. Menu-driven pricing gives complete transparency over current and future costs and makes budgeting and future planning simple. With no hardware or software to buy and support, simple implementation and data flexibility the total cost of ownership is kept to a minimum.

SuperDerivatives Adds Fitch Solutions CDS Pricing To Market Data Platform


Newswire | August 12, 2013 – 11:19am

Fitch Solutions is pleased to announce that SuperDerivatives, a leading provider of real-time market data, risk management and valuation services, has added the availability of Fitch’s CDS Pricing Service to its market data platform, DGX.

SuperDerivatives’ credit derivative service provides independent pricing, analytics and data for an extensive range of single names, indices and index tranches, sourced from a variety of top tier banks, exchanges, interdealer brokers, smaller regional banks, local brokers and data aggregators. The addition of Fitch’s CDS Pricing Service, which covers up to 3,000 single name CDS contracts, will further add to SuperDerivatives’ comprehensive valuation services over the DGX platform.

Fitch Solutions’ valuation tools use independent pricing data from contributing market participants who use it to mark their books. It also provides CDS pricing intelligence that can be used for valuations, regulatory, accounting and risk management purposes.

The DGX platform provides the widest coverage of cash and derivatives products direct to users’ desktop, iPad or mobile device. It is entirely free-text based and is driven by a very powerful search engine. Features include advanced chat facilities, live news and commentary from multiple sources, twitter integration and live business television channels and a third-party app store, which allows specialist vendors to develop additional functionality for the platform.

David Gershon, CEO of SuperDerivatives, comments: “As the demand for market data continues to move away from the traditional terminal-based approach, we continuously look to improve the user experience and deliver independent and accurate data.”

“This latest addition from Fitch Solutions shows our commitment to providing data from a wide range of sources, and demonstrates yet again that SuperDerivatives’ award-winning data and cutting-edge technology makes DGX a compelling proposition for our clients.”

Ian Rothery, Fitch Solutions’ Global Head of Strategic Partnerships, comments, “Today’s announcement shows that we are committed to developing solutions that support the needs of our market data partners, enabling financial professionals to access Fitch data on the platform or service of their choice.”

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