Interactive Data’s BondEdge Solutions Integrates Andrew Davidson & Co’s Prepayment and Mortgage…


Addition of AD&Co Models and Related Data for Mortgage-Backed Securities Enhances Analytics and Reporting Capabilities of BondEdge BondEdge Solutions, an Interactive Data company and leading provider of fixed income portfolio management software, today announced a collaboration with Andrew Davidson

via Pocket http://www.bobsguide.com//guide/news/2013/Jun/6/interactive-datas-bondedge-solutions-integrates-andrew-davidson-cos-prepayment-and-mortgage-credit-models-into-fixed-income-analytics-platform.html June 12, 2013 at 07:11PM

Thomson Reuters acquires Pricing Partners


Thomson Reuters acquires Pricing Partners

http://www.automatedtrader.net/news/at/142854/thomson-reuters-acquires-pricing-partners

Thomson Reuters acquires OTC derivatives pricing analytics provider, Pricing Partners

Paris – Thomson Reuters has acquired Pricing Partners SAS, the software developer and provider of OTC (over-the-counter) derivative pricing analytics and services.

The acquisition of Pricing Partners is intended to enhance Thomson Reuters Pricing Service (TRPS) pricing abilities for structured notes, interest-rate, equity, credit, commodities and FX derivatives, as well as hybrid products, adding derivative products valuation, pricing tools and risk analytics to TRPS.

“In today’s economic environment, regulatory requirements and continued economic recovery pressures are driving demand for independent and transparent evaluated pricing services that are specialized to offer local market expertise,” said Debra Walton, managing director and head of Enterprise Content at Thomson Reuters. “The acquisition of Pricing Partners strongly positions Thomson Reuters to meet the changing needs of our European and global client base.”

“Pricing Partners has built a strong brand with an impressive offering and client base in Europe with a growing presence in Asia,” said Neil Masterson, managing director and head of Investors at Thomson Reuters. “This acquisition builds on our commitment to providing our clients with the independent, neutral pricing services they need and represents another step forward in our vision to connect and power the global financial community.”

Thomson Reuters and Pricing Partners already have an established and successful working relationship under which Thomson Reuters has used Pricing Partners Price-it®, a proprietary financial library covering all major asset classes: interest rates, equity, inflation, credit, foreign exchange, commodities, life insurance and hybrid products, to provide pricing services through its proprietary delivery platform, Thomson Reuters DataScope, reaching over 2300 clients worldwide on a daily basis.

“Pricing Partners is delighted to have found a strong industry leader in Thomson Reuters who will use our critical talent and expertise to grow and serve our customer base,” said Eric Benhamou, CEO, Pricing Partners. “Thomson Reuters is a proven partner and shares our vision of the growth opportunities that exist in the evaluated pricing space.”

What is SEC Rule 15c3-5 — Risk Management Controls for Brokers or Dealers with Market Access?


What is SEC Rule 15c3-5 — Risk Management Controls for Brokers or Dealers with Market Access?

http://www.sec.gov/rules/final/2010/34-63241-secg.htm

A Small Entity Compliance Guide1

Overview

On November 3, 2010, the Commission adopted a new rule to require brokers and dealers to have risk controls in connection with their market access. Rule 15c3-5 is intended to address the risks that can arise as a result of the automated, rapid electronic trading strategies that exist today, and bolster the confidence of investors in the integrity of our markets. Rule 15c3-5 would effectively eliminate the practice known as “unfiltered” or “naked” access to an exchange or an ATS.

Requirement to Maintain Risk Management Controls and Supervisory Procedures

Rule 15c3-5 is applicable to broker-dealers with access to trading securities, by virtue of being an exchange member, an ATS subscriber, or an ATS operator with non-broker-dealer subscribers. Such broker-dealers with market access would be required to establish, document, and maintain a system of risk management controls and supervisory procedures that, among other things, are reasonably designed to: (1) systematically limit the financial exposure of the broker or dealer that could arise as a result of market access, and (2) ensure compliance with all regulatory requirements that are applicable in connection with market access. Specifically, the risk management controls and supervisory procedures would be required to be reasonably designed to:

  • prevent the entry of orders that exceed appropriate pre-set credit or capital thresholds, or that appear to be erroneous;
  • prevent the entry of orders unless there has been compliance with all regulatory requirements that must be satisfied on a pre-order entry basis; and
  • prevent the entry of orders that the broker-dealer or customer is restricted from trading, restrict market access technology and systems to authorized persons, and assure appropriate surveillance personnel receive immediate post-trade execution reports.

Direct and Exclusive Broker-Dealer Control Over Financial and Regulatory Risk Management Controls and Supervisory Procedures

The broker-dealer with market access would also be required to have direct and exclusive control of its financial and regulatory risk management controls and supervisory procedures, with a limited exception that would permit the reasonable allocation of certain regulatory controls and procedures to a customer that is a registered broker-dealer.

Limited Exception for Routing Broker-Dealers

There is a limited exception from the provisions of the Rule for broker-dealers that provide outbound routing services to an exchange or ATS for the sole purpose of accessing other trading centers with protected quotations on behalf of the exchange or ATS in order to comply with Rule 611 of Regulation NMS, or the Options Linkage Plan for listed. These routing brokers would be required to comply with the provisions of Rule 15c3-5 designed to prevent the entry of erroneous orders to help ensure that order handling by an exchange or ATS router would not increase risk to the market.

Regular Review of Risk Management Controls and Supervisory Procedures

Rule 15c3-5 requires broker-dealers with market access to establish, document, and maintain a system for regularly reviewing the effectiveness of the risk management controls and supervisory procedures and for promptly addressing any issues; and no less frequently than annually, conduct a review of its business activity in connection with market access to assure the overall effectiveness of such risk management controls and supervisory procedures and document that review.

The Rule would also require the Chief Executive Officer of the broker or dealer to annually certify that the risk management controls and supervisory procedures comply with Rule 15c3-5, and that such regular review has been conducted. The Rule 15c3-5 CEO certification requirement is a separate and distinct certification from the FINRA Rule 3130 certification requirement; however a FINRA member firm could leverage its current process for compliance with FINRA Rule 3130 to perform the required certification under the Rule. For instance, a FINRA member could combine in the same document the CEO certification required by the Rule with the FINRA 3130 or other required certifications, if the substance of each of the required certifications is contained in that document.

Other Resources

The final adopting release for Rule 15c3-5 can be found on the SEC’s website at http://www.sec.gov/rules/final/2010/34-63241.pdf. The proposing release can be found on the SEC’s website at http://www.sec.gov/rules/proposed/2010/34-61379.pdf.

Contacting the SEC

The SEC’s Division of Trading and Markets is happy to assist small entities with questions regarding Rule 15c3-5. The Division’s Office of Interpretation and Guidance answers questions submitted by email and telephone. You can submit a question by email to tradingandmarkets@sec.gov or you can contact the Office of Interpretation and Guidance at (202) 551-5777.

Implementation

Rule 15c3-5 will be effective 60 days from the date of publication in the Federal Register in 2011. Once effective broker-dealers subject to the rule will have six months to comply with the requirements of Rule 15c3-5.

Pro-Cyclicality, CVA and CCDS courtesy of theOTCspace


Pro-Cyclicality, CVA and CCDS
There’s been some recent news surrounding EU legislators exempting corporates, sovereigns and pension funds from mandatory CVA capital requirements under CRD IV (see article). Arguments for these institutions’ exemptions apparently stem from their current exemption from EMIR’s mandatory clearing requirements.

This has understandably led to fresh concerns over pro-cyclicality, which were first raised when sovereign counterparties were originally exempt from central clearing. To briefly summarise the issue:

A bilateral counterparty’s credit spreads increase
Therefore portfolio CVA increases
CVA exposure is dynamically hedged using CDS, and therefore more CDS protection is purchased referencing the counterparty
This increase in demand for protection further widens the counterparty’s credit spreads…
And the cycle continues.

However, such fears over pro-cyclicality can be alleviated through the purchase of a contingent CDS (CCDS) contract. CCDS contracts behave in a similar manner to vanilla CDS contracts. However, instead of referencing a notional of corporate or sovereign debt, CCDS can reference the market value of a portfolio of derivatives.

Hedging CVA using CDS is an example of dynamic hedging, whereby a portfolio must be rebalanced to reflect its changing sensitivity to credit spreads. CCDS contracts, however, are static hedges against CVA. Once the CCDS contract has been purchased, barring any changes to the composition of the reference portfolio, the CVA is perfectly hedged. This means that widening counterparty credit spreads don’t need to be met with further CDS purchases, and therefore the downward spiral is broken.

But, to quote The Real Hustle, “If it seems too good to be true, it probably is”. CCDS contracts are, by their nature, highly bespoke, and as a result they can incur high fees. In addition, CCDS contracts are themselves bilateral transactions which must be collateralised to mitigate counterparty credit risk. Punitive BCBS guidelines for margining uncleared trades will make this a costly option. The central clearing of CCDS would certainly be a very far-off, if not impossible, goal. The pricing of the contingent leg of the CCDS alone is as complex as the calculation of portfolio CVA itself, and depending on the size of a portfolio this would require significant computational power (and a huge investment in IT infrastructure) in order to run models that capture complex risk-factors such as wrong-way risk.

Despite these complications, if regulators and market participants are truly concerned about the potential for pro-cyclicality when trading with CVA-exempt institutions, then CCDS could be the potential solution– provided that the regulatory and technological infrastructure is put in place to make it work.

DTCC › Public SDR Now Covers All 5 Asset Classes by Bill Hodgson


The DTCC public SDR portal now shows trades from Rates, Credit, Equities, FX and Commodities. Have a look at Fixed-Fixed IR Swaps – can anyone explain what purpose a fix-fix swap serves? Is it like a currency swap without the notional exchanges? You can see trades erupt in real-time here: https://rtdata.dtcc.com/gtr/dashboard.do

As General Slice Report, Cumulative Slice Report, Info Centre,a nd Report Center.

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