Author Archives: Women in Derivatives

Global Regulations Creating Unintended Challenges

February 27, 2015

NEW YORK, Feb. 27, 2015 /PRNewswire/ — In the aftermath of the financial crisis, policymakers around the world introduced regulations aimed at strengthening and safeguarding financial markets. As these measures are rolled out and implemented across jurisdictions, challenges continue to emerge.

During a February 26 event hosted by Women in Derivatives (WIND), a nonprofit organization focused on the development of female leaders in the derivatives industry, panelists discussed the impact of key regulations and highlighted industry-wide concerns.

The panel discussion, Challenges for Global Market Structures as International Regulations Unfold, was moderated by Scott O’Malia, Chief Executive Officer of the International Swaps and Derivatives Association, Inc. (ISDA) and former Commissioner at the U.S. Commodity Futures Trading Commission (CFTC). Morgan Stanley served as event host and panelists included:
•Darcy Bradbury, Managing Director, the D. E. Shaw group
•Maria Douvas, Global Co-Head of Morgan Stanley’s Legal Department for the Fixed Income Division
•Jacqueline Mesa, Senior Vice President and Director of International Relations and Strategy at the Futures Industry Association (FIA)

In his role as moderator, Mr. O’Malia highlighted the need for ongoing collaboration. “Much of Dodd-Frank and its associated OTC derivatives rules have an extraterritorial impact, exposing market participants to duplicative and even contradictory rules because regulators did not fully consider how their domestic regimes would align with other jurisdictions. As these rules, such as the new margin rules for non-cleared OTC derivatives, take shape in a number of countries, the need for global harmonization is critical,” said O’Malia. “ISDA continues to take advantage of its global footprint and provide research and analysis to regulators that highlight these issues.”

Jacqueline Mesa highlighted potential stability concerns resulting from regulations. “The strength of the entire central clearing ecosystem depends on diverse and healthy participants. However, we are witnessing a disturbing downward trend in the number of clearing FCMs registered with the CFTC,” explained Ms. Mesa. “As regulators capital and other regulatory rules attempt to make the financial system safer, we must consider whether those rules are actually causing concentration risks and decreasing customer access to clearing. These stability concerns should be front and center for regulators.”

Darcy Bradbury stated, “As each of the regulators has worked to make the financial system safer, the practical impact of all the new bank capital and client margin rules hasn’t been fully assessed. While each component may make sense in isolation, in combination, I am concerned that we may be raising costs of traditional intermediary activities more than is necessary to protect the system. For example, CFTC Chairman Timothy Massad recently expressed concerns to Congress about a bank capital rule that would charge banks when they hold customer margin in fully segregated accounts.”

Maria Douvas discussed potential challenges resulting from diverse regulations. “Mandatory margin rules for uncleared swaps are critical to the derivatives reform agenda, and have been proposed globally, but not finalized,” Douvas stated. “These rules will present challenges for both dealers and their clients to implement because of the inherent operational and documentation complexity required for change. The fact that different regulators have proposed different rules, including as it relates to thresholds, segregation requirements and types of collateral that may be posted, will make implementation even more challenging for those participants with global businesses. We hope that regulators will continue to work together to harmonize rules to the extent possible, and to provide a framework for determining how rules should apply to cross border transactions.”

WIND – Creating Forums for Industry Dialogue

“One of WIND’s primary goals is to assist women in developing professionally,” explained Kristin Boggiano, President of WIND and Special Counsel at Schulte Roth & Zabel. “Events such as these provide a forum for engagement and discussion regarding critical issues taking place in the broader financial industry. In bringing a diverse group together to continue the dialogue surrounding the global impact of regulations, WIND is furthering its mission and assisting in educating and advancing women in the derivatives industry.”

CFTC Opens Comment Period on Position Limits

The CFTC has re-opened the comment period for Position Limits and Aggregation Limits in conjunction with the CFTC’s Energy and Environmental Markets Advisory Committee meeting. In its Notice of Proposed Rulemaking, the CFTC also provides in a chart counts of the unique persons over percentages of the 28 proposed position limit levels over the 2013-2014 time period. The comment period is open for 30 days to allow for people to comment on points made at the EEMA meeting and on the new chart. You can access the Notice of Proposed Rulemaking.

Challenges of Implementing BCBS-IOSCO

LONDON, Feb. 11, 2015 /PRNewswire/ — The derivatives industry faces challenges in the proposed introduction of margin requirements for non-cleared OTC derivatives transactions. Women in Derivatives (WIND), a nonprofit organization that provides channels for educating women through forums, brought together thought-leaders and experts in the derivatives industry who focused upon the impending margin requirements. At the first WIND educational event in London, the panel discussion focused on the challenges market participants may face as a result of implementing the BCBS-IOSCO proposal in relation to margin.

During “Changing Tides: The Evolution of Liquidity Pools in Today’s Global Markets”, panelists highlighted a range of issues including the anticipation of the final rules of the BCBS-IOSCO proposals and the need for regulatory coordination on both sides of the Atlantic, as well as globally.

The WIND event was hosted by international legal practice Allen & Overy in London. The panelists included leading professionals from the derivatives community:

  • Jenniffer Emanuel, Managing Director and Global Head of Counterparty Risk Management, Goldman Sachs;
  • Tina Hasenpusch, Chief Operating Officer, CME Clearing Europe;
  • Christiana Norman, Managing Director and Associate General Counsel, Bank of America Merrill Lynch; and
  • Melissa Tuttle, Executive Vice President and Global Head of Equity Trading, PIMCO.

In moderating the panel discussion, Emma Dwyer, Allen & Overy partner, commented: “In contrast to the imminent mandatory clearing obligation in the EU, which we sense the market is more prepared for, the margin requirements proposal still presents a multitude of questions for market participants. It will be interesting to see how the industry will carry out the work that still needs to be done in the proposed timeframe.”

Jenniffer Emanuel stated that “Implementation of the margin rules for uncleared swaps will be the single biggest and most complex logistical challenge the industry has faced as a result of regulatory change since the crisis.”

WIND Focus on Creating Forums for Female Leaders

“Creating a forum for senior female leaders to share their insights about trends and opportunities emerging in the financial industry is one of WIND’s top priorities,” explained Kristin Boggiano, President of WIND and Special Counsel at Schulte Roth & Zabel. “Our industry is undergoing historic regulatory and structural changes, and WIND provides a means for mentoring relationships to develop that help women navigate their careers as the market evolves.”

For more information about WIND and other WIND events, please contact:

Kristin Boggiano
President, Women in Derivatives
info@womeninderivatives.org

About Women in Derivatives
Women in Derivatives (WIND) is a nonprofit organization established in 2007. Its core mission is to attract, retain, educate and develop female leaders in the derivatives industry. It provides targeted channels for education, mentoring and sponsorship, leveraging senior leaders within its organization. Participants include people in trading, sales, law, economics, marketing, research, academia, government, operations and technology. For more information on how to become a member, please see http://womeninderivatives.org/membership/become-a-member/.

Rules on SB SDR Registration and Regulation SBSR

The SEC has just issued today the attached pre-publication versions (with links) of: (1) final rules on Security-Based Swap Data Repository (SB SDR) Registration, and Regulation SBSR – Reporting and Dissemination of Security-Based Swap Information; and (2) proposed rule, rule amendments and guidance on Regulation SBSR.  The Regulation SBSR proposals will have a 45-day comment period after their publication in the Federal Register.

Click here for the Joint Dissenting Statement from SEC Commissioners Gallagher and Piwowar, which also explains the SEC’s delayed issuance of its Regulation SBSR release.

SEC’s Results from Cybersecurity Sweep Exams

Today, the OCIE’s National Examination Program staff (the “Staff”), recently examined 57 registered broker-dealers and 49 registered investment advisers to better understand how broker-dealers and advisers address the legal, regulatory, and compliance issues associated with cybersecurity (the “Cybersecurity Examination Initiative” or the “Initiative”). The examined firms were selected to provide perspectives from a cross-section of the financial services industry and to assess various firms’ vulnerability to cyber-attacks. The press release of the cybersecurity data and report can be found here.

CFTC Commissioner Giancarlo released a White Paper

On January 29, CFTC Commissioner Giancarlo released a White Paper analyzing and expressing his concerns regarding the CFTC’s swap trading regulatory framework (see Press Release).  In it he states:

I am critical of the CFTC’s swaps trading rules because they increase market fragility and the systemic risk that the Dodd-Frank reforms were predicated on reducing. The rules also do not comply with the clear provisions of the law. My proposed swaps trading framework is pro-reform. It offers a comprehensive, cohesive and flexible alternative that betters aligns with swaps market dynamics and is more true to Congress’s stated intentions,” stated Commissioner Giancarlo

 

 

Women in Derivatives News

U.S. (CFTC, SEC, U.S. Prudential Regulators):

• On January 14, the SEC held an Open Meeting approving the following by votes of 3-2 (dissents by Commissioners Gallagher and Piwowar; also see statements from Chair White and Commissioners Aguilar and Stein; Press Release):
1. Final Rule on SBSD Registration, Duties and Core Principles
2. Final Rule on Regulation SBSR – Reporting and Dissemination of SBS Information
3. Proposed Rules, Amendments and Guidance to Regulation SBSR

• On January 13, the CFTC issued a No-Action Letter extending temporary relief from the reporting of certain identifying information through January 16, 2016 (see Press Release).

• On January 6, the CFTC issued a No-Action Letter providing relief to swap dealers from compliance with certain CCO reporting line requirements (see Press Release).

• Also on January 6, the CFTC published an extension for a Proposed Information Collection Notice for DCO reporting requirements (comments due February 5, 2015).

• On January 5, the CFTC published a clarification regarding the reopening of its comment period for its Proposed Rules on Position Limits for Derivatives and Aggregation of Positions (comments due by January 22, 2015; see Press Release and statement from CFTC Commissioner Bowen). The clarification notes that, in addition to comments on the proposal itself, commenters may also addressed issues discussed at the Dec. 9 Agricultural Advisory Meeting or related materials posted on the CFTC website (see Press Release).

International:

• ESMA will hold a hearing on February 19 to discuss issues on MiFID II/MiFIR.

• On January 16, ESMA announced an MOU with the Hong Kong Securities and Futures Commission regarding CCP (effective December 19, 2014).

• On January 9, ESMA released an updated list of CCPs recognized under EMIR (see Press Release).

• On January 8, ESMA released a review of CCP colleges under EMIR.

• On December 24, the IMF released a working paper analyzing CDS settlement auctions.

• On December 22, ESMA released an annex to the MiFID II draft consultation on cost-benefit analysis.

• On December 19, ESMA released a final report on technical advice to the EC regarding MiFID II and MiFIR, along with a draft consultation (also see Annex). Comments on the Consultation are due by March 2, 2015.

• On December 11, the European Commission issued a release entitled “Implementing Regulation on the Extension of the Transitional Periods Related to Own Funds Requirements for Exposures to CCPs”, extending the transitional period for capital requirements for exposures to CCPs (see Press Release).

• On November 25, IOSCO released its Draft Consultation on Cross-Border Regulation (comments due by February 23, 2015) (see Press Release).

• On November 17, IOSCO released a draft consultation paper on CDS post trade transparency (comments due by February 15, 2015).

Hearings/Regulatory Meetings/Legislation/Speeches/Testimony

• On January 21, CFTC Commissioner Sharon Bowen issued a statement regarding retail FX markets.

• Also on January 21, the House Financial Services Committee held a hearing to adopt its oversight plan for the 114th Congress.

• On January 20, Senate Appropriations Chair Thad Cochran (R-MS) announced subcommittee chairman for the 114th Congress.

• On January 19, CFTC Chairman Timothy Massad delivered a speech regarding derivatives reform in Asian markets.

• On January 15, the U.S. Department of the Treasury and European Commission issued a joint statement on “U.S.-EU Financial Markets Regulatory Dialogue”.

• On January 14, the House passed H.R. 37, “Promoting Job Creation and Reducing Small Business Burdens Act.” This bill included provisions exempting certain end-users from margin requirements, exempting non-financial inter-affiliate transactions from certain requirements, and delaying the conformance period for collateralized loan obligations under the Volcker Rule. See statement from HFSC Chair Jeb Hensarling (R-TX) and Press Release.

• Also on January 14, House Financial Services Committee Chair Hensarling announced subcommittee assignments for the 114th Congress.

Recent Regulatory Activity

CFTC, SEC, U.S. Prudential Regulators:

  • On January 6, the CFTC issued a No-Action Letter providing relief to swap dealers from compliance with certain CCO reporting line requirements (see Press Release).
  • Also on January 6, the CFTC published an extension for a Proposed Information Collection Notice for DCO reporting requirements (comments due February 5, 2015).
  • On January 5, the CFTC published a clarification regarding the reopening of its comment periodfor its Proposed Rules on Position Limits for Derivatives and Aggregation of Positions (comments due by January 22, 2015; see Press Release and statement from CFTC Commissioner Bowen).  The clarification notes that, in addition to comments on the proposal itself, commenters may also addressed issues discussed at the Dec. 9 Agricultural Advisory Meeting or related materials posted on the CFTC website (see Press Release).
  • On December 29, the CFTC issued an extension of relief for FCMs from certain acknowledgment letter requirements (see Press Release).
  • Also on December 29, the SEC published a list of rules that will be reviewed pursuant to the Regulatory Flexibility Act (comments due January 28, 2015).
  • On December 23, the OFR published a blog post regarding U.S. progress with G20 priorities.
  • On December 22, the CFTC took two actions:
  1. The Commission issued an advisory an no-action letter regarding annual SD, MSP and FCM CCO reports (see Press Release); and
  2. The CFTC’s subcommittee on FX Markets submitted a report to the GMAC regarding recommendations on an FX NDF clearing mandate (see Press Release)
  • Also on December 22, the CFTC and SEC published their semiannual regulatory agendas.  Comments on the SEC agenda are due by January 21, 2015.
  • On December 19, the CFTC issued a No-Action Letter providing relief from certain CPO registration requirements for ILS issuers (see Press Release).
  • Also on December 19, the OCC released a report on bank trading and derivatives activity in the 3rd quarter of 2014 (see Press Release).
  • On December 18, the GAO issued a report analyzing regulators’ Dodd-Frank analytical and coordination efforts (see highlights).
  • On December 16, the CFTC issued a No-Action Letter providing relief to CTAs from certain recordkeeping requirements under 1.35(a) (see Press Release).
  • Also on December 16, the Federal Reserve and OCC released an Interim Final Rule on Regulatory Capital Rules, Liquidity Coverage Ratio: Interim Final Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions.  The Interim Final Rule is effective January 1, 2015; comments are due by March 3, 2015.

International:

  • On December 24, the IMF released a working paper analyzing CDS settlement auctions.
  • On December 22, ESMA released an annex to the MiFID II draft consultation on cost-benefit analysis.
  • On December 19, ESMA released a final report on technical advice to the EC regarding MiFID II and MiFIR, along with a draft consultation (also see Annex).  Comments on the Consultation are due by March 2, 2015.
  • Also on December 19, ESMA released a final report on drafting implementing technical standard on main indices and recognized exchanges under CRR.

Re-Opening of the Comment Period for CFTC Position Limits

On December 1, the CFTC announced the reopening of its comment period for its Proposed Rules on Position Limits for Derivatives and Aggregation of Positions (comments due by January 22, 2015; see Press Release and statement from CFTC Commissioner Bowen).  The re-opening coincides with an upcoming Agricultural Advisory Meeting, to be held on December 9, which will focus on issues relating to deliverable agricultural commodity supplies in relation to position limits and the agricultural economy (see Federal Register Notice).