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.”