Monday 22nd December 2014
NEWS TICKER: MONDAY, DECEMBER 22ND 2014: NASDAQ welcomed 313* new listings this year, including 189 initial public offerings (IPOs), worth a combined $22bn -- more IPOs than any other US exchange, representing a 50% increase from the 126 IPOs in 2013. The exchange says that 62% of the top 100 best performing IPOs overall this year, including eight of the top ten, listed on its main board – Meanwhile, TMX Group today announced that Toronto Stock Exchange (TSX) set a new daily volume record on December 19th with 1,535,887,985 shares traded, which surpassed the previous record of 895,769,152, $20,213,746,759. The previous record of $19,278,924,809 was set on September 18th 2008.which was set on December 19th 2008 - Fitch Ratings has revised the Outlook for both Bahrain's Long-term foreign and local currency Issuer Default Ratings (IDR) to Negative from Stable and affirmed the IDRs at 'BBB' and 'BBB+', respectively. The issue ratings on Bahrain's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB' and 'BBB+', respectively. The agency has simultaneously affirmed Bahrain's Country Ceiling at 'BBB+' and Short-term foreign currency IDR at 'F3' - Finnish IT company Neonella Oy (Ltd) is launching a service platform that enables the use of bitcoins, as part of interactive advertising, for example in TV-programs. The service also makes bitcoin transactions possible from media companies or advertisers to consumers. Neonella is currently seeking funding for the platform through a crowdfunding campaign. The payment interface developed enables ordering of goods or services within video or TV programs. It is also possible to vote, donate and encourage the viewers to tell about their opinions as part of the content. The same technology works in internet marketing and banners as well as in TV- and video content. - Citi is reportedly stepping in to absorb the energy and metals commodity-trading books of Credit Suisse. Citi's acquisitions will be added to the trading books it took on from Deutsche Bank this year - Credit Suisse Group meanwhile is focusing on equity trading. The banking group is said to be working with Intercontinental Exchange to restore more trading on the exchange. ICE is proposing a compromise in which exchanges agree to reduce stock-trading prices and banks agree to a rule requiring more trading on exchanges, reports the Wall Street Journal - Looking beyond post FED rate hike actions should be the key for investors to explore deep values at reasonable earnings momentum thinks Is Yatirim in Istanbul. The firm’s analysis think that the world will have to endure “a long period of low-growth, low-environment double whammy, which may not necessarily bad for Turkey [which] has hunger for foreign savings at least for another five years – Private equity firms Lombard Investments and LeapFrog Investments have bought just under 11% of the shares of Thai insurer Syn Mun Kong (SMK) for $57.5m from the Royal & Sun Alliance Group (4.35m shares at around $13.20 each), according to a regulatory filing - VTB Capital has successfully completed the RUB 2.5 billion securitisation deal for AK BARS BANK mortgage portfolio​ as part of the Vnesheconombank's programme for investing in affordable housing and mortgages in 2010-2013 - According to the US government technology news agency, North Korea has denied the Obama administration's allegations that it launched the hack attack against Sony Pictures Entertainment and has demanded that a joint investigation with the US into the incident be launched. The secretive communist regime, based in Pyongyang, also promised there would be "grave consequences" if the United States failed to agree to the joint probe. - Fitch Ratings has revised the Outlooks on Bahrain's Long-term foreign and local currency Issuer Default Ratings (IDR) to Negative from Stable and affirmed the IDRs at 'BBB' and 'BBB+', respectively. The issue ratings on Bahrain's senior unsecured foreign and local currency bonds have also been affirmed at 'BBB' and 'BBB+', respectively. The agency has simultaneously affirmed Bahrain's Country Ceiling at 'BBB+' and Short-term foreign currency IDR at 'F3' - Finnish IT company Neonella Oy (Ltd) is launching a service platform that enables the use of bitcoins, as part of interactive advertising, for example in TV-programs. The service also makes bitcoin transactions possible from media companies or advertisers to consumers. Neonella is currently seeking funding for the platform through a crowdfunding campaign. The payment interface developed enables ordering of goods or services within video or TV programs. It is also possible to vote, donate and encourage the viewers to tell about their opinions as part of the content. The same technology works in internet marketing and banners as well as in TV- and video content. - Citi is reportedly stepping in to absorb the energy and metals commodity-trading books of Credit Suisse. Citi's acquisitions will be added to the trading books it took on from Deutsche Bank this year - Credit Suisse Group meanwhile is focusing on equity trading. The banking group is said to be working with Intercontinental Exchange to restore more trading on the exchange. ICE is proposing a compromise in which exchanges agree to reduce stock-trading prices and banks agree to a rule requiring more trading on exchanges, reports the Wall Street Journal - Looking beyond post FED rate hike actions should be the key for investors to explore deep values at reasonable earnings momentum thinks Is Yatirim in Istanbul. The firm’s analysis think that the world will have to endure “a long period of low-growth, low-environment double whammy, which may not necessarily bad for Turkey [which] has hunger for foreign savings at least for another five years – Private equity firms Lombard Investments and LeapFrog Investments have bought just under 11% of the shares of Thai insurer Syn Mun Kong (SMK) for $57.5m from the Royal & Sun Alliance Group (4.35m shares at around $13.20 each), according to a regulatory filing - VTB Capital has successfully completed the RUB 2.5 billion securitisation deal for AK BARS BANK mortgage portfolio​ as part of the Vnesheconombank's programme for investing in affordable housing and mortgages in 2010-2013.

New report says Asian OTC derivatives reform continue challenging for the buy side

Wednesday, 07 December 2011
New report says Asian OTC derivatives reform continue challenging for the buy side New Celent report looks at OTC derivatives market conditions in Asia, traded volumes, and structure, and the impact of regulatory changes on the segment. http://www.ftseglobalmarkets.com/

New Celent report looks at OTC derivatives market conditions in Asia, traded volumes, and structure, and the impact of regulatory changes on the segment.

The leading Asian economies have been active in their quest for more centralised clearing in the over-the-counter (OTC) derivatives markets. Japan and Singapore have taken the lead in setting up clearinghouses to deal with OTC derivatives such as credit default swaps and interest rate swaps, according to a new report, OTC Derivatives Reforms in Asia: Challenging for the Buy Side, from Celent, a Boston-based financial research and consulting firm.

The Asian central clearing model is slightly different than models in the US and Europe. In those markets, there are norms for the trading of standardised OTC products. There too, it is expected that trading will take place on regulated platforms and that CCPs will undertake the clearing for such trades. In Asia, however, there are no regulations governing the move of trading to regulated platforms, and trading is still expected to happen in a bilateral manner. In that context: “There are doubts over the sustainability and viability of central clearing in Asia, because there is a great deal of fragmentation,” says Anshuman Jaswal, Celent senior analyst and author of the report. “The existence of multiple jurisdictions could lead to regulatory arbitrage.”



The share of the Asian OTC derivatives market in global notional outstanding is around 15% for both OTC equity derivatives and interest rate swaps. It is only 2% for credit default swaps (which are not very popular in Asia) and 26% for OTC FX derivatives, with Japan contributing a majority of this volume.

Among the other findings of the report, it is clear that collateral and margin management will become more complex and expensive. One of the important changes will be the higher cost of collateral management. Right now, bilateral clearing allows the counterparties to decide on the necessary collateral. The mutual understanding and experience of trading with counterparties plays an important part in ensuring that the collateral requirements are not very high. However, it is expected that CCPs would be more conservative in their approach and set higher collateral and margin requirements going forward. Any cross-margining benefits that the larger participants currently derive from trading larger volumes might not carry into the new regime, and CCPs are expected to be more cautious in this regard.

The report also finds that central clearing would lead to significant IT and infrastructure costs. Market participants in leading Asian markets are expected to bear any increase in costs resulting from a move to central clearing. Certainly, connectivity requirements are going to increase and it is going to be difficult for the smaller buy side firms and regional banks to create and maintain the infrastructure required to trade in the OTC markets. “It is expected that the leading sell side firms will try to meet the buy side requirements by providing this infrastructure as an additional service that would resemble the connectivity they provide for exchange-based trading and post-trading services. Besides clearing, in most instances, connectivity would be required to the trade repositories that are expected to improve the post-trade transparency across these markets,” says the report.

Moreover, the report suggests that CCP clearing will invariably become a revenue-generating opportunity for clearinghouses and clearing brokers in the global markets. However, this might not be the case in Asian markets because the volumes in a number of these markets are not significant. There are also some doubts voiced in the report over the sustainability and viability of central clearing in Asia, because there is a great deal of fragmentation. One or two clearinghouses would be ideal for such a scenario, but the existence of different CCPs in each national market means higher costs for firms that are trading in more than one market because they have to create a separate infrastructure in each market.

The report mentions the obvious benefits of the introduction of central clearing, such as improved risk management and efficiency benefits. Once the infrastructure is ready and clearing is taking place on an ongoing basis, risk management and efficiency are going to improve for the OTC derivatives markets. Clearinghouses performed well during the financial crisis, and it is expected that central clearing will perform in a similar fashion. Additionally, Portability will be an important aspect of central clearing. A crucial aspect of the strategy to reduce systemic risk has to be the mechanism to cope with a clearing member's default. This can be done through portability, which allows a market participant to move their trades from a defaulting clearing member to another clearing member, thereby ensuring continuity and reducing systemic risk. While it plays a vital role, portability has complications. In markets where the mechanism has been provided, there would still be the added complication of ensuring it works even under stressful market conditions, such as a broker default.

There is, however, a possibility that regional and global players that operate across a number of markets would choose to move their OTC business to markets with the least regulation and lowest collateral and margin requirement costs. This would be undesirable for both the market that loses the business and the market that gains it. The market that loses business might not be able to sustain its CCP due to low volumes. The market that gains the business might have artificially high volumes and therefore would have more complex issues with regard to systemic risk in case of a default by a clearing member or even a CCP. Multiple markets with CCPs also mean that the jurisdictions will have to address extra-territoriality and interoperability issues that will arise.

It is a sensitive time for the OTC derivatives segment as it undergoes change. While volumes in the global OTC derivatives market have recovered from the lows of 2008, the move to central clearing is expected to lead to a dip in volumes globally for the next couple of years. Volumes are expected to fall in 2012 and 2013, with the recovery beginning in 2014.

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