Risk USA: Banks say new trades and novations create real funding costs
Dealers demanding compensation for extra funding costs
Capital a “sword of Damocles”, says Litvack; cleaner CSAs will fix valuation woes
Rule change ends years of uncertainty and piecemeal reform
Novations and profit-sharing form part of push to trim derivatives valuation adjustments
Dealers offer rewards to clients and rivals for help in cutting valuation adjustments
Standard-setter decides trades can still qualify for hedge accounting when voluntarily novated to a CCP, but experts warn wider stance on novation could cause trouble
Trades cleared voluntarily would not be protected by hedge accounting under IASB proposals
The adjustment bureau
Middleware provider MarkitServ now in line with industry standard - two months after initially planned and more than three months after rival Ice Link.
Revised rules replace laborious consent-then-confirm novation process
As the US Congress moves to boost derivatives clearing requirements, an industry panel has called for regulators to investigate a move towards clearing and netting across US power markets and to clarify the legal uncertainty in the area
The demise of Lehman Brothers has triggered fresh concerns about counterparty risk, creating a wave of novations and forcing dealers to think harder about the possibility of another major derivatives counterparty defaulting. Mark Pengelly reports
The International Swaps and Derivatives Association today launched its updated Novation Protocol II (NPII).