The swaps market, Euribor and Mifid II

The week on, February 5–11, 2016


EU-US clearing dispute is over (almost)

EURIBOR panel struggling for numbers

MIFID II may drive some single-dealer platforms out of business


COMMENTARY: Forcing change

New regulatory capital requirements could force an upheaval in the swaps market, with the success of Citadel's cleared swaps business providing both a threat and a temptation to banks wanting to sidestep the Fed's capital and liquidity standards. If they go ahead, the result could be a very different – and more diverse – swaps market in a few years' time.

This diversity can already be seen elsewhere in the fixed-income space, where the growing number of non-bank market-makers could actually prove the saviour of banks struggling with higher capital requirements. Banks in the US Treasury market are considering reining in their use of broker-run platforms, saving costs, and dealing directly with non-bank liquidity providers such as Citadel, Knight Capital Group and Virtu Financial, instead.

Elsewhere, banks are stuck with the capital hit – for now, anyway. A survey conducted by industry lobbying group Sifma found asset managers are paying more for clearing services as a result of the leverage ratio, which does not allow client margin to reduce a clearing provider's derivatives exposure, forcing it to be recognised as an exposure in its own right. The rule has been drawing heavy fire for the past year, and there was a sign of hope for the banks this week as the Bank of England came out in favour of softening the ratio "to ensure continuity and affordability of client clearing services".


"The best equity trading houses in the world are not part of a retail bank; they are specialised trading venues that hardly have any risk on their books, but just facilitate exchange trading. Eventually that is going to be the model in the swaps market" – head of rates trading for one European bank.


Assets under management in Japanese ETFs have grown 15-fold from $650 million in 2013 to more than $10 billion.



Isda and FIA urge phased implementation of Mifid II
One-year delay to new regime will not solve data problems, industry argues

SEC rule hikes cost of trading US CDS for non-US firms
CDS trades between non-US counterparties will be captured under Dodd-Frank

Priips stakeholders in final push for German-style risk ratings
European authorities' risk scale "too conservative", says trade body

All you need to know about op risk in four letters
Processes, people, systems and external events are fundamental to operational risk management, says Ariane Chapelle

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