Swaptions compensation method divides market
US and European firms back redress payments, but disagree over how they would work
Swaptions users are struggling to agree a method for compensating investors that lose out from the upcoming change in swap discount rate at clearing houses.
Market participants in the US and Europe broadly agree that a compensation mechanism is needed, but divisions still remain within each jurisdiction over how it would work in practice.
With any method of redress likely to be voluntary, there are concerns that beneficiaries of the rate switch will be loath to hand over windfall gains to the
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