Among the have-your-cake-and- eat-it-too suggestions following enactment of the Dodd-Frank Act is to form a new type of “clearinghouse” that allows traders to opt-out of the mutualized risk pool so that their funds at the clearinghouse cannot be touched if someone else defaults. (more…)
My, the editorials abound these days about the wacko Dodd-Frank Act and how it will bring ruin to all of us. Now we “learn” that derivatives will move abroad if the governing boards of exchanges and clearinghouses are not controlled by their customers, i.e., if the Commodity Futures Trading Commission goes ahead and requires (as the Securities and Exchange Commission already does!) that a majority of sitting directors should be unaffiliated with the market’s brokers and traders.
The Futures Industry Association (FIA) hosted a panel on Oct. 18 to discuss the status of clearing in Chicago including a look at where we are going from here. Speakers included heads from the Options Clearing Corporation (OCC), CME Group and ICE Clear U.S. Of particular interest to each speaker was the Commodity Futures Trading Commission’s (CFTC) rules that were proposed that would limit the ownership a single entity could hold in a swaps clearinghouse. (more…)
The over the counter (OTC) derivatives market has come under pressure in the aftermath of the economic meltdown and subsequent increased regulatory challenges. However, according to a new study by Aite Group, OTC asset classes are experiencing growth again, with growth in the credit default swaps (CDS) market outpacing other asset classes. According to the report, the drivers of this growth included a steady need for derivatives during the credit crisis and the development of central counterparties by exchanges to clear CDS. (more…)
The Dow Jones Industrial Average today closed down 369.88 points today. At one point the index was down 800 points, closing below 10,000 for the first time in four years at 9955.50.
“I don’t think anybody expected to walk into this today,” says OptionsXpress futures analyst Robert Kurzatkowsi. “Everybody knew Europe was bad and was going to feel the crunch of this financial mess. Everybody here expected them to be much more proactive about trying to ease the crisis over there.” The European Central Bank last week declined to lower interest rates, but since that initial hesitancy, Germany is trying to construct “a national financial shield,” he says and the United Kingdom has announced that it will cooperate with the United States to help ease the credit crunch.
During this time of remarkable volatility, brokerage firms and exchanges are constantly revising margin requirements.
After the Department of Justice (DoJ) released its comment letter last week on the regulatory structure associated with financial institutions advocating the changing of regulatory policy “so as to foster exchange competition by, inter alia, ending exchange control of clearing,” we decided to ask a few trading experts what, if anything, they would like to see change in the clearing structures at CME Group or any other exchange. Based on its comment letter, the DoJ “doesn’t have a good handle on how the markets work,” says Phil Flynn, VP and senior market analyst at Alaron. The breakup of clearing from the exchanges “would hurt the U.S. markets” and make it easier for foreign competition, Flynn says. “There’s no need to break up the CME Group” from its clearing, Flynn says, adding that he thinks the clearing structure at CME works well in its current state. “They’ve been clearing trades successfully for over 100 years,” and there’s no need to change that, he says. For more on the DoJ’s comment letter and reaction from various industry players, see the March issue of Futures magazine.
