Friday, July 13, 2012

EU to Provide Hedging Exemption for OTC Derivatives

Author: David Schwartz J.D. CPA
In his July 4 address before the Europlace Financial Forum, European Securities and Markets Authority  (ESMA) chair, Steven Maijoor, announced that ESMA would be proposing standards implementing regulation of OTC derivatives, central counterparties and trade repositories (EMIR) by September 30.  Maijoor said that these implementation standards will include an end-user exemption similar to the one expected to be in place under the Dodd-Frank Act.
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Wednesday, July 11, 2012

Is the CFTC Fatally Fragmenting the Global Swaps Market?

Author: David Schwartz J.D. CPA
On July 6, House Financial Services Committee Chairman Spencer Bachus (R-AL) initiated a series of hearings reviewing the two-year experience of the Dodd-Frank Act, and in particular the effects of its derivatives provisions.  Prompted by the June 28 release by the CFTC of proposed interpretive guidance regarding the application of the Dodd-Frank Act to non-US persons engaging in swaps activities with a connection to the US,  Bachus also urged the Senate to pass legislation, HR 2682, codifying and clarifying the end-user exemption from Dodd-Frank derivatives regulation.  These congressional moves arise amid fears in the financial industry that the CFTC's proposed cross-border rules could create dangerous fragmentation among financial firms operating internationally.
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Saturday, July 7, 2012

Risk Management - High Level, but Low Tech

Author: David Schwartz J.D. CPA

According to a June survey conducted by KPMG LLP, enterprise risk management processes of many major financial services firms are surprisingly manual - perhaps dangerously so.  The survey results are somewhat unexpected given that the financial services industry is one of the most technologically sophisticated, complex, and heavily regulated industries there is.  Of the financial firms responding to the survey, 47% relied primarily on manual processes across their organizations to manage enterprise risk and compliance.

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Friday, July 6, 2012

As Deadline Looms G20 Urges Action on OTC Derivatives

Author: David Schwartz J.D. CPA
In their final communiqué from June's Los Cabos meeting, the G20 said that it expects member nations to finalize their OTC derivatives regulations in order to meet the the G20's fast approaching deadline.  The communiqué urges member nations to fast track their legislative and regulatory policy processes so that by the end of 2012 all standardized OTC derivative contracts are traded on exchanges or electronic trading platforms (as appropriate) and cleared through central counterparties.  In addition, the G20's committment calls for OTC derivative contracts to be reported to trade repositories, and non-centrally cleared contracts to be subject to higher capital requirements by the end of 2012 as well. 
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Tuesday, July 3, 2012

From Earthquakes to Financial Shocks, Contingency Planning is Key to Survival

Author: David Schwartz J.D. CPA
. . . a company must choose the most appropriate decision from the perspective of business management by accurately identifying the balance between the loss that would be incurred if business were to be halted by an earthquake and the cost for risk mitigation measures which constitute trade-off relationships.


Inevitably, disasters will happen.  They can take many forms, from natural disasters like earthquakes to the purely manmade kind like financial shocks.  The occurrences of both in the recent past demonstrates dramatically that how a business prepares for adverse contingencies is key to their survival. Kasuchica Asano of the Nomura Research Institute has published a paper exploring business continuity plans, and the lessons companies can take from the March 11, 2011 Great East Japan Earthquake.  Asano's analysis focuses purely on business continuity planning for and reacting to widespread natural disaster.  Much of his analysis, however, can be applied in the context of a financial crisis as well.  
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