Just in time for the CFTC and SEC's final swaps provisions, State Street and TABB Group have published a paper,
Charting New Territory: Buy-Side Readiness for Swaps Reforms, based on a survey of buy-side firms examining where the investment community stands on a range of issues arising from global swaps reforms. The paper also looks at the challenges the industry faces as it transforms from an opaque, over-the-counter, bilaterally traded environment to electronic execution and central clearing.
With the majority of firms looking for a roadmap to navigate these new regulations, the State Street TABB report examines a range practical issues financial firms are worrying about in the face of the new regulation of swaps:
- Selecting Central Clearing Counterparties;
- Whether and how a firm's trading or investment strategies need to be changed as a result of the new regulations;
- Dealing with the anticipated drop in swaps liquidity (the liquidity squeeze is cited by buy-size firms as the likeliest unintended consequence of regulatory reform); and
- Obtaining the high-grade collateral necessary to trade centrally-cleared swaps.
With the US and Europe already implementing their respective OTC derivatives reforms, this publication provides a useful roadmap to dealing with the reality of the new regulatory regimes.