Sunday, May 21, 2017

CFTC Chair Highlights Effect of Regulation on Liquidity

Urges Regulatory Recalibration and More Comity

Author: David Schwartz

In a May 10, 2017 address, acting Chairman of the Commodity Futures Trading Commission (CFTC)  J. Christopher Giancarlo highlighted some unintended consequences regulation is having on the swaps markets. In his speech before the International Swaps and Derivatives Association 32nd Annual Meeting in Lisbon, Portugal Giancarlo talked about the changes to swaps trading liquidity, market fragmentation and regulatory comity in the post-reform global swaps markets. After providing an overview of how some aspects of the misapplication and miscalibration of regulatory reforms were harming global liquidity, he provided some astute observations on how to alleviate some of the harm being done to swaps markets in particular. 

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Monday, February 29, 2016

SEC Expects its Cross-Border Swaps Regulations to "Level the Playing Field"

Author: David Schwartz

On February 10, 2016, the Securities and Exchange Commission approved final rules intended to ensure that both U.S. and foreign dealers are subject to U.S. regulation when they engage in security-based swap dealing activity in the United States. The new rules require non-U.S. companies that use personnel located in a U.S. branch or office to arrange, negotiate, or execute a security-based swap transaction in connection with its dealing activity to include that transaction in determining whether it is required to register as a security-based swap dealer. The rules should sweep more non-U.S. security-based swap dealers into the SEC’s regulatory ambit, thereby subjecting more of the global business to consistent registration and regulatory requirements.  

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Tuesday, December 1, 2015

Swap Dealers Sued as Monopolists

Author: David Schwartz

On November 25, 2015, the Chicago Public School Teachers’ Pension and Retirement Fund and other institutional investors filed a class action lawsuit in federal court alleging that ten of the world’s largest investment banks conspired to rig the lucrative interest rate swaps market.  The suit filed in the U.S. District Court in Manhattan accuses the investment banks of violating federal antitrust laws by colluding to create an anti-competitive stranglehold over the market for interest rate swaps for their own profit.  Plaintiffs say the ten defendant banks, Goldman Sachs Group, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse Group, Barclays Plc, BNP Paribas SA, UBS, Deutsche Bank AG, and the Royal Bank of Scotland worked together to prevent the trading of interest rate swaps on electronic exchanges, creating a monopoly, and extracting millions of dollars in overpayments from trading clients.

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Wednesday, January 21, 2015

SEC Adopts New Rules Governing Security-Based Swaps Transactions

Author: David Schwartz

The SEC has issued final rules governing security-based swap data repositories (SDRs) prescribing reporting to regulators and setting public disclosure requirements for security-based swap transaction data.  These new rules implement mandates under Title VII of the Dodd-Frank Act requiring the SEC and CFTC to regulate swaps markets. The final rules approved by the Commission on January 14, 2015 "provide a powerful framework for trade reporting and the public dissemination of information that addresses blind spots exposed by the financial crisis.”   

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Thursday, December 11, 2014

Tarullo: Liquidity Regulation Today and Tomorrow

Who Will Be Swept Up in the Next Round of Liquidity Rules?

Author: David Schwartz

The financial crisis of 2007-08 was a crisis of liquidity. Facing deep uncertainty about the condition of counterparties and the value of collateral assets, investors refused to offer new short-term lending or even to roll over existing repos and similar extensions of credit. As a result, many funding markets ground to a halt.  The role liquidity, or rather the sudden lack of liquidity, played in the most recent crisis is unlike that experienced in the savings and loan crisis or the Latin American debt crisis of the 1980s.  Consequently, regulators and policy-makers have found the regulation of liquidity to be a new frontier, and one that remains the focus of keen interest to the Federal Reserve.  Recently, Fed Board Governor Daniel K. Tarullo outlined his thoughts on both the importance of liquidity regulation, and the direction he sees it heading.

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