Final FRTB tweak ‘will kill correlation trading’, say dealers
Some European banks plan to lobby ECB for relief when rules are transposed to local law
Changes to market risk rules are threatening to drive up capital charges for correlation trading desks, and may force dealers to rethink hedging methods or close down the business altogether.
The latest version of the Fundamental Review of the Trading Book, finalised in January, prevents banks from offsetting credit default swap indexes against their single-name constituents. Credit correlation trades depend on arbitraging these two components.
European banks are now hoping to persuade local
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