Pension funds sign hedge-only agreements with banks
Cardano and PGGM promise not to give banks speculative trades as dealers try to limit complexity of EU’s pension fund clearing exemption
Pension funds are promising not to execute certain over-the-counter derivatives with some of their dealers to avoid complications arising from Europe's clearing exemption. Trades must reduce a fund's risk in order to qualify for the exemption but some banks say it will be too difficult to identify and separate risk-reducing and non-risk-reducing trades – in addition to the clearing exemption, trades that do not reduce risk are also subject to Basel III's credit valuation adjustment (CVA) charge
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