Interest rate swaps
Swaps data: cleared volumes drop for all markets – except FX
Smaller CCPs make market share gains in a quarter of double-digit declines for rates and credit
Fed funds swaptions offer SOFR alternative
Investors dry-run systems using familiar overnight rate, as markets wait for SOFR liquidity to build
Dealers cast doubt on swaptions compensation plans
Redress scheme for victims of post-Libor valuation change may fail due to “cherry-picking” fears
FCA: sign up to fallback protocol or face ‘serious questions’
UK regulator urges derivatives users to accept Isda swap fallbacks to ensure compliance with benchmark law
Synthetic Libor faces legal obstacles
EU benchmark rules may thwart ‘tough legacy’ fix, reviving calls for blanket legislation
Margin exchange threshold relief: get out of jail free?
‘Game-changing’ IM exchange threshold relief may not be the phase five free pass it first appears
Goldman, JPM kick off SOFR swaptions
US dealers spearhead non-linear trading but patchy liquidity weighs on vol market ambitions
Isda plans February rerun of Libor pre-death trigger poll
Lack of consensus would add pre-cessation option to post-cessation protocol for bilateral swaps
Custody battle: competing tensions put IM prep in jeopardy
Conflicting custody interests and delayed docs call IM phase five readiness into question
Libor replacement jumble may hike hedging costs
Use of term rates and credit adjustments will create new basis risks that could be costly to hedge
LCH targets hardwired pre-cessation triggers
Proposal aims to align transfer pricing for cleared and bilateral markets in the event of split on ‘zombie Libor’ triggers
Bank disruptors: Crédit Ag taps AI to lure swaptions business
Machine learning model predicts client demand with high accuracy, giving traders an edge in pricing
New pre-cessation poll likely as FCA quells zombie Libor fears
Minimal non-representative lifespan opens door for rerun of Isda trigger consultation
Judgement day looms for dealers in swap shift to Sonia
Regulator pushes Q1 deadline for users to adopt risk-free rate as norm for interdealer trades
Giant £174bn Sonia swaps trading day may be biggest ever
Mammoth swaps focus on upcoming announcements from the Bank of England’s Monetary Policy Committee
EU compounding confusion creates headaches for banks
With the fallback possibly illegal in some EU states, loan system updates may become more complicated
At CME, required IM up 18% in Q3
Surge follows busy August and September for the swaps clearing business
Eurex: from EQD clearing specialist to all-rounder
Initial margin for equity derivatives makes up 41% of total, down from 63% four years prior
Singapore’s banks eye LCH membership
London CCP’s move to clear for stranded SGX clients pays off, amid broader Apac membership push
Sonia users push for official in-arrears rate
US Fed proposal for compounded SOFR index leads to calls for endorsement of NatWest’s Sonia calculation
US firms must rerun non-cleared margin test in March
Proposed CFTC calculation delay offers in-scope firms chance to trade out of phase five compliance
Compounded rate out of favour, finds Japan survey
Users prefer forward-looking term rate to replace yen Libor, but dealers bemoan “lack of understanding”
Initial margin – A regulatory bottleneck
With the recent announcement of an extended preparation period for those smaller entities needing to post initial margin under the uncleared margin rules, the new timetable could cause a bottleneck for firms busy repapering derivatives contracts linked…
Euribor fallbacks could hit thin legal ice
In Italy and Germany, compound interest – the foundation of Euribor fallbacks – is actually illegal