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EU rules threaten swaps compression 

November 3, 2014
Helen Bartholomew, IFR

Industry-driven initiatives to streamline balance sheets by clearing out superfluous swaps trades are set to come under pressure as clearing and execution rules being rolled out across Europe threaten to slap higher costs on an activity that is intended to reduce risk.

Post-trade risk reduction services have eliminated more than US$500trn in gross notional of over-the-counter derivatives contracts as dealers strive to flatten swaps exposures in the face of more stringent capital and leverage requirements.

But the service – offered primarily by post-trade infrastructure firm TriOptima and clearing houses themselves – faces new hurdles after Europe’s key swaps regulator failed to carve post trade risk reduction activities out of new rules that will see OTC derivatives cleared through central counterparties and ultimately traded over exchange-like venues.

Read more: IFR


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