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Frontloading bedevils swap pricing 

April 7, 2014
Christopher Whittall, IFR

Major derivatives dealers are struggling to price interest rate swaps because of uncertainty in the European regulatory regime triggered by the countdown to mandatory central clearing for over-the-counter derivatives which started last month.

Nasdaq OMX fired the starting pistol for European clearing on March 18 when it was the first to be given the green light from European regulators to operate as a central counterparty.

As a result, banks are now having to deal with frontloading – the requirement under the European Market Infrastructure Regulation for certain derivatives trades that are executed between the time a CCP is authorised and before it goes online to be funnelled through clearing later on.

Read more: IFR

 
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