Derivs - FX

Commodity Futures Trading Commission commissioner Mark Wetjen claimed that central counterparty risk mitigation and management strategies need more coordination and harmonisation. But legislative bodies should take note of the potential negatives associated with harmonisation and the centralisation of counterparty risk before pursuing new rules, said lawyers.

A lack of clarity over Canadian rules and regulatory oversight between provincial regulators has posed some challenges for derivative market participants. As Canada looks to fulfil components of the G20 reform mandate for OTC derivatives trading — including trade reporting, clearing and margin requirements — a lack of uniform compliance among participants and rulemaking differences between regulators pose hurdles for the market.

Turkish corporates and high net wealth individuals are buying downside puts on the dollar/Turkish lira currency pair with expiries of between three and 12 months, expecting the lira to rally as low oil prices benefit importers.

The European Securities and Markets Authority (ESMA) signed a memorandum of understanding (MoU) with the Australian Securities and Investments Commission (ASIC), which grants Australian authorities access to derivative contracts data from EU trade repositories (TRs) outside of their jurisdiction.

The Depository Trust and Clearing Corporation has partnered with TriOptima, enabling daily reconciliation of over-the-counter derivatives trades that are reported to DTCC’s European trade repository via triResolve, as mandated by the European Market Infrastructure Regulation.

The Singapore Exchange logged record volume of derivatives transactions in November with daily average trading volumes up 45% year-on-year, following the launch of the Shanghai-Hong Kong Stock Connect last month. This was primarily driven by FTSE China A50 futures and SGX FX futures in the Indian rupee and renminbi.

The International Swaps and Derivatives Association has elected Eric Litvack, managing director and head of regulatory strategy for Société Générale’s global banking and investor solutions business, as its new chairman. He will take over from current chairman Stephen O’Connor, on January 1, 2015.

Hedge funds have been picking up call spreads on sterling against the Swiss franc as opinion polls in Switzerland show declining support for a ‘yes’ vote in a gold referendum that will be held on November 30. The vote determines whether at least 20% of the Swiss National Bank’s assets should be held in gold.

Front end volatility trades in G10 currency pairs are likely to trend in the first quarter of 2015, particularly in the euro against the dollar, as strategists expect any significant spot movements in the pair to occur in Q1.

Funds have increasingly been buying topside options on the dollar against the yen as the Japanese unit continues to depreciate, however, high strikes on the currency pair are anomalously cheap despite the fact that both volatility and spot have continued to increase.

Hedge funds have been picking up puts on the euro against the dollar with reverse knockouts following increased volatility on the currency pair and a gradual strengthening of the latter currency over the past month.

Lawyers on both sides of the Atlantic hope that the creation of a clearing obligation for non-deliverable forwards (NDFs) could herald unprecedented regulatory cooperation between the Commodity Futures Trading Commission (CFTC) and the European Securities and Markets Association (ESMA).