Derivs - FX

European swap platforms are looking to match the language they use for swap trading to the language used by the bulk of swap execution facilities in the US, despite a breakdown in negotiations for mutual recognition between US swap execution facilities and their European equivalents, multilateral trading facilities.

European regulators are laying the groundwork for a derivatives market that will lead to greater benefits for non-European banks, according to Kim Taylor, president of CME Clearing. Taylor made the comments at the International Derivatives Expo in London today as EU regulators continue to stall in their authorisation of non-EU clearinghouses.

The Commodity Futures Trading Commission has slammed current efforts for mutual recognition of clearing regimes when European buyside firms attempt to access US clearinghouses. Ananda Radhakrishnan, director of the division of clearing and risk at the CFTC, called on the IntercontinentalExchange and LCH.Clearnet to clear its futures contracts exclusively at US designated contract markets, removing the need for equivalence in Europe.

Forcing clearinghouses to connect to rival venues under the revised Market in Financial Instruments Directive may have the unintended consequence of stifling competition among clearinghouses, leading to a small number of incumbent houses holding large amounts of risk.

Investors were tapping short-dated options on the euro against the dollar ahead of the much-anticipated European Central Bank meeting on Thursday, pushing volatility higher on the pair. However, some investors were caught out following interest rate cuts from the ECB, resulting in decreased vols and spot consolidating after a brief decline.

Investors have been picking up short-dated options on the euro against the dollar ahead of the European Central Bank meeting, due to take place Thursday.

Outperformance in five year CNY swaps flattened the curve on the rally on Thursday as liquidity concerns have eased. SCB recommends exiting paid two year CNH CCS positions, while Nomura is sticking with its paid one year call, writes Deirdre Yeung of Total Derivatives.

Private banks are entering into a range of structured products that allow them to participate in an expected decline in euro/dollar spot, driven by central bank policy.

Bank Negara Malaysia and the Bank of Korea are launching a Malaysia-Korea currency swap-financed settlement facility on which up to RM15 billion or W5 trillion will be made available for swap settlements between firms from both countries using their respective currencies. It will go live in June.

Policymakers around the world have enacted new rules and legislation, such as the Dodd-Frank Act in the United States, European Market Infrastructure Regulation and Basel III, to increase market stability and resiliency, enhance transparency and reduce risk in markets. A wide range of industry initiatives are also being designed, impacting the management, mobilisation and transformation of collateral. Often viewed as both a solution to and a trigger of massive financial losses that occurred as a result of the financial crisis of 2008, navigating how collateral is effectively managed by the industry is a topic of great interest under a new regulatory and evolving market environment.

The fx carry trade is providing significant returns for market participants year-to-date due to risk assets being broadly supported by the global macro environment and fx volatilities continuing to remain at extreme lows.

Bloomberg has launched its own swap data repository, serving as a centralized record keeping facility for interest rate, credit, fx, commodity and equity swaps transaction data.