26 April 2010
Published in: Market risks, Regulation - supervision
Derivatives dealers step up political lobbying
The International Swaps and Derivatives Association has issued an open letter to the US congress as it steps up its lobbying efforts against moves to regulate financial services and derivatives more tightly.
Published on 23 April, the letter from ISDA chairman Eraj Shirvani and CEO Conrad Voldstad to House and Senate leaders refuted "suggestions that derivatives dealers oppose changes to derivatives regulations and market practices."
ISDA said: "Such statements ignore the actions over the past five years of the major dealers, buy-side institutions and industry associations who continue to work collaboratively to deliver structural improvements to the global over-the-counter (OTC) derivatives markets, including improving the clearing and operational infrastructure and bringing transparency to the markets."
Among the steps taken by the industry and mentioned by ISDA:
- Development of the market infrastructure to support credit default swap (CDS) clearing.
- Standardization of credit default swap trading standards and updated contract terms to facilitate clearing and reporting of trades.
- Successful launch of CDS clearing in the US and Europe.
- Creation of Depository Trust & Clearing Corporation's (DTCC) trade information warehouse to centrally store, manage and allow life-cycle processing on the vast majority of CDS transactions.
- The clearing of over $210trn of interest rate swaps (IRS) as of January 2010.
- Implementation of a robust industry governance structure, with increased participation of the buy-side.
Other points made by the association during its AGM in San Francisco last week:
- Voldstad: "Corporate end-users did not create significant derivative risk nor did they suffer large derivative losses. A case for mandatory clearing of their derivatives activity cannot be made based on systemic risk."
- Voldstad again: "Exchange trading has nothing to do with reducing credit risk. Mandating that all swaps be exchange-traded will increase costs and risks for the manufacturers, technology firms, retailers, energy producers, utilities, service companies and others who use OTC derivatives. That's because the risk-hedging products that they want and need will no longer be available."
- ISDA 2010 operations benchmarking survey: 99% of eligible credit default swaps are confirmed electronically, compared with 95% last year, and 77% of eligible interest rate derivatives are confirmed electronically compared with 61% last year.
- 2010 ISDA margin survey: among large dealers, 78% of all transactions are now executed with the support of a collateral agreement and for credit derivatives it's 97% of trades.