John Kiff's Public Library

The impending implementation of Basel III regulations for banks across Europe will push up the price of derivatives for schemes, experts warn.

Derivatives

A plan by Brazilian exchange BM&F Bovespa to combine its four existing clearing houses into a single, integrated central counterparty (CCP) by 2014 will result in margin efficiencies of around 30–40%, according to the firm.

Derivatives

Central clearing for OTC derivatives does not make for a safer market and may increase costs for end-investors, Barry Hadingham, head of derivatives and counterparty risk, Aviva Investors, has warned.

Derivatives

Uncertainty over how clearers will handle issues related to segregation and insolvency are hampering preparation for new OTC derivatives rules, UK-based buy-side trade body the Investment Management Association (IMA) has warned.

Derivatives

This article from Reuters which was published yesterday contains some interesting insight on this trend we wanted to highlight. Generally the article says that focus is being placed on the reinsurance space as an investment because of the market-beating returns it offers and non-correlation with broader financial markets at this time of global market uncertainty.

ILS CAT

A group of federal regulators will likely lower the proposed 20% down payment requirement for home-loan lenders who wish to avoid holding added credit risk on the securitization of mortgages.

Mortgages Regulation

"Banks are less inclined than they were to hold longevity swaps,” says Clive Wellsteed, partner at consultants Lane Clark & Peacock.

Longevity

A requirement to retrospectively clear over-the-counter swaps through central counterparties if they are transacted after the regulation comes into force may present a potential source of market instability, according to industry experts.

Derivatives

Readers of theTRADEnews.com have overwhelmingly identified the cost of clearing and collateral as the primary concern for institutional investors in light of the impending shake-up of the OTC derivatives market.

Derivatives Collateral

European markets will not face mandatory clearing from January, one of the region’s top regulators has said, amid further signs that authorities are struggling with the tight deadlines set by the G20 to finalise reform of the derivatives market.

Derivatives

The European Securities and Markets Authority (Esma) on Thursday laid out a timetable for the legislative process in coming months as it reaffirmed its commitment to meeting a global pledge to introduce reforms.

Derivatives

Chi Hum states that cat bond pricing is becoming decoupled from traditional reinsurance pricing which he sees as a positive development for the cat bond market. He credits investors motivations for this decoupling as investors are driven by a completely different set of pricing drivers than reinsurers.

ILS CAT

Back in February we first wrote about the Volcker Rule which is part of the Dodd Frank Act and SIFMA, the Securities Industry and Financial Markets Association’s attempt to highlight concerns about the way this rule could impact the issuance of insurance-linked securities and catastrophe bonds. Part of the rule, formally known as Section 13 of the Bank Holding Company Act of 1956 (the Volcker Rule), seeks to change the way covered fund transactions and activities are regulated and that could impact ILS issuers.

ILS CAT

Banks are offering to replicate the economics of OTC swaps in loan format - avoiding new capital and clearing rules

Derivatives

Buy-side firms are unlikely to join over-the-counter clearing houses directly because of additional risks and expense – particularly the need to contribute to a central counterparty's (CCP's) default fund – according to speakers at the Credit Risk USA conference in New York on Tuesday.

de

Derivatives clearinghouses owned by CME Group Inc. (CME) and Intercontinental Exchange Inc. have been designated systemically important by U.S. regulators, a step that moves them closer to heightened supervision.

Derivatives

Reinsurer Swiss Re has announced the completion of a £1.4 billion longevity insurance transaction for one of AkzoNobel’s UK pension funds. The collateralised re/insurance deal was written through Swiss Re subsidiary ReAssure Ltd. The transaction covers 17,000 individuals and their future contingent beneficiaries who were members of the AkzoNobel Pension Scheme at the 1st August 2011.

Longevity

The online real estate data provider, in its first negative equity report, said 15.7 million, or 31.4%, of homeowners were underwater on their mortgages in the first quarter. That’s up from 31.1% three months earlier but down from 32.4% in the first quarter 2011. Homeowners owed $1.2 trillion more than the value of their homes in the first quarter, according to Zillow. With roughly 10% of homeowners 90-days-plus delinquent on payments, negative equity “remains only a paper loss” for most, said Zillow Chief Economist Stan Humphries.

Mortgages

Investor demand for catastrophe bonds continues to be demonstrated by the transactions issued this year as the latest cat bond in the market, the Long Point Re III Ltd. deal sponsored by U.S. insurer Travelers, becomes the latest to upsize during marketing. Almost every cat bond issued in recent months has increased in size to some degree and Long Point Re III continues the trend and increased from its initial size of $150m to become a $250m cat bond deal. The transaction is due to complete around the end of the month.

ILS CAT

A panel of U.S. regulators plans to designate some swaps clearinghouses as systemically important as soon as tomorrow, putting them under heightened supervision, according to two people familiar with the officials’ work.

Derivatives