MFA Submits Letter to ESMA on Draft Technical Standards on OTC Derivatives

August 05, 2012

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Topics: "delta" hedge administrator, affiliated market participants, agency basis, Asia, back testing, Basel Committee on Banking Supervision, Basel III, bespoke non-cleared trades, bilateral counterparty credit risk, bilateral non-cleared OTC derivatives transactions, capital, CCP, CCP governing bodies, CDS, central clearing, central counterparty, CFTC, clearing member, client protections, close-out, collateral, Commodity Futures Trading Commission, compliance, confidence interval, conflicts of interest, contractual relationship, Council of the European Union, counterparty risk, coupon, CPSS-IOSCO, CPSS-IOSCO standards, credit default swap, credit institutions, credit risk, Cross-Border, currency, Dealer, debt-security based swaps, default, default fund, Derivative Contracts, derivatives, derivatives contracts, direct client, Dodd-Frank Wall Street Reform and Consumer Protection Act, duplicative regulation, EMIR, ESMA, EU, EU Member State, Euro, Europe, European Parliament, European Securities and Markets Authority, European Union, execution, extraterritorial application of EMIR, extraterritoriality, fiduciary duty, financial instrument, floating rate payment, foreign exchange, gross basis, hedging, in-the-money swap, index, indirect clearing, indirect client, initial margin, interest rate derivatives, interest rate swaps, interlocking governance arrangements, internal controls, International Organization of Securities Commissions, interpretive guidance, IOSCO, LCH Clearnet, Lee Underwood, liquidation horizons, liquidity fragmentation, major swap participants, margin, margin requirements, margin valuation, market participants, maturity, money market instruments, mutual recognition, negative correlation, net basis, netting, non-cleared OTC derivatives, non-linear products, omnibus account, OTC derivatives, OTC derivatives market, OTC derivatives transactions, over-collateralization, over-the-counter derivatives, portability, portfolio compression, portfolio reconciliation, posted collateral, principal basis, Proprietary Trading Strategy, proprietary trading tools, public disclosure, Regulators, regulatory arbitrage, regulatory technical standards, risk committee, risk management, risk management framework, risk mitigation, risk profile, SEC, Securities and Exchange Commission, security-based swaps, segregation, self-regulatory organization, settlement prices, SRO, Stan Ivanov, straight-through processing, stress testing, swap dealers, swaps, systemic risk, third country regime, total return swaps, trade repositories, trading costs, trading venues, transaction fees, transparency, upfront payment, variation margin,
From: MFA, Stuart Kaswell

To:

ESMA

MFA submitted a comment letter to the European Securities and Markets Authority (“ESMA”) in response to its Consultation Paper on “Draft Technical Standards for the Regulation of OTC Derivatives, CCPs and Trade Repositories.” This letter was submitted in connection with an accompanying letter on straight-through processing. In our letter, among other things, MFA requested that ESMA:

(i) adopt various anti-circumvension mechanisms to enhance protections related to client representation on central counterparty (“CCP”) governing bodies;

(ii) ensure greater CCP transparency by requiring public disclosure of its governing bodies’ meeting minutes and the identities of CCP governing body members;

(iii) provide greater clarity about the legal, operational and collateral posting aspects of the “omnibus” and “individual client” segregation models; and

(iv) allow greater flexibility with respect to portfolio margining, portfolio compression and timing of confirmation of trades.

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