Concern about the Federal Reserve's pulling back on its purchases of Treasurys may be alleviated by new collateral rules for insurers, hedge funds and others, according to this article. The $633 trillion over-the-counter derivatives market will seek trillions of dollars' worth of Treasurys to satisfy collateral rules, observers say. "This is going to be a new, very powerful engine that drives demand for Treasurys," said Ted Leveroni of Omgeo, a trade processor.
Energy trade associations say Congress is off-base in its desire to tighten energy-market rules. A coalition of these groups argued in a letter to the Commodity Futures Trading Commission that energy end users should not have to play by the same rules that apply to financial companies when it comes to registering as a swaps dealer. The energy industry says that all Congress' efforts will accomplish is increased costs for consumers.
Monday marked the latest Dodd-Frank regulatory deadline, forcing many swap trades to be processed through clearinghouses. The deadline marked a long-prepared-for migration with wide-ranging implications, according to analysts. Clearing trades could cut into profits for financial firms, some experts said. "It will be a hard pill to swallow for many," said Luke Zubrod of Chatham Financial.
Regulatory changes require buy-side entities to clear over-the-counter derivatives through a central counterparty, making collateral management critical. Collateral transfers that fund managers must monitor will increase dramatically, according to this article.
Gary Gensler, chairman of the Commodity Futures Trading Commission, says the agency will recommend that credit-index and interest-rate swaps be the first derivatives to undergo clearing as required by the Dodd-Frank Act. Regulators are pushing for most swaps to be processed through clearinghouses to reduce risk. "Swaps-market reform also benefits markets by increasing the use of central clearing, which promotes the financial integrity of markets and lowers the risks of the highly interconnected financial system," Gensler said in a speech.