The codification of sell-side controls for buy-side clients is a big opportunity for IT firms finds Dan Barnes.
US regulator the Commodity and Futures Trading Commission
(CFTC) took a new step in its strategy to reduce systemic risk
on 1 October 2012 when Regulation 1.73 came into effect. This
framework of rules set out where risk management must take
place for buy-side firms’ order entry and the
specific controls which clearing futures commission merchants
(FCMs) and derivatives clearing organisations (DCOs) must use
to control buy-side clients’ trading
An extension to 1 June 2013 has been granted on two sections
of the rules, limits for give-ups and bunched orders for
futures and swaps, to allow the industry time to communicate
limits to firms.
The new rules are part of the larger drive to make the
derivatives market more secure by mitigating counterparty risk
and limiting the negative effects of a default. Since 2009 the
Group of 20 (G20) countries have been setting out regulations
that will reduce the systemic risk that was found to exist
during the early years of the financial crisis.
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