SunGard's Daniel Parker says that ICE's decision to convert OTC swaps into futures is just a precursor to further innovation around clearing.
As global regulators move to
implement new rules designed to control the swaps markets, the
world’s futures exchanges are responding with bold
and innovative structural changes intended to reduce or
eliminate certain regulatory burdens faced by their customers,
including increased trading costs and additional expenditures
associated with alternative risk management processing
As a basis for the change, the
Dodd-Frank Act and the subsequent regulatory definition of a
swap expressly exclude futures and options on futures. As a
result, on October 15, the Intercontinental Exchange (ICE)
intends to convert an entire class of over-the-counter cleared
swaps into listed futures. This change is meant to ameliorate
some of the negative effects of the Dodd-Frank rule-based
disparate treatment among swaps and futures, including higher
margin costs. Through this action, the ICE effectively creates
a hybrid instrument class that will trade, margin and clear as
futures, yet concurrently adhere to the enhanced segregation
and protection rules under the new swaps regime.
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