Three scholars find a very real possibility that there is a cause and effect relationship between index flows in the derivatives markets, at least the agricultural index markets, on the one hand and price moves in the underlying commodity on the other.

Under the Dodd-Frank Act, and the implementing rules now approved by the CFTC, trades that aren't "large notional swaps" are to be reported more rapidly and thoroughly than those that are. This of course makes the definition of a large notional swap (a/k/a a block trade) an important matter.

A new SEC proposal, promulgated May 1, would provide that Dodd-Frank requirements regarding swaps apply if a transaction is entered into by a U.S. person or conducted within the U.S. but that an entity operating outside the U.S. may be able to substitute foreign regulatory requirements for the U.S. requirements if the extraterritorial party's home system produces comparable regulatory outcomes.

IOSCO's new draft report says that regulators ought to do a lot of "monitoring" of the consequences of changes in market structure. A little less predictably: it goes into some detail on the diversity of regulatory systems that bear on the question of fragmentation.

The benchmarking consultation paper from ESMA/EBA has produced intriguing responses from, among others, the International Swaps and Derivatives Association and the EDHEC-Risk Institute.

Just as one buys bourbon from a retailer who buys it from a distributor who buys it from the manufacturer, so in the world of stocks someone desiring a share of Apple will call a broker who will often go through an exchange which matches him with the broker for a seller. But in a networked world, one can disintermediate.

Lehman's adversary proceeding may yet raise the important issues of risk management that arise out of the relationships among the major Wall Street players at times of crisis. But the latest 'Blame the whale' request by the bankruptcy lawyers involved is a blatant distraction and diversion.

This is the second of a two-part discussion of a paper jointly issued by Basel and IOSCO on margin requirements for non-centrally cleared derivatives. The new paper solicits feedback on the phase-in timeline it proposes, a phase-in designed to provide flexibility so the affected markets can meet "operational and logistical challenges" by which they might otherwise be stymied.

This is the first of a two-part discussion of a paper jointly issued by Basel and IOSCO on margin requirements for non-centrally cleared derivatives. The new paper solicits feedback on only four still-open issues, and the list of issues itself illustrates the near finality they claim for this paper.

Think of betting on black or red at the roulette table. If red comes up a lot, some people will be tempted to start putting all their chips on black.

As one authority puts it, 'the tectonic plates are shifting' in the world of derivatives exchanges and clearing. How can institutions keep their balance during the earthquakes? The Basel Committee may just have offered some help.

As the reforms come on line, or as the asset management industry makes its adjustments in anticipation thereof, the initial margin requirements will be a big hurdle, in part because CCPs are quite restrictive about what assets are eligible as collateral. This may set the industry up for a collateral crunch.

A number of U.S. centered studies before this, such as one by Robert Daigler and Laura Rossi in 2006, had found that adding a long volatility position to an underlying equity portfolio has a significant diversification effect. But the authors of the new EDHEC paper wanted to determine whether the same benefits can be found in European data.

In a presentation about Malaysian derivatives trading, the issue of capital controls, and memories of the late 1990s, briefly came to the fore. Assume that a foreign investor considers Malaysia a promising place to invest. Will this investor be confident that if he does so he’ll be in a position to repatriate at his own choosing?

As a recent paper from four scholars at the Universidad de Santiago de Compostela, in Spain, observes, the extra flexibility risk managers gain from using credit derivatives comes with drawbacks. Perhaps the most obvious of drawbacks is that it creates counter-party risk. Still, the authors: Luis Otero González, Luis Ignacio Rodriguez Gil, Sara Cantorna Agra, and Pablo Durán Santomil, have written “Banking Risk and Credit Derivatives,” in order to take an empirical look at the balance of pros and cons.

IOSCO, the international policy body for securities regulators, has this month published its own final report on international standards for the regulation of derivatives market intermediaries. This continues a course followed by international bodies ever since the G20 summit: the drift away from the grand idea of treating all derivatives in a standardized way, toward acceptance of the unharnessed character of the OTC world, though for all that a renewed insistence on regulating the particulars.

A deeper look at alternatives with Dr. Bob Swarup, a world-renowned expert and commentator on alternatives and financial markets as well as being a visiting fellow at London School of Economics.

The new normal, on Thambiah’s and Foscari’s account, includes an enhanced role by central banks, implementing monetary policies through open market operations, closer interconnections of banking institutions worldwide, much painful deleveraging, and persistently high levels of unemployment.

Cinnober has sold a customized form of its Scila Surveillance software -- a product designed to detect abnormal market behavior -- to the Qatar Exchange. One of the purposes of Scila Surveillance is the detection of harmful variants of algorithmic trading, such as the trading "snipers" who drive off market makers and reduce liquidity.

IMF economist Manmohan Singh, in a recent working paper for the IMF, makes a case that pledged collateral is a critical financial lubricant, and that since the collapse of Lehman in September 2008 there has been a significant and troubling decline in its supply. Certain measures intended by regulators to enhance financial stability may in fact undermine it, by worsening the supply/demand mismatch, in effect creating a grey market for this pledged collateral.

The Commodity Customer Coalition has now issued a white paper presenting its own view of the “background, impacts, and solutions to MF Global’s Demise.”

Well, maybe not $75 Trillion.  And it doesn’t call itself a hedge fund.  To be really, really fair, Bank of America couldn’t have gotten all its derivatives positions wrong, even though it’s a bank.  However, as we shall demonstrate, the phrase “equity sliver” is way too optimistic.  Understand this about a derivative hedge:  it’s a [...]