eDeriv Trading Solutions for the
Delta One Marketplace

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The OTC derivatives marketplace is undergoing significant and rapid change. While regulatory forces are the primary catalyst for these developments, ongoing cost constraints and increasing risk aversion has compelled trading desks to review how they do business and consider new solutions to old challenges.

eDeriv Technologies has benefited greatly from the ongoing discussions we have with clients and thought-leaders in the industry and hope to share some of these insights with you. We have assembled below some notes, links and resources related to the Delta One space and, more broadly, the OTC derivatives markets. We hope you find these of value.

Please let us know if you have any questions or comments.

  • Participants
    DEUTSCHE BÍRSE AG AND NYSE EURONEXT CONFIRM SUBMISSION OF REMEDY PROPOSAL - NYSE Euronext
    http://www.nyse.com/press/1321614083083.html
    These moves to divest Bclear and related assets are, perhaps, a small relative sacrifice considering what stands to be gained post-merger. Will be interesting to see how things change in the EU equity derivatives landscape...


  • Market Structure
    Dodd-Frank from the Industry Insiders: Larry Thompson/DTCC - Sungard
    http://bit.ly/tJ3NB6
    Transcript summary and video of comments on DTCC's central role as equity derivatives data warehouse provider.


  • Market Regulation
    Webinar: "A New Derivatives Market..." - DerivSource
    http://bit.ly/sbpevW
    A very good discussion of trade workflow in the new regulatory environment; a diagnostic review of where the rules are at and what concerns folks most.


  • Market Structure
    Reforms Have Swap Dealers And Brokers Considering Agency Model - Dow Jones Newswire
    http://bit.ly/s6EHXH
    Emerging discussions see potential 'sponsored access' models for buy-side SEF usage...


  • Industry Trends
    SEFCON II thoughts - Celent
    http://bit.ly/rJBoY8
    David Easthope offers his take-aways from the panel discussions.


  • Market Regulation
    Gensler's Remarks before the Swap Execution Facility Conference - CFTC
    http://1.usa.gov/thAvKn
    The full transcript of Gensler's comments, worth a read through.


  • Participants
    Wall Street Goes to Sefcon II on Swaps - DealBook
    http://nyti.ms/mZAj3u
    The NYT take on the days activities...


  • Industry Trends
    Baum: lower margins but higher volumes in the new world order - FOW
    http://bit.ly/tg5FNE
    Good analysis of likely OTC derivatives market movements relative to exchange-traded product trends.


  • Participants
    Swap-Trading Venture Folds, Unable To Get Funding - Dow Jones Newswire
    http://bit.ly/vRV0IA
    A would-be player in the ED space yields, citing eDeriv's head start...


  • Market Structure
    SEFalicious: Market Evolution Meets Regulatory Revolution - DerivSource
    http://bit.ly/l3Izhl
    Good analysis of OTC market structure evolution, including comprehensive list of would-be SEF players...


  • Market Structure
    Single-dealer platforms bounce back after Dodd-Frank - Risk.Net
    http://bit.ly/rvvD5C
    Buy-side focused but this note touches on general regulatory drivers of market electronification.


  • Market Structure
    DTCC Testimony to Senate Committee on Agriculture - DTCC
    http://bit.ly/vSgiuj
    Key market "Trade Information Warehouse" utility on regulatory arbitrage risk, among other things...


  • Market Regulation
    Technology Implications and Costs of Dodd-Frank - CFTC
    http://1.usa.gov/vNoPeB
    Recommended: An excellent walk-through of the different would-be roles implied by the Dodd-Frank rules, including technology cost assessment.


  • Industry Trends
    LEARNING CURVE: Equity Derivatives E-Trading - Derivatives Week
    http://bit.ly/uRduaB
    While options-focused, this is a good discussion of equity-specific OTC e-trading challenges.


  • Market Structure
    MarkitSERV Comments to SEC Re Trade Acknowledgment and Verification - MarkitSERV
    http://bit.ly/tsC3qx
    Recommended: Comment letter focused on would-be data warehouse reporting rules for security-based products.


  • Market Regulation
    Large Players Worry About Dodd Frank Swap Regs - Wall Street & Technology
    http://www.wallstreetandtech.com/electronic-trading/229200249
    Dealers and brokers both express concerns about regulatory ambiguity at Tabb derivatives forum.


  • Participants
    Derivatives trading platform bypasses banks - Financial Times
    http://on.ft.com/rKeTlE
    This upstart faces serious hurdles to delivering a buy-side-only platform in the less liquid, more complicated OTC product space. eDeriv is an exclusively sell-side (inter-dealer) solution.


  • Market Regulation
    Dealers win victory on clearing access - eFinancial News (DJ)
    http://www.efinancialnews.com/story/2011-01-11/dealers-win-victory-clearing-access
    This is a positive and important step, and essential to ensuring an even playing field for all emerging SEFs.


  • Market Regulation
    Justice Dept Urges Tighter Ownership Rules For Swaps Exchanges - DJ Newswires
    http://bit.ly/hZk5Qa
    Dealers and other market participants might rightly argue that restrictive ownership rules undermine development of healthy SEFs. As 2011 deadlines loom, the shifting sands of the regulatory rule-writing process are at least as problematic.


  • Market Regulation
    Inter-Dealer Swap Trading Will Move to Open Systems, CFTC's O'Malia Says - Bloomberg
    http://bit.ly/gHtXfE
    SEF rule rewrite appears to be a net positive for market...notions of cross-market (buy/sell-side) SEFs are implausible for many product classes but common sense should prevail provided regulators do "give people more time to digest this so they can give thoughtful comments."


  • Market Regulation
    CFTC Gets Definitive on Swaps - WSJ
    http://bit.ly/gFcjhs
    Details are emerging around the definitions of swap "dealers" and "participants". Indications suggest the scope could include a broad array of players, including many end-users. Gensler comments, however, suggest margin rules may serve to filter out smaller participants.


  • Industry Trends
    Delta One back in the spotlight - eFinancial News
    http://bit.ly/hhClnz
    Delta One head echos September JPM Cazenove report, anticipating strong growth. "(Delta One) is going to be a inventory, is crucial for banks and our clients in the current regulatory big growth sector. The efficient management of the balance sheet and, in particular, the optimal management of environment."


  • Participants
    Derivatives dealers oppose safety plans - Financial Times
    http://bit.ly/heoFd4
    "The 15-minute time frame seems quite short." As the proposed rules emerge the process of steering the public dialogue begins. Poorly titled but note that 'real-time' doesn't appear once in this article.


  • Industry Trends
    Broker-dealers count the cost of compliance - eFinancialNews
    http://bit.ly/iaFaig
    IT analyst firm Ovum, predicts regulation-driven, 2011 growth in spending on externally provided IT solutions will increase 15-fold versus 2010 rates.


  • Market Regulation
    New CFTC rule on reporting of swap trades - Financial Times
    http://bit.ly/gBX0ca
    Proposed reporting requirements would prove a real challenge to traditional market participants. A (mere) 15 minute delay for block trades is little comfort for voice and IM-oriented players and true real time reporting will be a non-starter.


  • Market Regulation
    Regulatory glare drives projects to capture derivatives trade data - eFinancialNews
    http://bit.ly/gvl3l2
    Data warehousing is the other half of the new post trade puzzle and represents yet another mandatory integration point burdening market participants in the emerging regulatory regime.


  • Industry Trends
    Regulatory shift to CCPs will force derivatives technology spend - eFinancialNews
    http://bit.ly/gdG4f9
    The notion that the "cost of updating technology will impact both buyside and sellside firms for little or no benefit" is simply unexceptable. eDeriv goes well beyond regulatory compliance, bringing new efficiencies and trading opportunities.


  • Market Regulation
    Dodd-Frank act will not herald end of voice trading - Financial Times
    http://bit.ly/dVA6Zw
    Tradition's Daniel Marcus draws some reasonable conclusions from the current regulatory dialogue. However, that "(e)ven a requirement to report a trade immediately post-execution would not invalidate the compliance of a voice trade" is, at best, a theoretical truth. Emerging reporting requirements will be the primary driver behind the electronification of the OTC markets.


  • Industry Trends
    New Opportunities in Over-the-Counter Derivatives: Capitalizing on Financial Reform (PDF) - Booz & Company
    http://bit.ly/h6xmcP
    A high-level impact analysis of emerging requirements, covering the entire trade lifecycle. The focus is on IRS and CDS but some interesting data points stand out, specifically that execution, clearing and asset servicing revenues will balloon from $1.5bn today to $12bn after the reforms.

    "Financial reform will fundamentally reshape the OTC derivatives market, creating opportunities for new and existing players. In the new, centrally cleared market, scale and automation will be key differentiators. Participants must quickly define their strategies, and invest in differentiated capabilities to capture a sustainable leadership position."



  • Market Regulation
    Swap Trading Systems Should Be Broadest Possible, ISDA Says - Bloomberg News
    http://bit.ly/glbGwq
    ISDA notes SEF law accommodates RFQ and suggests exchange-like, real time bid-ask data is not a requirement. The challenges of block exemptions are also raised. All were hot topics at the recent SEFCON event held in DC.


  • Market Structure
    Some Assembly Required - Streetwise Professor
    http://bit.ly/g7tLkq
    Snappy analysis make this tour through a recent speech by CFTC Commissioner Jill Sommers a bit more instructive.


  • Market Regulation
    Clearinghouses to Get 'Systemic' Tag - Institutional Investor
    http://bit.ly/fzxNV4
    This article articulates some of the concerns around moving to clearing of swaps and also quotes some of the players. The Gensler interview with Maria touches on some relevant points, including SEFs.


  • Participants
    Brokers Warn CFTC Against Forcing Change To CME's Clearport - Dow Jones Newswires
    http://bit.ly/sxlaCg
    Expect to hear more around this topic: a bilateral trading model and central clearing (with the associated risk mitigation) are not mutually exclusive.


  • Market Regulation
    Real-time swaps reporting may start in Sept '11-CFTC - Reuters
    http://reut.rs/fe86Pb
    This measure would be a real spoiler to the current voice-and-IM model and crystallizes the need for the eDeriv platform.


  • Industry Trends
    Delta One is the HOT new area for banks - FT.com Alphaville
    http://bit.ly/i3SiAZ
    JP Morgan report predicting a 10% CAGR for EDs between 2010 and 2012...
    JP Morgan analyst Kian Abouhossein previously reported on reg impact on bank bottom lines here:
    http://bit.ly/gKWR1K



  • Participants
    Interdealer-brokers buy into electronic trading - Financial News
    http://bit.ly/hmzAyy
    Few articles capture both the realities of the new, electronic inter-dealer era and nostalgia for the "rowdy, profane and jocular dealing floors" of the traditional inter-dealer broker.


  • Market Regulation
    SEC, CFTC To Host Joint September Roundtables On Swap and Security-Based Swap Matters - Securities & Exchange Commission
    http://bit.ly/h6LWXH
    New regulations around SEFs are taking shape. We'll be listening in...so can you.


  • Market Structure
    Q+A-What's at stake for swap execution facilities? - Reuters
    http://reut.rs/e6m47E


  • Participants
    Citadel's Griffin: Dealers Stand To Gain From OTC Regulation - Dow Jones Newswires
    http://bit.ly/ujFMJt
    Citadel founder takes pro-reform stance, suggests benefits for all and that the market should look past the explicit costs of clearing. Lower risk and greater transparency, he opines, will yield increased volumes (that offset reduced profitability).


  • Participants
    2009 ISDA Operations Benchmarking Survey - International Swaps Dealers Association
    http://bit.ly/idvSc8
    A wealth of information on how bad the state of operations and trade completion really is in the swaps space.


  • Participants
    Newedge Welcomes EU derivative Reform and Highlights Regulatory Arbitrage Risk with the US - DerivSource
    http://bit.ly/eOzf4H
    A pro-reform stance often reflects more strategic than philosophical positioning. Broker Newedge, a JV of SocGen and CA (With its Calyon unit) is indicative of our evolving marketplace.


  • Participants
    CME Exploring 'Alternatives' For Swap-Clearing Platform--CEO - Dow Jones Newswires
    http://bit.ly/eT4rfF
    It's not just the dealers and brokers that are scrambling to manage through the the new regs. Exchanges, too, are feeling some pain.


  • Participants
    Swaps Brokers `Getting Scared' of New Economics, Newedge's DeWaal Says - Bloomberg
    http://bit.ly/fXwQqK
    Another recent piece related to Newedge.


  • Market Structure
    House Offers Amendment to Swap Execution Facility Definition - DerivAlert
    http://bit.ly/fEqsm3
    The definition of "SEF" includes "voice" trading. However, related operational requirements still overwhelmingly benefit the eDeriv model.


  • Market Regulation
    CFTC Releases List of Areas of Rulemaking for OTC Derivatives - DerivSource
    http://bit.ly/e9jyqm
    The CFTC has hit the ground running with regard to drafting rules concerning OTC derivatives. The CFTC OTCD page is:
    http://www.cftc.gov/LawRegulation/OTCDerivatives.



  • Market Regulation
    Dodd-Frank Wall Street Reform and Consumer Protection Act: Implications for Derivatives (pdf) - Shearman & Sterling
    http://bit.ly/fGewoI
    This is a good non-legalese tour of the Act, including detailed analysis of key derivatives rule changes.


  • Market Structure
    On Dodd-Frank: Major Swap Participants, Swap Execution Facilities, and Block Trades - Economics of Contempt
    http://bit.ly/eerU04
    This post further diffuses voice-as-SEF notions and points to the inevitable move towards fully electronic solutions.


  • Participants
    Business Rallies to Shape Finance Endgame - WSJ
    http://on.wsj.com/eIv8Yw
    Great narrative of how the derivatives legislation has evolved; provides good understanding of the changes afoot.