IOSCO Report on Post-Trade Transparency in Credit Default Swaps Market
On August 10, 2015, the International Organization of Securities Commissions (IOSCO) published its final report on "post-trade transparency" in the credit default swaps (CDS) market (FR17/2015).
The term post-trade transparency refers to a regulatory system that mandates disclosure of information, widely accessible to the public, about the price and volume of each relevant transaction. The term does not refer to regulatory structures that allow for voluntary or selective disclosure of data.
The report analyses the potential impact of mandatory post-trade transparency in the CDS market. The analysis is based on a review of relevant works of international bodies and academic literature, an examination of publicly available transaction-level post-trade data about CDS, a survey of market participants and other market observers regarding their use of certain publicly available post-trade data and its perceived impact on the market.
IOSCO concludes that the data does not suggest that the introduction of mandatory post-trade transparency had a substantial effect on market risk exposure or market activity in the CDS market. In addition, IOSCO has identified certain potential benefits and costs to mandatory post-trade transparency, as set out in part VI of the report.
In the light of the potential costs and benefits, IOSCO believes that greater post-trade transparency in the CDS market, including making the price and volume of individual transactions publicly available, would be valuable to market participants and other market observers. Member jurisdictions are encouraged to take steps towards enhancing post-trade transparency in the CDS market in its jurisdiction. To assist, part VII of the report includes recommendations that IOSCO jurisdictions may wish to consider.
In an accompanying press release IOSCO notes that additional data from jurisdictions with mandatory post-trade transparency will enable further studies of the impact of post-trade transparency in the CDS market and other OTC derivatives markets.
ESMA Final Report on Technical Advice on Delegated Acts Required Under the CSDR
On August 5, 2015, the European Securities and Markets Authority (ESMA) published its final report (ESMA/2015/1219) setting out technical advice to the European Commission on delegated acts required by the Regulation on improving securities settlement and regulating central securities depositories (CSDs) (Regulation 909/2014) (CSDR).
The final report sets out ESMA's technical advice on the content of the delegated acts required by two CSDR provisions:
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Penalties for settlement failure.
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The substantial importance of a CSD.
Penalties for settlement failures. ESMA's advice covers:
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The parameters for calculating the cash penalty that a CSD will normally charge for settlement fails (that is, the basic amount of a cash penalty).
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The circumstances that may justify an increase of the basic amount of the cash penalty and the parameters for the calculation of such an increase, where applicable under an automated system.
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The circumstances that may justify a reduction of the basic amount of the cash penalty and the parameters for the calculation of such a reduction where applicable under an automated system.
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How to adapt the parameters for the calculation of cash penalties in the context of a chain of interdependent transactions and whether there are cases where this would not be possible (for example, the chain would not be visible).
The substantial importance of a CSD. ESMA addresses:
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Initial recording of securities in a book-entry system (notary service).
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Providing and maintaining securities accounts at the top tier level (central maintenance service).
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Operating a securities settlement system (settlement service).
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The above three core services in the cases of market consolidation affecting host member states and branching into host member states.
ESMA believes that it may be necessary to establish a mechanism for the collection, processing and aggregation of the data necessary for the calculation of the indicators for determining substantial importance, given the importance of the use of consistent data, and is looking at the most appropriate way to establish such a mechanism.
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