About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

US Regulators Pushing for Increased Pricing Transparency Around CDSs

Subscribe to our newsletter

US regulators have this week been highlighting the need for more transparency around OTC derivatives pricing, in particular around credit default swaps (CDS), which are now moving towards being centrally cleared in the market. Speaking in New York at an International Swaps and Derivatives Association (ISDA) conference, Theo Lubke, senior vice-president at the Federal Reserve Bank of New York, told delegates that the CDS market must act as a benchmark for other OTC markets with regards to pricing transparency.

The Fed uses CDS prices as a benchmark to assess market and credit risk, explained Lubke, and this means that transparency is of systemic importance in this space. He reckons a lot more needs to be done to improve transparency around the pricing of these instruments and soon: “The more CDS is used as a reference tool, the more important it is that market participants understand the pricing process.”

Moving CDSs and other OTC derivatives onto central clearing counterparties (CCPs), as suggested by the Obama administration’s regulatory overhaul proposals, is likely to improve pricing transparency to some extent. Indices on CDSs have already begun to be cleared by the CCPs currently operating in the market and this has indeed meant that pricing for these has been made publicly available. However, clearing on these CCPs has not yet been mandated by Congress and it will take regulatory approval for this to happen on a wider scale.

The goal of the regulators may be to mitigate counterparty risk in the OTC derivatives market but a side effect will be institutionalising pricing sources. Pricing feeds that are employed by the various CCPs will therefore give certain data providers the edge over others, although the need for financial institutions to provide best price to their clients will also add to the valuations data cause.

Congress is due to vote on these measures before the end of the year and the valuations vendor community will have to wait until then before it can judge the full impact of regulation on the space.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Get to grips with FRTB data and data management requirements

The Fundamental Review of the Trading Book (FRTB) sets out a revised market risk framework and proposals to improve capital requirements. Although the regulation’s compliance deadline is 18 months away and some details have yet to be finalised, financial institutions need to be preparing now as FRTB is complex, presents significant data management challenges and...

BLOG

ace Seeks to Disrupt the Very Idea of ‘Digital’ for Financial Institutions

For more than a decade, financial institutions have been told to go digital. Data strategies have been written, platforms migrated to the cloud, and front-end experiences wrapped in slick apps. But for Niamh Kingsley, founder of ace, that conversation is already out of date. Her new firm, launched in November as a specialist post-digital advisory...

EVENT

Data Management Summit New York City

Now in its 15th year the Data Management Summit NYC brings together the North American data management community to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

RegTech Suppliers Guide 2019

Welcome to our brand new RegTech Suppliers Guide. This unique guide provides detailed data profiles on close to 100 suppliers in the RegTech world, offering you an unrivalled selection of solutions for your most pressing financial regulatory challenges. The aim of the A-Team’s RegTech Suppliers Guide is to steer you through this complex marketplace, offering...