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: The Data Management Implications of Solvency II

A-Team Group recently held a webinar on the popular topic of The Data Management Implications of Solvency II, discussing the data implications for asset managers and their custodians and asset servicers. You can register here to get immediate access to the webinar recording Download the accompanying Special Report here.

BLOG

Data Quality Still Troubling Private Market Investors: Webinar Review

Obtaining and managing data remains a sticking point for investors in private and alternative assets as financial institutions sink more of their capital into the markets. In a poll of viewers during a recent A-Team LIVE Data Management Insight webinar, respondents said the single-biggest challenge to managing private markets data was a lack of transparency...

EVENT

TradingTech Summit London

Now in its 15th year the TradingTech Summit London brings together the European trading technology capital markets industry and examines the latest changes and innovations in trading technology and explores how technology is being deployed to create an edge in sell side and buy side capital markets financial institutions.

GUIDE

FRTB Special Report

FRTB is one of the most sweeping and transformative pieces of regulation to hit the financial markets in the last two decades. With the deadline confirmed as January 2022, this Special Report provides a detailed insight into exactly what the data requirements are for FRTB in its latest (and final) incarnation, and explores what needs to be done in order to meet these needs on a cost-effective and company-wide basis.