Smoothing the Road to Reconciliation August 25, 2015, DerivSource By Christina Norland Christina Norland – Director of Global Regulatory Solutions at Chatham Financial discusses the thornier issues of portfolio reconciliation and how both parties can share the burden. Download Complete Article

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Hedging Deposits to Reduce Liability Sensitivity A Chatham Financial White Paper – April 2015 Chatham has long espoused POLAR (the Path Of Least Accounting Resistance) when it comes to balance sheet risk management. There is a bias towards simplicity and operating in the cash flow hedge accounting model whenever possible, in order to minimize or even eliminate hedge ineffectiveness and P&L volatility. For a liability sensitive FI, reducing asset duration or extending liability duration, or both, can have the desired impact on the FI’s interest rate risk position. Once a financial institution decides it will use derivatives to make these adjustments, the question of what to hedge takes center stage. This white paper focuses on increasing liability duration (and thus reducing liability sensitivity) by hedging deposit accounts. Of course we apply our POLAR methodology to determine the simplest and most…

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Last week regulators from the US, Britain, and Switzerland announced fines of $4.25 billion against several major financial institutions for conspiring to manipulate the foreign exchange markets. Simultaneous with the settlement announcements, the CFTC published select transcripts detailing chat room evidence of the manipulations. The transcripts are rough reading, especially if you aren’t a text-happy teenager well versed in financial slang and impervious to foul language. But because they afford critical background for our story, we’ve decided to translate a short excerpt from one chat into clearer, safe-for-work English. The excerpt comes from three traders discussing how they could manipulate the 4 pm WM fixing for GBP-USD (often referred to as “cable” by FX traders), selling large amounts just before the fixing to drive the rate down. Trader 1 (70 minutes until fix): it’s early but I am selling cable…

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Now that Election Day is nearly a week behind us, the bunting has all been put away and the confetti swept from the streets…wait, this was a midterm election, so maybe no bunting or confetti, but at least TV ads are back to selling, not slinging, and a few yard signs have come down. For all the glamour and hype that a midterm election typically lacks, this one saw big change across the nation. But whether you experienced elation or devastation…wait, midterm year, make that modest content or mild disappointment, one fact remains: what happened on Tuesday was not without precedent. Some call it the Six-Year Itch, others the Six-Year Curse, but whatever you call it, there is a phenomenon that has been playing out over the last 100 years wherein whichever political party has held the White House for…

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Guest view: U.S. swaps need clearer reform July 25, 2014, BreakingViews By Luke Zubrod Clearer changes are needed for U.S. derivatives markets than the Dodd-Frank Act’s prescription. Four years after the regulatory reboot became law, many of the reformers’ hopes have been realized. Download Complete Article

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This is part two in a three-part series on the hedging outlook for 2014. Last week, we reviewed current Fed Policy and discussed the impact on hedging programs in 2014. This week, we look at the path of derivatives regulation and the expanding role of global regulation on domestic hedging programs. Part II: Derivatives Regulation. Hedging programs in the U.S. changed monumentally over the past year. A veritable alphabet soup of regulatory requirements was heaped upon market participants, including the following: – ECP: Now all market participants must be Eligible Contract Participants (ECPs), or be qualified so by virtue of certain qualifying owners or guarantors. – LEI: Each hedging party must obtain and maintain a Legal Entity Identifier (LEI). – End-User Exception: All parties to a new transaction who are eligible to do so must now preserve the right to…

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Today is the day. Even the apolitical among us know that if the two parties don’t agree today to something, anything – then the government will shut down at midnight. At least parts of it will. What comes next depends on whether you fall into the “essential” or “non-essential” category of government work. Services such as defense, homeland security, mail delivery, and even Congress will stay open for business, while national parks, and passport processing, among others, will grind to a halt as the funding tap runs dry. Without a spending resolution passed by Congress and signed into law, nearly 25% of the 3.3 million government workforce will be furloughed. As it turns out, when it comes to government spending, disagreement and indecision are all that is needed to shut it down. Whether you are for it or against it,…

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Thelma and Louise, James Bond, Frodo Baggins and the Inception Cast Following the election, financial and non-financial presses alike gravitated rapidly to the topic of the fiscal cliff. At present, lead articles on the Wall Street Journal, Financial Times, CNBC, Fox News, and CNN splash pages all give top billing to the fiscal crisis and its implications for Main Street. American citizens are no different – Google Trends analysis reveals that searches on the term “fiscal cliff” on November 7th were 12 times more frequent than at any other point in the previous ninety days. Clearly, it’s on our minds. There are many scenarios that could play themselves out over the next fifty days, as Congress and the President work to find compromise in order to avert the tax hikes and spending cuts that could further damage the frail economy.…

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What Does Europe Know About Derivatives Reform That the White House Doesn’t? April 26, 2010 European policy makers have joined those in the UK in asserting that manufacturers, energy producers and hospitals should not be subject to the same derivatives regulatory regime as large financial institutions. At the same time, the Obama administration has said that it would “fight hard to oppose” provisions that clearly differentiate such companies – known as “end users” – from the likes of AIG and Goldman Sachs. So it begs the question: “What does Europe know about derivatives reform that the White House doesn’t?” The answer: European policy makers have been listening to hundreds of corporate treasurers from companies like Lufthansa and Caterpillar and to the European Association of Corporate Treasurers, who have told them of the great harm that would result from indiscriminate application…

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