Asian Swaps Regulation - White Papers

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White papers addressing Asian swaps regulation

ISDA Japan Credit CCP Working Group: Requests for the CCP on Japanese CDS

September 2009

From the white paper:

"On this background, ISDA Japan Credit Derivatives Committee, in which most of the CDS market participants are members, shared the view that CCP on Japan referenced CDS is a necessary infrastructure for increasing the market liquidity and for further development of Japanese CDS market, and decided to launch the working group (“the WG”) to discuss the necessity of the CCP and the essential functions and issues to be considered for such CCP, independently from any interests of specific CCPs.

"In the WG meetings, the members shared the view that CCP on Japanese CDS is necessary for the sound development of Japanese CDS market. There are ongoing initiatives by Japanese exchanges to establish the CCP on Japan referenced CDS in Japan (“Japanese CCP”), but the members are concerned whether it makes any business sense for Japanese CCP to operate independently from overseas CCPs given the small size of Japanese CDS market. In addition, it was questioned whether the proliferation of CCPs by regional reference names across the world is really desirable for our industry."

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Reserve Bank of India: Over-the-Counter Derivative Markets in India

July 2010

From the white paper:

"The present article tries to put in perspective the boundary conditions, imposed by the macroeconomic constraints, which have guided the evolution of over-the-counter (OTC) markets in India and underlines the point that the process of transiting from a predominantly OTC based model to an exchange-traded model needs to follow a calibrated path. Through this transition period, the overall regulatory approach towards OTC derivative markets is as important as addressing the transactional aspects.

"In India, unlike the developed financial markets where OTC derivative markets epitomised complex, unregulated financial innovations that grew exponentially over the last two decades, the OTC derivative markets have evolved within a regulated space. The major elements of this regulatory framework include a broad special cation of products to be permitted, nature of participants in the markets, distinct responsibilities for market makers and users for all OTC derivatives, effective reporting systems for capturing systemic information and focus on developing market infrastructure for post-trade clearing and settlement.

"Given the above context, the OTC space in India for interest rate and forex derivatives will continue to operate within a regulated manner with increased transparency. New instruments for exchanges will be introduced in a gradual manner, as hitherto. Further areas for strengthening the functioning of OTC markets will include greater standardisation of OTC derivatives and extending central clearing arrangements for such contracts where feasible. Work has already been initiated for designing a centralised trade reporting system for all OTC derivatives for better systemic oversight and market transparency."

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Anderson Mori and Tomotsune: Amended Commodity Derivatives Act - Following Promulgation of Subordinate Regulations

November 12, 2010

From the white paper:

"The Commodity Exchange Act of Japan (Act No. 239 of 1950, as amended; the “Commodity Exchange Act”) at present principally regulates business relating to domestic commodity exchange transactions; while commodity derivatives transactions traded on offshore exchanges and OTC commodity derivatives transactions that reference market prices on offshore exchanges are subject to different and limited regulations. Effective as of January 1, 2011, however, (i) the title of the Commodity Exchange Act will change to the “Commodity Derivatives Act” (shouhin sakimono torihiki hou) (the “Amended Act”), and (ii) the regulatory framework for commodity derivatives business in Japan will be drastically altered to impose seamless regulation for the commodity derivatives business, without distinction among cross-border and domestic transactions, or exchange and OTC transactions.

"A number of key details with respect to the Amended Act will be covered by subordinate regulations which will also take effect on January 1, 2011. This paper focuses on notable points in the Amended Act and the subordinate regulations and provides an outline of how they are expected to affect current commodity derivatives business in Japan, with particular attention to offshore exchanges and OTC markets."

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