Entries for ' financial reform'

Turbulent economic conditions combined with stringent and uncertain regulatory reform are bringing dramatic changes to the face of energy and commodity credit risk. Don't just cross your fingers and hope a catastrophe won't happen to your organization.

Triple Point recently hosted a webinar on The New Rules of Counterparty Credit Risk and how you can prepare for potential economic & regulatory pitfalls with a flexible and transparent credit risk system.

In case you missed the live webinar, here is a link to download the webinar and view at your convenience.

In this webinar, Triple Point’s Vice President, Credit Risk Division, Dan Reid, discussed how Triple Point’s Commodity XL for Credit Risk™ will safeguard against counterparty credit risk failure and growing regulatory demands. Attendees learned how our solution will deliver an ROI to their business through liquidity savings and business expansion, how to reduce reliance on credit rating agencies, the impact of Dodd-Frank, Markets in Financial Instruments Directive (MiFID) and Market Abuse Directive (MAD) on credit risk management, and more.

To learn about the implications of market volatility and financial reform on credit risk, and how you can safeguard against counterparty credit risk failure, download the webinar below.

Triple Point announced today the availability of Commodity XL for Dodd-Frank: End User Exemption™. The compliance solution is designed to ensure that organizations comply with Dodd-Frank rules for validating hedging programs in order to avoid central clearing and additional margin requirements.

 Dodd-Frank will require that all OTC trades be centrally cleared but exempts companies that trade to mitigate their commercial risk. Commodity XL for Dodd-Frank: End User Exemption enables the exemption process for each hedge, allowing companies to protect their hedging programs and ensure that valuable working capital is retained.

Triple Point’s compliance solution manages the exemption process on a hedge by hedge basis. Key functionality of the product includes a complete audit trail of hedging activity, effectiveness testing, and automated documentation and disclosure management. Commodity XL for Dodd-Frank: End User Exemption will be continually updated as regulations evolve.

“The business impact of failing to get Dodd-Frank end-user exemptions for bona fide hedges starts with increased margining but ultimately ends with hedging programs becoming too expensive to maintain. This puts organizations at risk of an increasingly volatile market,” said Michel Zadoroznyj, VP, treasury and regulatory compliance, Triple Point. “There are better uses of capital than having it sit in margin accounts. To ensure exemptions, organizations need to have the right software solution in place.”

For the third year running, top analyst firm Gartner has named Triple Point as a ‘Leader’ in trading & risk management. Among Triple Point’s many core strengths, Gartner stated that Triple Point continues to offer the most comprehensive FASB compliance solutions.

Attempting to cope with the ambitious time lines demanded by the Dodd-Frank Act, the CFTC went into high gear in December by promulgating 10 new rules. That put their total to over 40 rules related to DFA in five-month time span. To put this into perspective, prior to Dodd-Frank, the CFTC’s rulemaking averaged to only a little over 5 per year. The merits and faults of the rapidity of the CFTC’s rulemaking process has been the subject of many debates, but under current law, the deadlines stand and must be met.

December Proposed Rule Highlights

I won’t go into each and every rule that was proposed in December, but rather would like to highlight a few that I would consider very important. No, I’m not trying to trivialize the others; I just believe there are a few that are really high on many watch lists.

The Players Defined

How an entity is categorized will ultimately determine their specific regulatory requirements. Although Title VII of the Dodd-Frank Act provided basic definitions for Swap Dealer, Major Swap Participant and Eligible Contract Participant, it charged the CFTC and SEC to further define these entities.

Are You a Dealer?

The Swap Dealer definition did not really stray from what the legislators proposed.  The
CFTC’s definition:

  1. Swap dealers tend to accommodate demand for swaps from other parties;
  2. Swap dealers are generally available to enter into swaps to facilitate other parties’ interest in entering into swaps;
  3. Swap dealers tend not to request that other parties propose the terms of swaps; rather, they tend to enter into swaps on their own standard terms or on terms they arrange in response to other parties’ interest; and
  4. Swap dealers tend to be able to arrange customized terms for swaps upon request, or to create new types of swaps at their own initiative.

If you meet the criteria, you’ll be required to register as a swap dealer. The proposed rule will permit an application to be designated as a swap dealer with respect to only specified categories of swaps or activities. So, being a swap dealer in one category of swap does not mean you are considered a swap dealer in other categories.

Pertaining to the definition of a Swap Dealer, the CFTC also established a De Minimis exemption as instructed by the DFA.  In order to avoid the Swap Dealer classification an entity must satisfy all the following conditions:

  1. The aggregate effective notional amount, measured on a gross basis, of the swaps that the person enters into over the prior 12 months in connection with dealing activities must not exceed $100 million.
  2. The aggregate effective notional amount of such swaps with “special entities” (like governments) over the prior 12 months must not exceed $25 million.
  3. The person must not enter into swaps as a dealer with more than 15 counterparties, other than security- based swap dealers, over the prior 12 months.
  4. The person must not enter into more than 20 swaps as a dealer over the prior 12 months.

CFTC Chairman Gary Gensler stated that it wasn’t the intent to capture end users in the definition of swap dealers and felt that was reflected in the commission’s definition. Commissioner Scott D O'Malia brought up concerns in the energy market and whether entities currently categorized as producer/merchants will fall into the swap dealer category as a result of the rulemaking. The Commission admitted to not possessing a clear understanding of the complexity of the physical energy markets. The Commission is seeking comment from the energy sector to gain an understanding of factors that could influence the swap dealer definition.

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Events

Procemin 10th International Mineral Processing Conference

October 15-18, 2013 | Chile

XXV Brazilian National Meeting of Mineral Treatment and Extractive Metallurgy (ENTMME)

October 20-24, 2013 | Brazil



Opinions expressed on this blog are those of its individual contributors, and do not necessarily reflect the views of Triple Point Technology, Inc.