A recent report by State Street and the TABB Group discusses where the investment community stands on a range of issues as a result of global swaps reform. The paper, drawing on a study conducted by the two firms, also explores the industry's challenges as it transforms from an opaque, over-the-counter, bilaterally-traded world to an electronically-executed, centrally-cleared market place. The report looks at a variety of issues firms are dealing with, including:
- How best to select Central Clearing Counterparties (CCPs);
- Whether a firm's trading or investment strategies need to be changed as a result of regulatory reform;
- How to handle the anticipated drop in swaps liquidity (the liquidity squeeze is cited by buy-size firms as the likeliest unintended consequence of regulatory reform); and
- How to obtain the high-grade collateral necessary to trade centrally-cleared swaps.
The report is timely given that the CFTC just recently approved final regulations that establish a schedule to phase in compliance with new clearing requirements under the Dodd-Frank Act.