HUTCH, this un's fer you!
Derivative players to report progress at Fed meet
Thu Feb 16, 2006 9:20 AM ET
NEW YORK, Feb 16 (Reuters) - Fourteen of the largest derivatives players are likely to report that they are on track to meet an end of April deadline in resolving half their trade confirmation problems when they meet for the second time with the New York Federal Reserve on Thursday.
The dealers will also report to the Fed on Thursday that they have achieved their first deadline of fixing 30 percent of the unconfirmed trade backlog by the end of January, said several sources that were familiar with the dealers' preparations for the meeting.
FACT BOX
BAC.N (Bank of America Corp)
Last: $44.69
Change: +0.33
Up/Down: +0.74%
MarJunSepDec
Quote
Full Chart
Company Profile
Analyst Research
News for BAC.N
Derivative players to report progress at Fed meet
UPDATE 4-MOVES-Deutsche Bank, Bank of America, Pillsbury
UPDATE 1-US Rep. Frank: should name retailer in data breach
The meeting, scheduled for 3 p.m. (2000 GMT), has been called by the New York Fed in response to its concerns that delays in confirming trades could lead to confusion if the market comes under stress, and potentially spill into other markets.
Back office operations of trading desks have not kept pace with volumes in credit derivatives, which surged at an annual growth rate of 128 percent to around $12 trillion in mid-2005.
The absolute number of backlogs continued to rise in 2005, despite bank efforts to fix the problem, though as a percentage of the total they fell, pricing provider Markit said in January.
The group of banks is also expected to set a new target, which may be to reduce backlogs in confirming trades by as much as 60 to 70 percent by the summer, with the deadline most likely to be set for the end of August, according to a source familiar with the discussions.
Some banks, however, have also expressed some interest in negotiating the more specific targets with the Fed on bank-by-bank basis, in addition to setting more overall industry goals, said another source. It is not sure whether this topic will be raised at the meeting on Thursday.
The 14 banks first met with the New York Fed on Sept. 15 and submitted their plan to fix the problems in a letter dated Oct. 4.
In general, the plan agreed included dealers submitting standardized data so that regulators can monitor the market, a guide to implement new contract transfer procedures, target dates to cut confirmation backlogs, the standard use of and electronic clearing system, and an improved settlement process.
More than 2,000 participants have signed on to a protocol designed to standardize and tighten up the process of transferring derivatives contracts to third parties, said trade association the International Swaps and Derivatives Association.
The protocol is viewed as pivotal in resolving potential confusion in which counterparties may be unsure of who is on the other side of a contract.
In December the group of dealers said in a further letter they would fix 50 percent of trade lags by the end of April, pushing back an original commitment to meet an "aggressive target" by the end of March.
This delay suggested that they needed more room to meet their target due to issues arising from the bankruptcy of auto supplier Delphi Corp.
The banks invited to meeting are
Bank of America Corp. (BAC.N: Quote, Profile, Research), Barclays Capital (BARC.L: Quote, Profile, Research),
Bear Stearns <BSC.<N>,
Citigroup (C.N: Quote, Profile, Research),
Credit Suisse (CSGN.VX: Quote, Profile, Research),
Deutsche Bank (DBKGn.DE: Quote, Profile, Research),
Goldman Sachs (GS.N: Quote, Profile, Research),
HSBC (HSBA.L: Quote, Profile, Research),
JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research),
Lehman Brothers (LEH.N: Quote, Profile, Research),
Merrill Lynch (MER.N: Quote, Profile, Research),
Morgan Stanley (MWD.N: Quote, Profile, Research),
UBS (UBSN.VX: Quote, Profile, Research) and
Wachovia Corp. (WB.N: Quote, Profile, Research).
© Reuters 2006. All Rights Reserved.
==================
I presume, Hutch...you saw the reference to Merrill Lynch in that list? |
