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Report: Readiness for Swap Reform

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.