Isda complains about FSA treatment of CFDs
The International Swaps and Derivatives Association has complained that proposed UK rules regarding disclosure requirements for contracts for difference (CFD) transactions will hamper the growth of the market.
The UK Financial Services Authority (FSA), in a consultation paper issued in March this year, hinted it could require investors to disclose their interests in companies through contracts for difference on the company's stock. Holding a CFD does not normally transfer voting rights from the shareowner to the contract holder. But the UK regulator said: "To the extent that CFD brokers have no ‘real’ use for the stock held to hedge a CFD position, it is likely that they will be mindful of the wishes of their underlying clients (the CFD holders)."Under current takeover rules, derivatives holders must disclose their interests during the offer period. The FSA said it could require disclosure at all other times as well.
Isda, the derivatives trade association, argues that even disclosure during takeovers is unnecessary. Many derivatives are not simply proxies for shares, it said, adding they can be used as part of a volatility strategy or to emulate limit orders. The body said the FSA should concentrate on side arrangements, which allow derivatives holders to influence votes, if such arrangements exist - anything else would be "an unnecessary and unjustified burden".
The FSA is in any case unlikely to implement its plan soon. "We believe it is neither practical nor appropriate to consult on draft rules for a mandatory disclosure of major CFD holdings regime in this consultation," it said, adding that it would carry out a market-failure analysis and cost-benefit analysis before putting such rules forward.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Markets
Regulatory crackdown puts Korea autocalls in deep freeze
Mis-selling fears see distributors pull back, leading to 40% issuance fall in a month
Invesco more than triples size of its FX options book
Counterparty Radar: Manager’s portfolio exceeded $5bn notional in Q4
Volatility shape-shifters: arbitrage-free shaping of implied volatility surfaces
Manipulating implied volatility surfaces using optimal transport theory has several applications
BGC forming consortium to take on CME Group’s rates empire
Banks and PTFs are being offered a stake in FMX, which has CFTC approval to launch a futures exchange
RMB vol returns as hedge funds take barrier trade profits
Unwinds of exotic positions saw vol jump 72% after surprise PBoC move last week
‘Fear gauge’ within expectations, some say
Several options specialists dismiss claims that structured products are distorting the Vix
Brazil readies long-dated FX hedging scheme for green projects
Development bank IDB will lend its credit rating to unlock cheaper USD/BRL hedges out to 25 years
Options market still searching for cause of the Vix plunge
BIS paper blames yield-enhancing structured products, but market participants are unconvinced
Most read
- As FCMs dwindle, regulators fear systemic risk
- Top 10 operational risks for 2024
- Top 10 op risks: AI fears drive cyber risk to record high