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…What cancer research can teach us about how to reform the derivatives market…If margin rules are excessive or apply to firms that pose no risk to financial stability, they will blunt economic growth and job creation without proportional benefit…Read More
…It’s being met with a temporary sigh of relief,” said Craig Pflumm, a senior advisor at Chatham Financial, which advises clients on derivatives reform. “It gives market participants more legal certainty. Still, he noted that the CFTC had a long debate at its meeting on Tuesday over whether the new Dec. 31, 2011 implementation date gives the commission enough time to write new rules…Read More
…As regulatory reform evolves on both sides of the Atlantic, end users still face the possibility of new rules negatively impacting their ability to use derivatives to hedge commercial risks. Chatham Financial’s Joe Siu offers a timely update on the specific risks end users face under Dodd-Frank and EMIR…Read More
…according to Luke Zubrod, director of Derivatives Regulatory Advisory service for Chatham Financial, FX swaps and forwards constitute less than 10 percent of the hedging done by most major U.S. companies. Interest rate swaps account for perhaps 80 percent of commercial hedging, with commodities somewhere near FX swaps in terms of percentages…Read More
…CFTC head Gary Gensler made it a point to reassure corporate treasurers during the annual meeting of the National Association of Corporate Treasurers last week that regulators would provide legal certainty, said Luke Zubrod, who heads the derivatives regulatory advisory service of Chatham Financial…Read More
..This exemption appears to end July 16, said Sam Peterson, a senior adviser at Chatham Financial, a Philadelphia consulting firm…Read More
…The rule still remains open to interpretation, according to Luke Zubrod, who heads the derivatives regulatory advisory service of Chatham Financial. And while the rule is technically meant to go into effect on July 16, the CFTC’s interpretation of the language probably won’t come until later, he said….Read More
…Amol Dhargalkar, a corporate consultant with foreign exchange adviser Chatham Financial, said another way to manage the rupee risk is simple: generate more rupee revenue…Read More
…Clark Maxwell, director of accounting policy and global accounting services at Chatham Financial, says FASB’s and IASB’s existing hedge accounting standards have differences but fundamentally are on the same page…Read More
…It’s a little bit tricky,” said Amol Dhargalkar, who advises companies on currency hedging at Chatham Financial in Kennett Square, Pa. “The primary method has been to not hedge that much, but just to be aware that it’s out there…Read More
…Luke Zubrod discusses the impact of the overhaul of U.S. regulation on derivatives on Bloomberg’s Fast Forward with Lisa Murphy…Watch Video
…Nearly a year ago, in the wee hours of the morning of June 25, 2010, members of the House and Senate were negotiating the final details of the Dodd-Frank Act. In a brief moment of confusion, key text was deleted from the final bill….Read More
…Under the new law, collateral would be demanded if rates move in the opposite way than the swap anticipates. The figure may reach 65 billion euros ($106 billion) in Europe, financial adviser Chatham Financial Europe Ltd. said in a report in November…Read More
…Under the proposals, a payment could be demanded if rates move in the opposite way than the swap anticipates. The figure may reach 65 billion euros ($93 billion) in Europe, adviser Chatham Financial Europe Ltd. said in a report in November…Read More
…Most end users trade with banks, so the more relevant of the two rules is the prudential regulators’ rule,” said Luke Zubrod, head of the derivatives regulatory group at Chatham Financial, an advisory firm that works with the Coalition for Derivatives End-Users, which was formed to lobby Congress and regulators against the changes mandated by Dodd-Frank…Read More
…as the dollar continues to decline, it spotlights currency volatility for companies that don’t have a program in place to hedge their currency risks. Such a policy can help mitigate negative currency effects by using forward contracts and options to guarantee the exchange rates that companies will receive when they convert money, said Amol Dhargalkar, who advises companies on currency strategy at Chatham Financial. “More than anything else, [the weaker dollar] is causing firms that have not been hedging to think more broadly about how they should be hedging or not,” Dhargalkar said… Read More
…Luke Zubrod, a director at Chatham Financial, notes that today bank counterparties may simply refuse additional trades with a company if it exceeds thresholds. “In the new world, the banks would have to draw hard line in the sand and shift that risk back to customer by asking for more collateral,” Zubrod says…Read More
“…Luke Zubrod, a director with Chatham Financial, a consulting firm advising the end-user coalition, said banks and their customers today can agree to dispense with providing collateral. If the rule is approved as written, a wide range of companies could find themselves subject to the new requirements…Read More
“…by giving bank counterparties the authorization to determine the thresholds, banking regulators clearly recognized that corporate end users pose far less of a systemic risk than financial institutions. However, corporate users still have concerns, says Luke Zubrod, director at Chatham Financial…Read More
“…Joe Siu, a senior adviser for Chatham Financial, said the differences between the CFTC’s and the bank regulators’ proposals are more nuanced than they might appear. “At the end of the day, they may have the same effect,” Siu said of the two plans. “I wouldn’t blow it out of proportion…Read More
“…Sam Peterson, an analyst at Chatham Financial, said regulators were going against the intent of Congress by stating that they could impose margin requirements on non-financial companies. “We disagree with that,” he said. “The ideal would be that we have a clear iron-clad exemption…Read More
“…The requirements, however, are expected to be limited to circumstances in which the corporate customer’s net mark-to-market derivatives exposure exceeds specified thresholds. “This is where the only silver lining shows up,” says Luke Zubrod, director at Chatham Financial. “So even though the [banking] regulators believe they are required to impose margin, given the legislative text, their proposal will attempt to reflect that end users don’t contribute meaningfully to systemic risk…Read More
“…The U.S. and European approaches are intentionally trying to be made as similar as possible to prevent opportunities for regulatory arbitrage,” Luke Zubrod, director of derivatives regulatory advisory services at Chatham Financial, told Markets Media. “Although Europe is behind U.S., it’s probable that most of the differences will be narrowed by the time [EMIR] becomes a final product…Read More
“…Non-financial end-users are exempt from clearing in both the U.S. and Europe,” Luke Zubrod, director of derivatives regulatory advisory services at Chatham Financial, told Markets Media. “Financial end-users, however, will be subject to clearing, so to the extent there’s more competition it could be beneficial to them…Read More
“…Although their corporate bonds have seen spectacular growth, it’s still not always possible to issue large amounts of debt there, because “capital markets are not nearly as developed as the U.S. and Europe,” said Amol Dhargalkar, who heads the corporate hedging advisory team at Chatham Financial…Read More
“Chatham Financial today announced that Luke Zubrod, director of the firm’s Derivatives Regulatory Advisory Service, will testify before the U.S. House of Representatives’ Capital Markets Subcommittee…
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“Companies hedge their currency exposures by forecasting expectations of either sales or costs, and then buying a financial product–a forward, option, or swap, for instance–to mitigate that risk. “If forecasts change materially, they may want to change their hedging program,” said Amol Dhargalkar, who advises companies on hedging risks at Chatham Financial…Read More
“…should the Republicans – who nearly unanimously opposed passage of Dodd-Frank – manage to tighten the nation’s purse strings, regulators can maneuver around their constrained budgets by leaning on the National Futures Association, argues Sam Peterson, a senior adviser at Chatham Financial…Read More
“…Chatham Financial said in November the cash call could total 65 billion euros….Read More
“…Chatham Financial said in November the cash call could total 65 billion euros….Read More
“…the survey was conducted using an online survey tool by the U.S. Chamber of Commerce, Business Roundtable, Chatham Financial, and the National Association of Corporate Treasurers…Read More
“…the Coalition for Derivatives End-Users worked with the U.S. Chamber of Commerce’s Center for Capital Market Competitiveness, consultancy Chatham Financial…Read More
“The property industry would be hit by an estimated 65 billion euro cash call for collateral on interest rate swaps if the plans do not change, interest rate and currency risk adviser Chatham Financial said in a report in November…Read More
“…the changing nature of many firms’ business models means they’re taking on additional risk, says Amol Dhargalker, director of corporate advisory services with Chatham Financial…Read More
“At Chatham Financial, an advisory firm in Kennett Square, Pa., clients are asking for forwards and some uncomplicated currency options, but not so much for more involved hedging products…Read More
“The exemption is fairly meaningless if regulators have the authority to impose margin,†said Sam Peterson, a senior adviser to Chatham Financial, a Pennsylvania-based consulting firm for end users…Read More
“If end-users are subject to margin requirements, they face the unwelcome decision of whether to tie up cash in a margin account and mitigate risk, or to not mitigate risk and have the liquidity available,†says Luke Zubrod, of Chatham Financial…Read More
“Sam Peterson, a senior adviser in Chatham Financial’s regulatory advisory services group, says most of his firm’s customers will not exceed those thresholds…Read More
“The approach for potential future exposure was largely based on an existing model developed by a Bank for International Settlements’ Basel committee on bank capital regulations based in Europe, according to Chatham Financial analysts… Read More
“There are going to be a lot of new intermediaries in this space and a lot of firms seeking to help companies adapt to the new mandates, even if they are not directly subject to the new Dodd-Frank rules,†said Luke Zubrod, director of derivatives regulatory advisory services, at Philadelphia-based Chatham Financial… Read More
“We are still hopeful to see clarity that an end-user wouldn’t be deemed a swap dealer simply as a result of how it structures its hedging activities,” said Sam Peterson, a senior advisor for Chatham Financial, an interest-rate and currency-hedging advisory firm… Read More
“EPRA, which is lobbying Brussels on behalf of Europe’s listed real estate industry, has highlighted new research from Chatham Financial showing that failure to grant exemption would cause EUR65bn in collateral damage to the European real estate sector… Read More
“This is the main conclusion of a Chatham Financial study commissioned by the European property sector to assess the impact of the European Commission’s proposed Regulation on OTC derivatives…Read More
“A study, yet to be published, by consultants at Chatham Financial estimates that, in that case, the loss of working capital in the property sector could be as much as €64.9bn, with substantial knock-on effects for development projects and jobs…Read More
“Luke Zubrod, director and part of the derivatives regulatory advisory services at Chatham Financial said that Treasury going through a comment process was good in that it will result in a the Secretary having lots of direct information from industry “to support a view that providing an FX exemption won’t contribute to systemic risk…Read More
“The legislation is somewhat ambiguous with respect to the power of U.S. regulators to impose margin requirements on end-users in non-clearable trades, according to Luke Zubrod, director at hedging advisor Chatham Financial…Read More
“This afternoon at the AFP Annual Conference in San Antonio, three treasury executives discussed how they manage interest rate risk amid a period of capital structure instability and fluctuating rates…Michael Bontrager, president and founder of Chatham Financial, moderated the discussion…Read More
“Sam Peterson, a senior adviser in Chatham Financial’s regulatory advisory services group, says Chatham analyzed the impact of requiring a bank dealer to post 2.5% initial margin and full-variation margin on a 10-year, $100 million notional interest-rate swap…Read More
“For corporate end users that haven’t been posting collateral, they’re probably not cut out from an operations perspective to post or receive the collateral,†says Sam Peterson, a senior adviser in Chatham Financial’s regulatory services group. “So they must either hire someone to do it for them or use an outsourced collateral management system…Read More
“This could mean the property industry having to put up tens of billions of euros of additional collateral,†said Bartek Ostrowski, director at derivatives adviser Chatham Financial…Read More
“Chatham Capital Advisors, a subsidiary of Chatham Financial, has opened an office in Chicago. Simultaneously it’s hired Mike Havala and John Avioli, two commercial real estate veterans, as managing directors…Read More
“…Chatham Financial has greatly expanded its valuation platform for financial instruments. It now values over 20,000 debt and derivative transactions on a real-time, daily, monthly and quarterly basis, with technology designed to comply with all the appropriate accounting standards…Read More
“If the real estate loses value, the amount of financing it can support will change, and so the value of the existing loan will fluctuate,†says Mark Henderson, director of valuation services at Chatham… …Read More
“On Sept. 15, the European Commission said its rules would consider the “systemic relevance and the sum of net positions and exposures” when determining the threshold for clearing. Also in Europe, large non-financial companies will not be subject to a major swap participant type definition for their hedges, according to Luke Zubrod at Chatham Financial… …Read More
Following Gary Gensler’s remarks, Chatham Financial founder Michael Bontrager lead a group of panelists who spoke about the potential impact the new rules would have on the over the counter (OTC) derivatives markets, with a special focus on the implications for end-users of derivatives that access OTC derivatives to hedge commercial risks associated with their businesses…Watch Video Now
“With commercial real estate credit markets slowly beginning to thaw, borrowers are beginning to explore the costs and requirements associated with exiting existing real estate debt. If the loan has been sold into a commercial mortgage-backed securitization, borrowers will likely find that their only alternative is to go through the loan defeasance process…Read More
“The MSP definition is not industry-specific and could apply to any company in any industry whose degree of hedging activity is roughly deemed systemically significant,” explained Luke Zubrod, regulatory advisory services director at swaps consultancy Chatham Financial. “The hope would be that it doesn’t affect too many industrial companies, but it could, depending on where the SEC and CFTC set thresholds around substantial positions…Read More
“Over-the-counter (OTC) derivatives are perhaps the most feared and despised of all financial creations, even more than sub-prime mortgages. After all, Warren Buffet famously referred to them as “financial weapons of mass destruction.” Though few know it, Americans’ everyday lives are touched by the hidden hand of OTC derivatives…Read More
“There was a need for expertise on a highly technical subject matter and not a lot of desire to gain that expertise from the banks,” said Zubrod, a director at Chatham. “The [new unit] translates a Washington-focused exercise into one specifically focused on the business community…Read More
“There was a need for expertise on a highly technical subject matter and not a lot of desire to gain that expertise from the banks,” said Zubrod, a director at Chatham. “The [new unit] translates a Washington-focused exercise into one specifically focused on the business community… Read More
“There is something for everyone to be focused on – no one [in financial -markets] can say: it does not apply to me,” said Luke Zubrod, director at Chatham Financial, an advisory firm… Read More
“The biggest concern in the end-user community is to not have to divert working capital from their businesses,” said Sam Peterson, senior adviser at Chatham Financial, which advises companies on interest-rate and currency hedging practices…Read More
Banks hedging their true exposures using CDS would likely be unaffected. “They can do anything for hedging and nothing for speculative exposure purposes,” said one source familiar with the developments. “Essentially they created a framework in which they narrowed the application of the provision only to those products that are considered especially risky and preserved those that were considered normal banking products,” explained Luke Zubrod, director at independent risk advisor Chatham Financial…Read More
Only two major strokes are really needed when it comes to derivatives, not hundreds of pages worth of new regulations, according to Dave Hall of end-user-centric derivatives trading firm Chatham Financial. The firm has been active in trying to shape policy, and Mr. Hall has testified before the House…Read More
Luke Zubrod, a director at interest rate and currency risk management adviser Chatham Financial, said that although some of the entities still exist, many were not used much any more. “Those that are still used as counterparties to commercial transactions appear to be primarily focused on options, rather than taking on credit risk for transactions like interest rate swaps,†he said… Read More
Chatham Financial, an independent risk adviser, estimates that 40% of the first group offer swaps, and virtually all of the ones in the second group do… Read More
In 1883 sugar farmers introduced the mongoose to the Hawaiian Islands to combat a significant threat to their crop – a growing rat population. This would prove a disastrous decision. The mongoose did not… Read More
With all the doomsday predictions of how derivatives reform will impact the financial industry, it’s worth asking how much the measure currently being debated in Congress will cost. The short answer: “It’s difficult to say,” according to Luke Zubrod, a consultant with Chatham Financial who works with derivatives end-users… Read More
David Hall of Chatham Financial, the interest rate and foreign-exchange risk management advisers, said: “If you don’t get the exemption, you’re going to be forced to abide by all the most stringent clearing margin and trading provisions… Read More
David Hall has recognized this problem in the legislation for end-users of derivatives. He’s the chief operating officer of Chatham Financial, the largest independent interest rate and foreign exchange risk management advisory. Hall says: “The general concept is right in the Senate bill in that it tries to catch the systemically risky players… Read More
Chatham Financial has put together a list of important issues that still must be addressed in the derivatives title of this bill. These changes are related to tying collateral charges to risk of loss, protecting end-users adequately in the bill’s definitions, ensuring there is sufficient grandfathering to prevent credit events due to a retroactive law and not requiring banks to spin-off their swaps desks, which would require hedging transactions to occur in a limited, non-competitive and risky environment amongst a few investment banks… Read More
The first task was bringing treasury pros together with lawmaking pros to help policymakers differentiate hedgers from speculators, reports Luke Zubrod, director of the U.S. public real estate advisory practice at Chatham Financial in Kennett Square, Pa. Chatham was invited to explain to congressional staffers how corporations used derivatives to hedge and what would happen if these tools were taken away… Read More
“This would be a sweeping change to our financial system and it was introduced 11 days ago without a hearing, without a study on its impact,†said Luke Zubrod of Pennsylvania-based Chatham Financial Corp., which advises more than 1,000 firms on derivatives… Read More
European policy makers have joined those in the UK in asserting that manufacturers, energy producers and hospitals should not be subject to the same derivatives regulatory regime as large financial institutions. At the same time, the Obama administration has said that it would “fight hard to oppose†provisions that clearly differentiate such companies – known as “end users†– from the likes of AIG and Goldman Sachs. So this begs the question: “What does Europe know about derivatives reform that the White House doesn’t?†â€¦ Read More
Interest rate, foreign exchange and commodity price fluctuations can disrupt company profits and cost structures, Michael Bontrager, Founder and CEO at Chatham Financial highlights. A solution provider at the marcus evans CFO Summit XX Spring 2010, Bontrager comments on the risk management strategies that could make or break an organization… Read More
“If banks are forced to get rid of their swaps businesses, then there may be no one for end users to do their swaps with,” said Hall, chief operating officer of Chatham Financial, an interest rate and currency risk management advisor… Read More
David Hall, chief operating officer of Chatham Financial, which advises industrial companies on risk management, said the bill gave a clearer exemption to corporate end-users from new restrictions than previous texts… Read More
On March 15, Senator Christopher Dodd, (D.-Conn.) presented an updated version of Restoring American Financial Stability… Read More
In the war to rid the financial markets of the sort of unchecked risk that brought the global economy to its knees… Read More
The saga involving the proposed regulation of over-the-counter derivatives, as covered in this post. Read More
