Briefly: "Centralized clearing system best for managing risk: poll" and more news
February 05, 2010 |
Staff
Corporations and financial institutions agree that moving over-the-counter (OTC) derivatives trading to a system of centralized clearing would help manage both counterparty risk and market-wide systemic risk, a recent survey reveals.
The latest Greenwich Market Pulse finds that approximately 80% of respondents cite counterparty risk mitigation as the primary benefit of centralized clearing, while almost 51% believe a move to centralized clearing would be effective at mitigating systemic risk.
"Financials and corporates agree that the need for centralized clearing is most pressing for credit default swaps, which emerged as a key source of both counterparty and systemic risk during the global financial crisis," says Woody Canaday, a consultant with Greenwich Associates.
Respondents were split on the idea’s effect on trading volumes, with 42% expecting no change in volume, including 44% of financial institutions. However, nearly half of all respondents expect volumes to decrease if a centralized clearing is mandated. Further, 47% cite the potential for increased transaction costs on OTC derivatives trades as a significant drawback, and 70% see the potential for increased costs associated with margin requirements as an important negative consequence.
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State Street in SEC settlement
State Street Corporation has entered into a US$663 million settlement with the Securities and Exchange Commission (SEC), and Massachusetts regulators regarding losses suffered by investors who used active fixed income strategies run by State Street Global Advisors.
According to the company the settlements are neither an admission nor denial of guilt.
State Street initially ran into trouble with investors in 2007 over the amount of risk in some of its bond funds, specifically its Limited Duration Bond Fund. The past two months have seen law suits launched at the firm over its investment strategies by two Dutch pension funds that accuse State Street of breaching its fiduciary duty over securities tied to defunct Lehman Brothers Inc.
Under the settlement with the SEC, State Street has agreed to establish a $313 million fair fund, which includes a $50 million fine and $8 million in advisory fees. The company will also pay $10 million to both the Massachusetts Secretary of State and the Massachusetts Attorney General.
"We value our reputation as a trusted fiduciary to institutions around the world and we recognize the critical importance of fulfilling our fiduciary obligations,” says State Street chair and chief executive Ronald Logue. “As such, we were determined to work with our regulators and with our customers to resolve their concerns around investments in certain SSgA active fixed-income strategies in 2007."
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Great-West Life, TELUS Health Solutions offer eClaims service
Great-West Life has signed an agreement with TELUS Health Solutions for the development and implementation of the first nationwide eClaims exchange service for extended healthcare providers.
The system will allow extended healthcare providers to submit electronic reimbursement requests directly to Great-West Life from their point of service, reducing the need for paper claims.
"We are building new, environmentally friendly claims technology that will enable the delivery of enhanced customer service capabilities in terms of convenience and efficiency," says Mike Schwartz, senior vice-president of group benefits with Great-West Life. "We are pleased to work with TELUS Health Solutions to bring this important new service to our group insurance customers and their employees."
The initial release of the service is planned for the second half of 2010 and will focus on physiotherapists, chiropractors and vision care providers.
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