Yesterday, the Swiss franc rose 30% against the euro upon a surprise move by the Swiss National Bank to remove a cap on its country's currency (see WSJ).
In other news, according to commentary from Latham & Watkins dated Jan. 8, 2015, rulemakings by Prudential Regulators and the CFTC regarding the margining of uncleared swaps are expected to be completed early this year.
The rulemakings are being made pursuant to DF 1, which requires regulators to adopt margin (and other) rules for uncleared swaps to ensure the safety and soundness of certain swap entities and to reduce risk to the financial system. The regulators draw on principles from an international framework developed by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions 2, such as a principle that requires collateral to be liquid and to hold its value (see excerpt below from the CFTC's proposed rule)3:
Based on considerations such as the principle referred to above, the proposed rule allows for certain types of assets to qualify for initial margin requirements, which are chosen in part because of a determination that they can be readily valued and easily liquidated4. These assets include the following major currencies5:
Basel is in Switzerland.
1. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111 -203, 124 Stat. 1376 (2010).
2. Margin requirements for non-centrally cleared derivatives, Basel Committee on Banking Supervision and the International Organization of Securities Commissions (Sep. 2013).
3. Proposed Rule and Advance Notice of Proposed Rulemaking, Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants, 79 Fed. Reg. 59898, 59912 (Oct. 3, 2014).
4. Id.
5. Id. at 59927.