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Treasury & Capital Markets
FSA allows landmark yen-swap trade on electronic platform
The trading landscape in Asia got a boost on September 1 when Japan’s Financial Services Agency (FSA) allowed the first regulated yen swap. Executed on Tradeweb’s electronic trading platform (ETP), it represents the latest breakthrough of regulations involving trading over-the-counter (OTC) derivatives in Asia. It was only last June that the first electronically traded and JSCC –cleared yen swap was conducted by a Japanese bank
Darryl Yu 3 Sep 2015
The trading landscape in Asia got a boost on September 1 when Japan’s Financial Services Agency (FSA) allowed the first regulated yen-swap trade. Executed on Tradeweb’s electronic trading platform (ETP), it represents the latest breakthrough of regulations involving trading over-the-counter (OTC) derivatives in Asia.  It was only last June that the first electronically traded and JSCC –cleared yen swap was conducted by a Japanese bank.   
 
“The market has been preparing for the derivatives trading mandate in Japan for some time now, and there has been a trend toward electronic trading even before the regulations became effective,” said Andrew Bernard, managing director and head of Asia at Tradeweb. “To make it as easy as possible for our clients to comply with the new regulations, we’ve designed our ETP to provide an effective solution for trading, processing and reporting yen-swap transactions. Banks using the platform also benefit from greater efficiency and risk reduction in their trading functions.”   
 
Other countries in Asia-Pacific are also keen on reviewing their current regulations. Australia for example is phasing in its reporting rules and developing its clearing proposals. In addition, Hong Kong and Singapore are also planning to introduce clearing and reporting mandates. 
 
Tradeweb ETP is supported by 18 dealers and allows traders execute yen-swap trades on a request-for-quote (RFQ) basis. After the trade execution trade details are sent in real time to a middleware provider for clearing at the Japan Securities Clearing Corporation (JSCC). 
 
“Greater use of technology can simplify and improve trading processes immensely. One clear example of this concerns the requirement that, in some jurisdictions, derivatives trades must be cleared. This has created a need for swaps users to efficiently manage an increased number of clearinghouse line items, where each outstanding transaction increases costs and risk,” explains Bernard.  
 

The FSA also announced that it would require certain derivatives trades between large financial institutions to be traded on the ETP and publicly reported. Regulations cover onshore transactions in 5- 7- and 10-year yen swaps, where both counterparties are financial firms with a derivatives balance of ¥6 trillion or more. 

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