Most custody banks offer various collateral management services, which includes collateral improvement, a process that turns securities ineligible for use as collateral into more liquid assets, according to Financial News.

Various firms stand to benefit from the need for custodial services, including financial giant BNY Mellon, which has a total of $25.8 trillion of assets under custody, the media outlet reports. State Street is also vying for business, establishing an operation to clear swaps in September.

David Field, managing director with banking consultancy Rule Financial, told the media outlet that "the buyside simply doesn’t have enough quality collateral available to lodge for clearing.
Executing brokers are expecting to generate strong post-trade revenues from collateral transformation – but the custody banks are the ones holding the collateral."

European Market Infrastructure Regulation (EMIR), which would require most OTC derivatives transactions to be processed through CCPs, could become finalized as early as the week of January 30, after key progress was made on the regime, a source familiar with the matter told Financial News.

Representatives of the two financial entities have begun lobbying European regulators present at the World Economic Forum, according to The Financial Times. The objective of this effort is convincing the officials at the forum and the 27 commissioners of the European Union that the merger would result in a "European champion,"which would be better positioned to compete with CME Group, the largest U.S.-based derivatives exchange.

Although NYSE Euronext chief executive Duncan Niederauer has stated that he will not stop advocating the merger until a final decision is reached, he stated that the disapproval of the proposed megamerger could result in exchanges halting their attempts at high-profile transactions such as this one, the media outlet reports.

Niederauer stated in an interview on CNBC that he is "very comfortable with the stand-alone strategy, according to Dow Jones Newswires. He stated that although exchanges could certainly benefit from consolidating, the financial entities might have to pursue smaller transactions for now. 

The regulatory regime is intended to require most over the counter (OTC) derivatives trades to be cleared through central clearingparties (CCPs), according to the media outlet. This move is meant to lower counterparty risk by decreasing the chance of a participant in a contract not fulfilling their part of the deal.

The United Kingdom, France and Germany have failed to reach a consensus on how much oversight national regulators would have over CCPs in their jurisdictions, the media outlet reports. A meeting of the EU's Economic and Financial Affairs Council on January 26, finance ministers representing the various European Union nations arrived at an agreement on how much oversight the European Securities and Markets Authority will have over the clearing houses. The Brussels sources told the media outlet that the compromise will permit the council to create a final version of the text.

Previously, lobbyists in Brussels predicted that the EMIR rules would not be finalized until Denmark gained control of the European Union presidency later in 2012, according to The Financial Times. 

Data provided in the survey indicates that 61 percent of Western European corporate treasurers believe that the regulators responsible for the creation and enforcement of the requirements do not understand the impact of the new rules, the media outlet reports.

Although various industry insiders, including highly visible executives like J.P. Morgan chief executive Jamie Dimon, have expressed their opposition to the new rules, the survey indicated that Europe is particularly sensitive to the implementation of the new capital requirements, according to the media outlet.

While the Basel III regulations are intended to protect the economy as a whole, "many commentators now argue that Basel III will have a negative impact on the banks’ ability to lend to corporates, to fund trade finance and on risk management via OTC derivatives," Katharine Morton, managing editor at EuroFinance, told the media outlet.

Earlier in the month, consultancy Sia Conseil issued a report predicting that implementing the capital requirements will force banks to have four times as much capital to cover the risk of their investment banking units, Agence France-Presse reports.

The NCUA released a request for comments on these concerns, looking for advice from market experts, according to Credit Union Times. The agency has been working on a policy for credit unions to trade derivatives since 2011, especially in terms of how the risk management tools could be used to hedge against fluctuations in interest rates.

"In terms of interest-rate risk (IRR), NAFCU has pushed for improvements in NCUA’s approach to credit unions’ IRR policies. NAFCU supports, in part, NCUA’s efforts to ensure credit unions have an interest-rate risk policy in place," Becker said in the statement.

The NCUA originally requested input in June 2011, but agency chairman Debbie Matz stated that the comments received from various market participants such as credit unions and trade associations revealed a need for more information, the media outlet reports. 

The ratings of both Italy and Spain were lowered by two notches, while the credit ratings of Cyprus, Belgium and Slovenia were reduced one, according to BBC. The ratings agency stated that the nations did not have the resilience needed to cope with the region's debt situation, Bloomberg reports.

Earlier in January, fellow ratings agency Standard & Poor's lowered the credit ratings of nine of the 17 euro zone nations, according to BBC. Greece has been negotiating with people representing the troubled nation's bondholders in an attempt to arrive at a compromise that will enable the country to obtain another round of bailout funding.

"The divergence in monetary and credit conditions across the euro zone and near-term economic outlook highlight the greater vulnerability" that the nations have in the case that they encounter further financial challenges, Fitch stated, Bloomberg reports. "These sovereigns do not, in Fitch’s view, accrue the full benefits of the euro’s reserve-currency status."

BBC reports that the downgrade of the five nations comes after the agency put them on review for possible ratings cuts in December. 

Debt concerns in the 17-nation euro zone have resulted in a sharp disparity between the borrowing costs of safe-haven Germany and less stable Italy and Greece, according to Dow Jones Newswires.

Most of the BTP contracts traded were Long-Term Euro-BTP Futures contracts. The trading volume for these risk-management tools was 9,827 for 2011, which represented a 70 percent gain from 2010's trading of these contracts. A total of 4.3 million of the 5 million BTP contracts traded in 2011 were long-term, while the rest were focused on the short and medium term.

The report indicated that Spanish and Italian clients have made substantial use of BTP derivatives.

"The extensive use of BTP futures is primarily due to the hedging motives of participants. Uncertainty regarding the development of the euro zone in light of the debt incurred by certain member countries caused a significant increase in volatility on the bond markets in 2011," Steffen Köhler, Eurex's head of product development, said in the statement.

"More businesses engaged in energy derivatives view the certificate as a reliable indicator of recipients having built a solid foundational knowledge and skill base upon which to carry out activities on behalf of their employers," Jobert E. Abueva, vice-president of global sales and marketing for The Oxford Princeton Programme, said in the statement. "

To fulfill the requirements need for the certificate, candidates need to complete three sequential courses, which include Energy Derivatives Markets, Instruments and Hedging (DPH1), Energy Derivatives Pricing, Hedging and Risk Management (DPH2) and finally Advanced Energy Derivatives Pricing, Hedging and Risk Management (DPH3). The program provides candidates with a three-year time frame to complete the three courses.

The statement expressed the opinion that the certificate program could benefit a plethora of energy industry professionals. The individuals who might benefit range from chief financial officers to energy traders and risk managers.
 

Different organizations representing the financial industry have claimed that the new regulations including the Basel III capital requirements and the new rules set forth by the Dodd-Frank Act could end up costing market participants more than $1 billion, according to the media outlet.

"A lot of the rules in Dodd-Frank are still being worked out, and some of them are already overdue," Álvarez told the media outlet. "From my perspective, as the [top] risk manager for the securities lending business, some of these changes are potential game-changers with huge implications."

The new regulations could potentially be used to help the firms develop a competitive advantage, he explained

One key regulation, the Basel III requirements set forth by the Basel Committee, have drawn fire from industry experts as providing a potential threat to the profitability and jobs of banks, and even economic growth. Market insiders have also stated that the compliance efforts required by the Dodd-Frank could drive up costs. 

The new financial instrument, which is called a PAF2, is a fixed-income security that makes coupon payments between 5 and 6.5 percent over a time period of nine years, according to The Financial Times. After a period of four years, the bank will retain the right to cancel payments to the holder of the structured note.

This plan will reduce the amount of cash paid to bankers, and will also benefit the balance sheet of the firm, according to The Financial Times. The strategy of paying bonuses in the form of these securities will provide the banks with better capital ratios, which will enable the lending institutions to meet the Basel III requirements more easily.

"It is a very effective risk-reduction measure and the right thing to do in the current environment. It provides a healthy coupon, provides a long-term incentive, and it helps the firm achieve its strategic goals," bank chief executive Brady Dougan stated, the media outlet reports.

Various reports have indicated that various financial institutions including Morgan Stanley and Bank of America have warned their investment bankers of pay cuts in 2012 ranging between 20 and 30 percent.