Friday, March 16, 2012

Iran's banks to be blocked from global banking system

Swift, the body that handles global banking transactions, says it will cut Iran's banks out of the system on Saturday to enforce sanctions.
The move will isolate Iran financially by making it almost impossible for money to flow in and out of the country via official banking channels.
It will hit its oil industry, but may also have a heavy impact on Iranians who live abroad and send money home.
The move follows EU sanctions against Iran over its nuclear programme.
The US and its allies accuse Iran of trying to develop nuclear weapons - a charge it denies.
Sanctions expert Mehrdad Emadi: "Losing Swift facilities is equivalent to not having travel documents for a business person"
Iran last week agreed to hold talks with six major world powers over its nuclear programme, although no date or venue has been set.
Almost all banking transactions pass through Belgium-based Swift, the Society for Worldwide Interbank Financial Telecommunication, which is sometimes called the "glue" that holds the financial system together.
Swift will pull the plug at 1600 GMT on Saturday, in what is all but the final blow to Iranian business dealings.
Oil Its announcement coincides with news that major money exchange houses in the nearby United Arab Emirates have stopped handling Iranian rials over the last few weeks, something that has further reduced Iran's ability to trade and acquire hard currency.
Iran's business activities had already been restricted by US anti-money laundering legislation which made it risky for banks around the world to do business with Iran, including trade financing.
It is heavily reliant on its oil industry.
China and India have said they will still take Iranian oil, but the only obvious way for Iran to be paid for it is now in gold.
One Iranian businessman said Swift's move would make it now impossible to conduct business with Iran.
Morteza Masoumzadeh, a member of the executive committee of the Iranian Business Council in Dubai and managing director of the Jumbo Line Shipping Agency, told the Reuters news agency: "If Iranian banks cannot exchange payments with banks around the world then this will cause the collapse of many banking relations and many businesses."
Lazaro Campos, chief executive of Swift, said: "Disconnecting banks is an extraordinary and unprecedented step for Swift. It is a direct result of international and multilateral action to intensify financial sanctions against Iran."

CME Clearing Europe Vacates Registration as Derivatives Clearing Organization Prior to Greek CDS Payouts

CME Clearing Europe has vacated its registration as a derivatives clearing organization, less than a week before the March 19th Greek debt auction, after which CDS payouts will be required.

CFTC Vacates CME Clearing Europe Limited Registration as a Derivatives Clearing Organization
Washington, DC—At the request of CME Clearing Europe Limited (CMECEL), pursuant to Section 7 of the Commodity Exchange Act, the Commodity Futures Trading Commission issued an Order on March 13, 2012, vacating the registration of CMECEL as a derivatives clearing organization.
The Order of Vacation is available on the CFTC’s website (see Related Links).

Why does one suppose the CME might ask to be vacated from CFTC registration only 6 days prior to March 19th when the Greek debt auction is held?

First, an overview of the CME Clearing:
"Welcome to CME Group's European clearing house. CME Clearing Europe has been established to offer greater choice of central counterparty clearing infrastructure to users of derivatives outside the US. CME Group has developed systems and operational and risk management standards that support its position as the world's largest and most diversified derivatives marketplace; and since 2002 has extended its clearing in the US to cover OTC derivatives: commodities, IRS and CDS. On the basis of those systems and the accumulated clearing experience and investment, CMECE aims to offer a full range of OTC derivatives clearing from its London base."

So it appears that the CME is scared s***less of the possibility of an imminent $50 trillion credit default swap seize up/ conflagration once the Greek CDS payouts begin after the March 19th Greek debt auction.  There is simply no other explanation for the CME to voluntarily request to vacate its registration as a derivatives clearing organization!

CME Clearing became registered on September 2nd, 2011 and requested to leave December 14th, 2011.

Interesting that the CME Clearing Europe had to supposedly notify the CFTC 90 days ago and it just happens to be approved by the CFTC only days after the ISDA decision that a credit event has occurred which will trigger the payout of CDSs.  There is no mention of the CME's request prior to today.

See PDF of full vacate request which is dated today below: