OTC Derivatives – More Regulations and Reform

In case you didn’t already know, last week in Amsterdam Sibos brought together members of the financial industry to discuss topics that “matter most, across business areas, across functions and across regions.” This year one of the topics discussed were OTC derivatives and the current shift of placing more risk on the CCPs. With our 5th Annual OTC Derivatives Operations & Processing Conference coming up next week I thought this might be a timely issue to discuss. So, in essence, what came out of Sibos on this topic was that stronger recommendations need to be made on standards around the CCPs. CCPs are taking on more risk than ever, something that is new to them, so shouldn’t regulators being working out all potential scenarios to protect them? There has been reform put in place to increase transparency and prevent the accumulation of outsized OTC positions – in hopes of avoiding an AIG or Lehman repeat – but will the new CCP model bring on new problems and concerns?

Cian Burke, co-head of securities services at HSBC, who was also a presenter at Sibos, said, “There is a lack of clarity around the definition of who needs to clear and who will be mandated to clear.” Burke went on to point out that there is confusion on a global scale surrounding this issue. To me, it basically sounds like everyone knows the regulators need to make a move towards reform surrounding the risk the CCPs are taking on, but no one is quite sure when and what will come from this. My question now is… what is the regulators’ interpretation of this?

This entry was posted in Clearing and Settlement, Derivatives, Regulation, Securities Operations and tagged , , , . Bookmark the permalink.

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