The document discusses the impact of mandatory central clearing of over-the-counter (OTC) derivatives on costs and the derivatives market. Central clearing of OTC derivatives has increased costs for market participants due to higher capital charges, margin requirements, and collateral costs. It has also led to a shift toward clearing standardized products and away from bespoke hedges. Firms are focused on optimizing their collateral and improving collateral management processes to help offset these increased costs. Regulations continue to evolve in ways that will further shape the OTC derivatives market.
CLEAR OR NOT CLEAR? CURRENT TRENDS ON THE OTC DERIVATIVES MARKETLászló Árvai
The objectives of regulators and market participants have thus become aligned. While regulators are looking to enhance prudential supervision by
requiring more rigorous capital and liquidity adequacy standards, credit institutions are looking to improve the quality of their asset base both to
reduce credit and counterparty risk and to improve their liquidity profile.
EMIR - European market infrastructure regulation has been initiated by European union to avoid situation similar to 2008-09. Financial scenario led Lehman to default and bear stearn near to collapse.
This helps EU regulatory bodies to monitor OTC, CCP and TRs.
European Market Infrastructure Regulation (EMIR) - New EU Rules on Derivative...Rüdiger Rücker
Presentation about the European Market Infrastructure Regulation (EMIR) focusing on objectives, obligations, affected entities and instruments, reality check on pension funds, reality check on clearers and reality check on real economy (20 pages).
CLEAR OR NOT CLEAR? CURRENT TRENDS ON THE OTC DERIVATIVES MARKETLászló Árvai
The objectives of regulators and market participants have thus become aligned. While regulators are looking to enhance prudential supervision by
requiring more rigorous capital and liquidity adequacy standards, credit institutions are looking to improve the quality of their asset base both to
reduce credit and counterparty risk and to improve their liquidity profile.
EMIR - European market infrastructure regulation has been initiated by European union to avoid situation similar to 2008-09. Financial scenario led Lehman to default and bear stearn near to collapse.
This helps EU regulatory bodies to monitor OTC, CCP and TRs.
European Market Infrastructure Regulation (EMIR) - New EU Rules on Derivative...Rüdiger Rücker
Presentation about the European Market Infrastructure Regulation (EMIR) focusing on objectives, obligations, affected entities and instruments, reality check on pension funds, reality check on clearers and reality check on real economy (20 pages).
Presentation is about #RegulatoryCompliance that #Financial Institutions need to ensure today. While regulators continue to publish regulations to enhance consumer protection and address safety and soundness, Financial Institutions are under pressure to meet these regulatory obligations.
Cost of Trading and Clearing OTC Derivatives in the Wake of Margining and Oth...Cognizant
We examine how recent regulatory changes (in central clearing, margin requirements, etc.) are impacting the OTC derivatives market, and causing several leading players to exit. With the spike in clearance and trading costs, a multitude of ratios show how firms are likely to adjust.
Regulations are integral to the banking industry, and the extent to which the bank complies with such regulations not just maintains its bottom line in terms of avoiding hefty fines, but also has a big bearing on credibility and integrity. So how do banks comply with all that is required, and save themselves from the ill-effects of non-compliance?
PrecisionLender Webinar - Preparing for SOFR: Changing the PlaybookPrecisionLender
This webinar will recap what we know so far about the transition toward risk free rates and provide insight into what financial institution management teams are doing now to prepare. The conversation will focus on the topics most relevant to Treasury, Lending and Risk Management teams, and add strategic perspective on the associated challenges and opportunities.
The European Banking Authority are proposing to change fundamentally the prudential landscape for investment firms. In this briefing we looked at these proposals for strategic context around the update to your 2016 ICAAP.
The purpose of this directory, which the FSB has delivered to the April 2019 G20 Finance Ministers and Central Bank Governors meeting, is to provide information on the relevant regulators and other authorities in FSB jurisdictions and standard-setting bodies who are dealing with crypto-assets issues, and the aspects covered by them. Contacts information with regard to the below functions has been shared among the authorities mentioned.1.
Https://digitalis.id
Another year has gone by and the FCA’s combined Business Plan and Risk Outlook has been released… So what’s new and what does it mean for your firm?
Our briefing walked through the key messages of the document and took a look back at 2015’s release. We also explored what you might need to be doing differently in the year ahead.
Hotel management contracts trends hotelsAnil GROVER
This report identifies the main commercial
trends and conditions contained within a
selection of Hotel Management Contracts
(HMC’s) across India by JLL. JLL comments
are based on a review of 42 management
contracts for properties across various
segments, located in the primary and
secondary cities of India. The review
highlights key trends pertaining to fee
structures and important clauses in Hotel
Management Contracts and aims to reflect
current trends in the industry.
NEW STANDARDS ON ASSET SERVICING AND LIQUIDITY MANAGEMENTLászló Árvai
As for CSDs, T2S represents a mix of opportunities and threats for global custodians. So we can state that there will be a number of different business models able to fit with the various different scenarios that can be drafted. Some of those models may also overlap with the ones of other T2S actors.
Financial crime hot topics: DPA's and Correspondent BankingBovill
At our February briefing in London, we looked at the evolution of and practical approaches to two current hot topics, Deferred Prosecution Agreements (DPAs) and Correspondent Banking.
Conversation with Matthew Lynes, Aberdeen Asset Management. Buy-Side System Requirements - Whitepaper by Quantifi and OTC Partners. The Cost of Collateral - Webinar Survey.
The July 2015 Insight newsletter, discussing the changing regulatory landscape and including a conversation with Matthew Lynes, Senior Investment Manager at Aberdeen Asset Management
Presentation is about #RegulatoryCompliance that #Financial Institutions need to ensure today. While regulators continue to publish regulations to enhance consumer protection and address safety and soundness, Financial Institutions are under pressure to meet these regulatory obligations.
Cost of Trading and Clearing OTC Derivatives in the Wake of Margining and Oth...Cognizant
We examine how recent regulatory changes (in central clearing, margin requirements, etc.) are impacting the OTC derivatives market, and causing several leading players to exit. With the spike in clearance and trading costs, a multitude of ratios show how firms are likely to adjust.
Regulations are integral to the banking industry, and the extent to which the bank complies with such regulations not just maintains its bottom line in terms of avoiding hefty fines, but also has a big bearing on credibility and integrity. So how do banks comply with all that is required, and save themselves from the ill-effects of non-compliance?
PrecisionLender Webinar - Preparing for SOFR: Changing the PlaybookPrecisionLender
This webinar will recap what we know so far about the transition toward risk free rates and provide insight into what financial institution management teams are doing now to prepare. The conversation will focus on the topics most relevant to Treasury, Lending and Risk Management teams, and add strategic perspective on the associated challenges and opportunities.
The European Banking Authority are proposing to change fundamentally the prudential landscape for investment firms. In this briefing we looked at these proposals for strategic context around the update to your 2016 ICAAP.
The purpose of this directory, which the FSB has delivered to the April 2019 G20 Finance Ministers and Central Bank Governors meeting, is to provide information on the relevant regulators and other authorities in FSB jurisdictions and standard-setting bodies who are dealing with crypto-assets issues, and the aspects covered by them. Contacts information with regard to the below functions has been shared among the authorities mentioned.1.
Https://digitalis.id
Another year has gone by and the FCA’s combined Business Plan and Risk Outlook has been released… So what’s new and what does it mean for your firm?
Our briefing walked through the key messages of the document and took a look back at 2015’s release. We also explored what you might need to be doing differently in the year ahead.
Hotel management contracts trends hotelsAnil GROVER
This report identifies the main commercial
trends and conditions contained within a
selection of Hotel Management Contracts
(HMC’s) across India by JLL. JLL comments
are based on a review of 42 management
contracts for properties across various
segments, located in the primary and
secondary cities of India. The review
highlights key trends pertaining to fee
structures and important clauses in Hotel
Management Contracts and aims to reflect
current trends in the industry.
NEW STANDARDS ON ASSET SERVICING AND LIQUIDITY MANAGEMENTLászló Árvai
As for CSDs, T2S represents a mix of opportunities and threats for global custodians. So we can state that there will be a number of different business models able to fit with the various different scenarios that can be drafted. Some of those models may also overlap with the ones of other T2S actors.
Financial crime hot topics: DPA's and Correspondent BankingBovill
At our February briefing in London, we looked at the evolution of and practical approaches to two current hot topics, Deferred Prosecution Agreements (DPAs) and Correspondent Banking.
Conversation with Matthew Lynes, Aberdeen Asset Management. Buy-Side System Requirements - Whitepaper by Quantifi and OTC Partners. The Cost of Collateral - Webinar Survey.
The July 2015 Insight newsletter, discussing the changing regulatory landscape and including a conversation with Matthew Lynes, Senior Investment Manager at Aberdeen Asset Management
Custody Banking and Emerging KYC NeedsTodd Breeden
Presentation prepared for one of the world's largest custodian banking service providers summarizing macro trends affecting the landscape and how to focus on emerging technology vendors in RegTech as a potential strategic solution to expand their business footprint
By 1st December 2015, BCBS-IOSCO rules mean that all eligible financial and non-financial counterparties must be able to exchange bilateral Variation Margin (VM) and Initial Margin (IM) with their OTC derivatives counterparties. The consequences of this extend far beyond methodology, requiring a re-evaluation of the whole end to end workflow.
Even though many organizations only care about the return on investment (ROI), but they never revisit it. Treasurers rarely toot their own horn about achieving or exceeding promised ROI. During this presentation we will examine vital financial benefits derived from both strategic and operational changes made possible with modern technology. It will cover some leading practices and preventable pitfalls others have made while making the case for treasury technology.
This presentation will provide you with tools to improve how you “make the case” for technology.
The spring 2017 Insight newsletter from Quantifi, discussing FRTB and whether it is strengthening market risk practices, and whether banks are prepared for the changes it will bring
Trading has changed from local to global and so have the processes from paper to Online. The result is change in process from T+3 to T+1 and real time trading and settlement of a trade.
Webinar Deck: Efficient Methods for Managing Global Cash in Today's Regulator...Kyriba Corporation
Check out our powerpoint for Efficient Methods for Managing Global Cash in Today's Regulatory Regime where the expert speakers explored proven liquidity and intercompany cash management strategies, as well as tax/treasury collaborative initiatives that can help optimize global cash in an ever-changing complex environment.
Rethinking Reconciliation: How a Global Center of Excellence Can Enhance Risk...Broadridge
In two years, outsourced reconciliation solutions have grown exponentially as increased focus on risk, regulations, and cost reduction has heightened the need for greater transparency and efficiency across all areas of financial services operations. Discover how leading financial institutions are enhancing risk management and reducing costs through a global center of excellence for reconciliations.
Medicines Verification Systems in Europe – a perspective from wholesale distr...László Árvai
The Falsified Medicines Directive and its Delegated Regulation on Safety Features
European Medicines Verification Organisation (EMVO) and the roll-out of National Medicines Verification Systems
GIRP and wholesale distributors perspectives on medicines verification systems
Impact on the actors in the supply chain
Best Practices in the Field of Serialization and Safe Supply Chain László Árvai
GS1 – and global standards • ABC – Argentina, Brasil, China and other countries – what is the world doing beyond Europe? • Serialisation – how and when? • Visibility in the supply chain – reality or myth • Patient Safety and the “Level below the Each”
The transparency of securities financing transactions in the EULászló Árvai
Capital Markets Union (CMU)
•EU capital markets are global
•Considerable progress has been made
•But inefficiencies, legal barriers, insufficient competition remain.
•Markets need to work better for the economy, delivering growth and jobs.
Potential career path between profilesLászló Árvai
Architects
Business
Development
Governance
Group IT - job profiles
Infrastructure
IT Development
IT Operations (development)
IT Service
Management
Management
Project Management
Security
Staff
Test Management
Agenda
Danske Bank IT – A Global Workforce
Career Path project vision and overview
Job profile example
Presentation of speaker
Paradigm shifts of IT Competencies
CSDR Technical Standards and Technical AdviceLászló Árvai
Presentation to explain ESMA’s on-going involvement in the drafting of
the CSDR Level 2 requirements
Outline of ESMA’s role in the Level 2 process
Reference to main stakeholder feedback to the ESMA consultation
papers and the related ESMA responses
Questions
What affects interview
• Overconfidence!
• Biases
- First impressions
- Stereotypes
- Like me/I like you
- Halo/horns
• Poor planning for interview (lack of knowledge of role and/or criteria)
• Poor decision making
• Lack of interviewing skills (questioning, listening, note taking, evaluating)
Why could this presentation be relevant for you?
IF you have: - duplications in your organisation
-unclear processes
-unclear responsibilities Or: - It is not clearly defined, who your internal consumers are - What are the real added value activies? - You do not exactly know how measure the effectiveness?
CHALLENGES FOR A CRO IN A NEARLY GONE CONCERN OPERATING ENVIRONMENTLászló Árvai
Banca Marche is a very typical commercial retail bank, offering a wide range of products and services… … at the end of 2012 (last official figures available)… was among the first 20 Italian banks in terms of total assets (23 bln) had a very high market share in Marche Region (25%, 23% deposits and 20% branches) and about 1% of whole Italian market share (1,0% loans, 0,8% deposits and 1,0% branches)
Are CCPs here to manage risk or instead to cause it?
•Changing environment: security vs capital efficiency
•Diversity killed by regulation?
•CCP default scenario: recovery vs resolution
2
Credit Risk Losses | Real Losses Are they inconsistent?László Árvai
Focusing on:
• Contracting a new deal
• Good and properous customer relationship
• To have nice conversation
• Learn all the needs of his client
• Write a loan application
• Fill in the forms of the system
• Cope with all the compliance „handicaps“
• Analyse the business plan, the forecast, …
The post trade challenges of implementing CSDR settlement discipline: Mandato...László Árvai
What is a buy-in, and how do they work?
What is cash compensation?
The challenges of buy-ins and cash compensation
CSDR Level 1 and mandatory buy-ins
The Level 2 ESMA Consultation Paper: the 3 options for a buy-in mechanism
The challenges with the options
Conclusion (the need to amend the Level 1 text)
CSDR Mandatory Buy-ins
1 . How did we get into this mess
•Ukraine is one of only two countries of the FSU yet to recover to its 1991 level of GDP
–Total reform failure
–Got democracy but Yanukovych was a bad choice
•In the last decade Russia has been transformed into a “normal” country
(albeit with a lot of problems)
100 mln clients 6 countries 70,000 employees
TOP-3 best employers
85% vacancies are closed by internal candidates
TOP-10 best companies for leaders in Russia (2014)
G20 (2009): Strengthen loan loss accounting using broader
range of information aiming at greater stability
IFRS 9: 3S-approach replaces Incurred Loss (IL)-approach
Basel Committee Guidelines: Are claims justified?
higher model quality and backtesting
Macroeconomic projections
Denouncing shortcuts (e.g. 30d past due)
For lack of empirical evidence: Let’s use simulations
Revolving 10Y-loan portfolio, infinitely granular follows Moody’s
US-Corp. migration statistics, transfer S1/2: 3notch downgrade
(papers.ssrn.com/sol3/papers.cfm?abstract_id=2187515
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how can I sell pi coins after successfully completing KYC
The future of the OTC Derivative Market - Eugene stanfield
1. The future of the OTC Derivative Market
The impact of Central Clearing
2. 1
Agenda
Impact of mandatory central clearing on OTC derivatives
Cost of doing business
Collateral management efficiency
Regulations still to shape how we do business
3. 2
Impact of mandatory central clearing on OTC derivatives
Source: Statistical release – OTC derivatives statistics at end-December 2014, April 2015, Bank for International Settlements
Gross market value drops significantly post 2008 crisis
Trading becoming increasingly capital-intensive
Clearing, trade compression and netting gaining importance
Recent trends in OTC derivatives market
Dec 12
585
Dec 11
596
Dec 10
553
Dec 09
532
Dec 08
525
Dec 07
508
Dec 06
361
Dec 05
257
Dec 14
598
Dec 13
676
CDSFXInterest rate
Notional Principle (USDbn)
Dec 10
19
Dec 09
18
Dec 08
29
Dec 07
11
Dec 14
19
Dec 13
17
Dec 12
22
Dec 11
24
Dec 06
7
Dec 05
7
Gross Credit ExposureCDSFXInterest rate
Gross Market Value & Gross Credit Exposure (USDbn)
4. 3
What is the impact of the regulations on OTC market?
37% believe OTC liquidity has deteriorated over the past years
54% still consider derivatives crucial for efficient risk management
67% believe reforms won’t impact their demand for derivatives
Source: ISDA Insight (a survey of issues and trends for the derivatives end-user community); April 2015.
Impact of mandatory central clearing on OTC derivatives
What are firm’s biggest concerns regarding
ability to use derivatives to manage risk?
0%
10%
20%
30%
40%
50%
60%
70%
Increased
costs of
hedging
Uncertainty
about
regulations
Concerns
about cross-
border
derivatives
regulations
Few er
dealers to
transact w ith
Reduced
availability of
hedging
products
Not able to
handle
clearing
Not
sure/other
5. 4
62% expect more OTC derivatives to be centrally
cleared
17% believe more than 30% of their transactions will
remain uncleared
Source: the Global Survey conducted by Risk and IBM. Risk Magazine, May 2014
2015: 65 % of IRS and 29% of CDS outstanding
notional is centrally cleared
What are the firm’s expectations on cleared transactions?
Impact of mandatory central clearing on OTC derivatives
Currently being
centrally cleared
Expected to be centrally cleared in the next
two years
0-25% 25-50% 50-75% Total
0-25% Buy-side 10% 19% 9% 38%
Sell-side 10% 15% 12% 37%
25-50% Buy-side 2% 2% 4%
Sell-side 5% 5%
50%+ Buy-side 6% 6%
Sell-side 10% 10%
Total 19% 36% 44% 100%
Maintain cleared % Increased cleared %Key:
Desire to clear vs Requirement to clear!!
6. 5
Source: BIS report - Regulatory reform of OTC derivatives: an assessment of incentives to clear centrally. October 2014.
Collateral costs
Capital costs
Initial margin requirement
Default fund requirement
Default fund exposures capital charge
Trade exposures capital charge
Initial margin requirement
CVA risk capital charge
Counterparty default risk capital charge
Central clearingBilateral trading
Cost of doing business
Costs of central clearing vs non-cleared – USD1m 5 year IRS
Breakdown of cost components for a stylised example
Bilateral Trading Estimated cost example (USD) Central Clearing
5,000 Potential future exposure 5,000
700 Total collateral required (initial margin + default fund) 572
80 Counterparty credit risk 8
310 Credit valuation adjustment n/a
n/a Default fund capital requirement 72
-11 Offset for initial margin received (for bilateral only) n/a
379 Total capital required 80
Costs
5 Cost of collateral (0.7% x total collateral required) 4
25 Cost of capital (6.7% x total capital required) 5
30 Total costs 9
7. 6
1The leverage on a portfolio level is calculated differently from PFE at trade level. It recognises hedging at netting set level by net gross ratio.
Cost of doing business
What are LCR costs for Clearing Brokers?
LCR-implied costs
Maturity [yrs] 0 - 1 1 - 5 5 - 10 10 - 20 20 - 30 30 - 40 40 - 50 Total
Notional sum [m €] 1,400 1,438 971 352 119 43 16 4,339
Risk Add-on 0.0% 0.5% 1.5%
=
€30m
A gross
€ 13.5m
= 0.4 x
€30m
+ 0.6 x
0.09
x
€30m
PFE A gross NGR1 A gross
€ 0
+
€13.2m
+
€13.5m €26.7m
x
4% €1.07m
x
12% €128k
Current
exposure
IM + 20% addn
collateral
PFE LR exposure LR
Required
capital
ROC
Required
return
Leverage Ratio ~ 0.3bps on total notional
8. 7
New capital charges drive costs higher for all
OTC derivatives but particularly for non-cleared
derivatives
Focus shifts towards the futures market thus
compromising on the hedge’s bespoke nature
End-users opting for non-perfect hedges
(increased demand for standardised products)
Operational complexity is leading to investment
into collateral and processing set up
Firms to restructure product offerings and
pull back from too costly asset classes
Careful selection of one or two CCPs to
maximise netting benefits and reduce
costs
Market is developing standardised
approaches to model margin
requirements
Cost of doing business
What will the OTC market look like post-reform?
9. 8
Collateral value chain
Need to understand bilateral & cleared margin requirements
Solutions to facilitate margin calculations & asset segregation
Enhanced mechanisms to track collateral & its beneficiaries
Configuration to support the re-hypothecation requirements
Multiple custodians connectivity to manage cash & securities
Central
clearing
Mandatory clearing coverage to grow
Bilateral
margining
Complex and Illiquid market with high
margins
Collateral value chain
Optimal Counterparty Choice Efficient Margin Management Optimal Allocation of Collateral
CCP
Bilateral counterparty A
Bilateral counterparty B
Cross product margining
Netting & compression
Backloading
Holistic approach
Collateral substitution
Automated collateral
processes
Pre trade Continuous Post trade
Collateral management efficiency
10. 99
Need an overarching approach to risk management
Alignment of disjointed collateral management
essential
Investment in infrastructure and technology is expected
Demand for eligible collateral to increase
Collateral upgrade and transformation gaining
importance
Capital, balance sheet and liquidity management
critical
Increased interconnectedness of previously distinct considerations
Collateral management efficiency
Inventory
Optimisation
Operational
Execution
Organisational
Set-up
Infrastructure
/ Technology
Resource
Management
Trading
Strategy
Balance
Sheet
RWA
LCR
LR
11. 10
Documentation management platform
Sungard
Accenture
Markit
KYC utility
DTCC
(Static Data)
Genpact
TCS -Bancs
Clearstream
Broadridge
CAPCO - FIS
Euroclear
Bank Consortium
(Static data)
WIPRO
IBM
Growing importance of third party providers
New utility set-up emerging from the collateral paradigm shift
Collateral management efficiency
Repo Desk
Sec Lending
Derivatives
Treasury
Operations
Collateral management function
Sec
Lending
Repo F&O Treasury…
Markets/FO businesses Regional treasuries GT, …
Collateral
Optimisation platform
Eq Fl FX
Commodities
Cash
ListedandOTCderivatives
Governance
Product lines
Legal and
documentation
Collateral users
Traditional collateral setup Emerging trend
Markets/FO businesses Regional treasuries GT, …
MNA…ISDACSAGMRA
Source: Oliver Wyman, “Collateral Management Perspectives, September 2014
12. 11
Current issues
Leverage ratio =
Tier 1 Capital
Total Exposure ≥ 3%
January 2018
implementation
Proposed changes on leverage ratio
Regulations still to shape how we do business
1. BCBS drafting a FAQ document to address the margin issue.
2. Market expects segregated client IM to be exempt from LR Replacement Cost but IM offsets to remain.
3. PFE add-on likely to be calculated with the method in place.
What are
next steps?
Exposure-reducing effect of IM not recognised1
PFE add-on (driven by total notional) jeopardises porting between CBs4
IM an on-balance sheet asset & part of Total Exposure – significant extra-burden2
Banks argue for this to change as client assets are segregated from bank’s own
and not available for re-use
3
13. 12
MiFID II/MiFIR – all-encompassing impact on your organisation
Transparency
Investor Protection
Organisational
Requirements
Position Limits
OTC Derivatives &
Commodities
Market Structure
Non-discretionary
access
to venues
Trading of derivatives
on RMs
SME markets
introduced
Rules for Systematic
Internalisers
Specific capital/reporting
requirements
Electronic execution of
certain derivatives
ESMA to draft technical
standards
Pre/Post trade transparency Trade reporting to the authorities
Best Execution
Key Information
Documents (KID)
Client money/asset
rules
Client classification
Better risk controls for algorithmic
trading
Enhanced Governance
Position limits on commodity
derivatives
Position Reporting
Firms should review their client base and how MiFID II impacts their way for doing business with these clients
Significant changes to operational processes – including IT systems updates – required
MiFID II/MiFIR – key areas
Regulations still to shape how we do business
14. 13
Source: the Global Survey conducted by Risk and IBM. Risk Magazine, May 2014.
What BCBS/Iosco requirements are ranked as being
most difficult?
How prepared are you to calculate and post initial
margin on a gross basis?
BCBS/IOSCO requirements are ranked as being most challenging*
Regulations still to shape how we do business
26%
18%
10%18%
14%
21%
0% 10% 20% 30% 40% 50%
Initial margin
modelling
Group level
initial margin
threshold
Managing
restrictions on
rehypothecation
Buy-side Sell-side
Buy-side Sell-side
7.7%
61.5%
30.8%
12.2%
40.8%
46.9%
Well-prepared to calculate IM
On track and expect to meet the requirements
Concerned about requirements
15. 14
Limited time between the determination of whether parties are in scope and the mandatory compliance.
Major business, operational, legal and technical changes need to be addressed.
What are the implications of BSBS/IOSCO margin requirements?
Regulations still to shape how we do business
Gross IM to impact firm’s liquidity, funding, systems and legal documentation
New infrastructure needed to support daily margining
Application scope
Various internal models can receive regulatory approval
Disputes when non-standard internal models used – risk implications
Calculation methodology
Demand for and costs of eligible collateral likely to increase
Firms to focus on collateral optimisation/transformation
Eligible Collateral
Increased funding requirements due to gross IM exchange
Changes to existing ISDAs/CSAs
Re-hypothecation
Implications for firmsKey areas
16. 15
Markets not waiting for rules to be finalised and are adhering to the rules on a voluntary basis
The paradigm is shifting
Summary
Margining and collateral management at the forefront of clients’ attention
Need for a holistic, centralised approach to collateral optimisation and management – substantial investment
Chose carefully providers capable of facilitating your collateral needs throughout the collateral value chain
Liquid and eligible collateral crucial for doing business – collateral substitution and transformation to gain importance
OTC market increasingly expensive – shift towards futures expected