DeriviDoc Founder and Director, Melissa van der Merwe, attended the Risk South Africa (RiskSA) conference in Cape Town in October last year and found the panel discussion on central clearing of particular interest. Read her summary of the discussion below. RiskSA conference – Cape Town, Oct 2018 Summary notes from a panel discussion with Garth Klintworth (Head of Markets, Barclays Africa Group) Sean Quinlan (Head of Clearing Broker Relationship Management EMEA and APAC, LCH)

Central Clearing is a key component of regulatory reforms for OTC derivatives. A centrally cleared transaction will be cheaper than a bespoke bilateral. This extract, from a paper called 'The Economics of Central Clearing: Theory and Practice' by Craig Pirrong, explains why: Executive Summary (pages 2-3): Regulations requiring the clearing of certain OTC derivatives through central counterparties ('CCPs') are causing a profound change in market structure and trading practices

Central clearing of standardised OTC derivatives products is already a reality in the US and EU markets. The Financial Markets Act has made provision for it in the South African market, and it will be implemented in phase 3 of the phasing-in process (potentially by Q3 of 2019). This is not far away, when one considers the large number of new legal documents that need to be put in place to support central clearing. The ISDA Master Agreement can form the basis of your clearing

The Financial Markets Act has finally been implemented as of 09 February 2018 (almost four years after it was published). This means the clock has started to tick for compliance on various provisions under the Act ... Cliffe Dekker Hofmeyr’s article clearly sets out the requirements that market participants should be aware of in order to comply. Read it here. DeriviDoc offers training on various elements provided for in the Financial Markets Act. Register here if you would li

Central clearing is one of the many new regulatory requirements being implemented across the globe in the OTC derivatives market - as a way to mitigate systemic risk. This short YouTube clip explains central clearing in simple terms: DeriviDoc runs two courses on central clearing: 1. An Introduction to Central Clearing ... which focuses on how the operational elements of clearing work in the OTC derivatives space. This is a great introductory level course which will give del

The regulatory changes, which have been implemented across the globe in the derivatives market, are having a substantial impact on the way in which risk is managed by institutions. Central clearing requirements as well as margin requirements are the main reasons why risk management processes have to change. In the past, risk management in the derivatives space involved assessing counterparty credit risk and market risk and occasionally collateral risk. Central clearing will f

​With central clearing of standardised OTC derivative contracts gaining traction under the EMIR and Dodd Frank regulations, market participants are becoming more focussed on diversifying the types of assets that they can post to the clearing house as collateral. This Reuters article gives an interesting insight into how LME clearing house is permitting commodities to be posted as Initial Margin for commodities trades that are cleared. Ultimately, once all the margin rules are

During the recent ISDA® AGM held in Lisbon in May, a panel discussion highlighted a few of the challenges that have arisen in the clearing space, and this article aims to highlight some of these. Regulators have imposed higher levels of margin on uncleared OTC derivative transactions. Regulators have purposefully done this in order to encourage parties to clear transactions, since clearing is designed to reduce systemic risk. The concern is that there are certain products, wh

The year 2016 was characterised by change and surprise: first the news of the Brexit vote, and then that Donald Trump had been voted in as the 45th US President. Finally, in late 2016, the SARB proposed a directive in terms of the Banks Act outlining the margin rules for uncleared derivatives in the South African market. All of these events are likely to have a large impact on the derivatives industry in 2017. Global financial regulatory reform continued rolling out in 2016 a

Central clearing is fast becoming a reality. Counterparties in the US have been clearing standardised interest rate swaps and credit derivative transactions since 2013. In Europe, the first phase of clearing began on 21 June 2016. Under the Financial Markets Act, the first phase of mandatory clearing could apply as soon as the second half of 2017. Many Central Clearing Houses or Central Counterparties (‘CCPs’) have sprung up all over the globe, each one offering something sli