Individually Segregated Account (ISA) Your collateral assets are totally segregated from the clearing house (and clearing member’s) proprietary assets, and from the assets of any fellow customers. Therefore there is no fellow customer risk nor clearing house / clearing member risk. Both the collateral assets themselves, as well as the value of those assets, are protected (i.e. you get the actual asset back which you posted, not just the economic value). The right to port coll

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 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

Regulatory changes will continue to be the main area of focus for the derivatives industry in 2018. In addition to that, new product types (Bitcoin and other cryptocurrencies) are also likely to dominate the way in which the derivatives industry will develop this year. Key areas of focus in 2018: MiFID II: The Markets in Financial Instruments Directive (MiFID) and the accompanying Markets in Financial Instruments and Amending Regulation (MiFIR) both originate from the Europea

As mandatory clearing of certain standardized OTC derivatives products starts to gain traction globally, as a potential Clearing Member (CM), it is pertinent to identify what factors one should consider in choosing a central counterparty clearing house (CCP). Many CCPs have sprung up in the market, each offering slightly different services, and not all CCP rules are consistent. For example, not all CCPs have the same default waterfall mechanics, or standardized events of defa

Currently London is the hub of clearing euro-denominated derivatives. For clearing houses to be authorized under EMIR, they have to be approved by ESMA. Since Brexit negotiations began, it is clear that the EU wish to move euro-denominated derivatives clearing into the EU. Doing so could force clearing houses located in London to move into Europe. The European Commission has drafted a new law that will require systemically important firms in the EU to be overseen by the EU au

LCH recently announced that they will launch a client clearing service for repo trades. This is good news for banks as it will ease the balance sheet impact of repo trades with buy-side firms. Buy-side firms will now be able to clear their repo trades through the RepoClear service by using a bank as their clearing member. The buy-side client will not be able to access the RepoClear service directly, as the LCH needs to ensure that it is only ever facing exposure to approved C

​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

Global financial regulation is focused on reducing systemic risk and central clearing is one of the ways in which regulators plan to achieve this. Currently central clearing has been implemented in the US and EU for the most standardized OTC derivatives contracts. The Financial Markets Act in South Africa has made provision for the establishment of central clearing houses and it is anticipated that by 2018 a central clearing house may be authorized to begin clearing standardi

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