FEATURE
“Central clearing has the potential to create new challenges in the realm of documentation, collateral management, position margining, post-trade processing, client reporting and cross- asset class prime brokerage,” he says. “Naturally these challenges are also exciting opportunities as well!”
While UBS is now providing full automation and straight-through-processing to FXPB clients, Pla says that the changing regulatory environment will dictate new “design principals” and functionality of both its FXPB offering and its electronic trading platforms.
He believes that the adaptability of a prime broker is a an important measure of its commitment to the business, as demonstrated by the number of, and the diversity of clients, both by region and customer types, across asset managers, hedge funds, currency overlay managers, retail aggregators and banks.
Also, in a sector that is still growing and which has seen a relatively large number of new service providers enter the market in the past few years, Pla believes clients should look for signs of franchise strength and stability, such as how long an FX prime broker has been established, its Tier 1 capital ratio, its cumulative investment in technology and the depth and stability of its front-to-back prime brokerage team.
“An institution’s commitment to FXPB and central clearing can be measured by the prime broker’s alignment with both the FX execution business and the firm’s cross-product prime services platform. It is important for an FXPB to be able to demonstrate the depth of its resources, including not just sales, but client service, product development, risk management, IT and capital introduction,” he adds.
For Pla believes that global and regional interest in cross-asset prime broking will increase as FX derivative products are assessed for their suitability for centralised clearing. He says: “A bank’s preparedness for ‘OTC2CCP’ is essential; an FX prime broker must be able to fully leverage its cross-product resources required for the migration of OTC products to central
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