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He says: “Te existence of multiple clearers requires new smart trade-routing technology to manage the routing of trades to the correct CCP and to monitor and manage the various trade status updates from each CCP – and critically the ability to adapt and re-route over time as regulations and providers change.” He adds that gateways to multiple CCPs will be required to ensure banks do not have to build and manage physical interfaces to several CCPs. Furthermore, FX trades are not centrally matched – some clearers will match each side of a trade while others will require submission of a matched pair of trades, driving further technology and network investment.
Kriskinans says: “Banks engaged in clearing on behalf of clients will need the ability to manage the clearing process for their client trades, as well as their own trades. To manage risk and provide optimum client service, it will be critical for a bank to be able to see both cleared and non-cleared positions for a customer in a single, unified view. To make the most efficient use of margin, banks will look to leverage existing clearing technology for other asset classes as much as possible when deploying solutions for clearing FX trades.”
Dashboard applications
Kriskinans believes that a new breed of dashboard applications will provide real-time homogenous views of the clearing workflow, giving transparency within the bank of all trades submitted for clearing. Te same applications can provide an overview of the cost, speed and status of the various clearing providers, giving banks insight not only into their position and market activity, but also the efficiency of their clearing operations. “Routing of trades to SDRs will promote transparency across the market of all non-spot FX trades,” he says.
Tere will be some points in the clearing lifecycle that will offer opportunity for firms to differentiate their services and provide market participants with value added offerings. For example. Kriskinans says that building and maintaining several physical interfaces to multiple CCPs would be a significant overhead for banks, so the provision by vendors such as DealHub of a ‘gateway’ that makes the individual interfaces transparent to the bank is very attractive.
“At the same time the bank needs to be able to see a single view of all activity related to clearing across
102 | january 2012 e-FOREX
Peter Kriskinans “To manage risk and provide optimum client
service, it will be critical for a bank to be able to see both cleared and non-cleared positions for a customer in a single, unified view.”
all CCP venues in one place and so the ability to implement a dashboard view for the bank that shows all activity across internal and external systems is a key component of clearing solutions. Te value we provide is a connectivity manager layer that not only provides the multiple physical interfaces to CCP venues but also provides the flexible workflow management required to route trades and expose the status of all trades during the clearing process,” he adds.
To comply with the new requirements, sell side banks will need to push forward prices and volatilities to CCPs for use in margin calculations. Bank’s portfolio valuation, collateral and margin management systems will need to absorb intraday updates from CCPs and use these to monitor CCP exposures and according to Kriskinans margin call settlement systems and counterparty default management systems will be driven by data received from the CCPs.
Increased volumes
Initially, Kriskinans believes that is likely that NDF and options flows will be of a manageable volume and relatively easily absorbed by existing infrastructure.
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