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However, if forwards and swaps are ultimately cleared as well, then the volume increase would be significant. He says: “In addition to scaling capacity of existing systems, clearing houses may want to look at smart solutions that ensure trades likely to have a significant market impact, such as those with a particularly high value or risk profile, are prioritised during peak flow, helping maintain an accurate market picture at all times.”
He adds that there are certain aspects of the clearing process such as trade matching that can easily be purchased from vendors as the
technology exists and is readily available, but other aspects may be seen as differentiators by clearers and may therefore be more likely candidates for in-house build. Time to market is likely to be a major part of the decision making process as in-house build is often costly and time consuming and subject to extensive project risk. “If the solutions exist, then choosing best of breed technology for key components can provide the clearer with a real advantage,” he says.
For Kriskinans, the fundamental requirement of any participant at this point is to have a flexible framework in place – a set of physical interfaces coupled with an intelligent, rules based workflow engine. He says: “Tis is what DealHub offers in its Connectivity Manager – a solution that connects you to the various CCPs, SDRs and SEFs and helps you manage your response to the evolving regulatory landscape now, but more importantly provides a basis for quickly responding to changes in regulation and regulatory service providers which are inevitable in the coming years.”
But with the regulations all but finalised, time is running out for the amount of change and preparation work needed within the banks to adapt to new processes and get all their clients onboard.
Banks
Gil Mandelzis, CEO of post-trade specialist, Traiana, says that the company is focusing on building client
104 | january 2012 e-FOREX
clearing technology for the banks because he believes that this is where a lot of the complexity will come from. He believes the key issues are around settlement and confirmation, credit, margining and collateral
requirements, which are actively being worked upon between the banks and the clearing corporations.
Although the rules have not been finalised, Mandelzis says that even once published in final form by regulators, the approach to implementing the rules will evolve for months if not years as clearing for OTC products is such huge change to the infrastructure that it will be an ongoing process of adjustment and finer detail to be able to achieve such change.
He says: “As new SEFs enter the market there are going to be new requirements, new challenges and new thoughts. Tere are a lot of topics that are still open for debate and we think they will remain so as people come to market with new trading ideas and new models. We are entering a period of time that is going to be characterised by many changes, so one cannot assume that integration to a clearing corporation from a client or counterparty is a one-off process.” Te finer points of integrating new venues and instruments will be fine-tuned for years to come.
At present there are four clearing corporations set to offer clearing for FX options and/or NDFs – Chicago Mercantile Exchange,
LCH.Clearnet, ICE and the Singapore Exchange – but Mandelzis says that Traiana is in discussions with others and that there will be
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