The Capital Markets are not ready for Central Clearing

SimCorp Survey -released the findings of a poll conducted in March. Respondents included nearly 60 executives from 34DSC01210 capital market firms from around the world.Results show that 53% of capital markets respondents are not ready to centrally clear interest rate and credit default swaps.

With regulations like Dodd-Frank and EMIR aiming to increase transparency and market efficiency in over-the-counter (OTC) derivatives trading, the poll asked respondents whether or not their firms are ready to centrally clear interest rate swaps (IRS) and credit default swaps (CDS). While 41% answered yes, a 53% majority answered no.

Well to be honest – The fact that most investment management firms are not prepared for central clearing is not surprising. This is rooted in an overreliance on legacy and fragmented portfolio management systems which makes it difficult for firms to get the most basic information on the state of their business. Without the right technology in place, asset managers will continue to struggle, especially considering how OTC derivatives reform is only the first step in what will likely be a continuing overhaul of how firms address all securities and manage their exposures across an enterprise.

The major challenges expressed by firms in processing derivative transactions as part of this poll were cost, collateral management, intraday reporting, systems integration and regulatory compliance across multiple jurisdictions.

Derivatives are complex instruments. Therefore, state-of-the art systems with accurate collateral forecasting, consolidated positioning-keeping to facilitate intraday reporting and automated workflows to support the entire trade lifecycle are absolutely essential for investment managers dealing with the tsunami of new regulations.

I do not have much detils about the Questnaire.

June 10th 2013 key date to pay attention to this year 2013, when interest rate swaps and credit default swaps will have to be centrally cleared by most market participants who fall under Dodd-Frank. Consequently, many clients have been finalizing their production account set-ups at CME Clearing, and signing up for direct access to their reports and margin analysis tools.

4 thoughts on “The Capital Markets are not ready for Central Clearing

  1. Derivatives with central clearing have been working well in Brazil since its beginning. I can’t see why market participants in more (supposedly) developed places cannot do it…


    1. That’s a great example Otaviano of Brazil, but the size of the market in US and Europe is far more bigger and complex too .. and the Banks, Hedge funds are reluctant too abide by the regulations ..


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