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Majority of Asia-Pacific Buyside Firms are Unprepared for OTC Derivatives Clearing Regulations

By 17 Apr, 2014November 11th, 2019Press Releases

Cognito Europe

  •  Asia-Pacific buyside firms are largely unprepared for the future complexity of OTC derivatives central clearing regulations in the region, according to investment bank clearing brokers.
  • While most Asia-Pacific buyside firms have not yet selected a clearing broker for trades in uncleared OTC derivatives, the companies are asking banks to provide them with the same central clearing value-added services available to the buyside in the EU and US.

LONDON – 7th April 2014 – A new report from GreySpark Partners, a London-based capital markets consulting firm, found that buyside firms seeking OTC derivatives clearing brokerage services in Asia-Pacific view the provision of value-added service offerings as essential for investment banks to win their business. The results of a quantitative survey of buyside firms, sellside banks and technology vendors show that value-added services like real-time limit dashboards and ‘what-if?’ scenario modelling tools that slowly became essential for winning business among EU and US buyside clients are key to winning market share in Asia-Pacific where many firms already view these offerings as essential. This report, Asia-Pacific OTC Derivatives Clearing 2014, provides banks with a guide to winning business in one of the newest and most competitive landscapes for central clearing services.

GreySpark’s survey of the market found that hedge funds based in Asia-Pacific are more ready than their buyside competitors in the region to take up sellside clearing brokerage services. Meanwhile, other types of buyside firms are awaiting further clarity on the extent to which EU and US regulations will require them to comply with central clearing mandates. At the end of 2012, the notional outstanding value of OTC derivatives trading in Asia-Pacific encapsulated only 6.7% of a USD 633 trillion market, according to Bank of International Settlements figures. While it is reasonable to expect the Asia-Pacific market for OTC derivatives trading to grow in size and value in the future, it is unreasonable to expect that the market in the region will remain limited to the international trading venues of Hong Kong, Singapore and Tokyo where it currently resides. The GreySpark report provides banks seeking to take an OTC derivatives clearing brokerage service offering to market in Asia-Pacific with a guide that highlights all of the important criteria buyside firms in the region are looking for in such an offering.

Braian Szwarcberg-Poch, managing director of GreySpark’s Sydney office and report co-author, said: “The G20 commitments and Basel III accords greatly incentivise clearing. In reality, the overall cost of a cleared and uncleared trade is the same – the higher capital requirements for bilateral trading offset the sharper pricing and margin requirements associated with a cleared trade. As liquidity shifts to the cleared markets and regulators prepare to impose margin requirements on non-cleared OTC derivatives, trading bilaterally will become increasingly unfeasible AsiaPac buyside firms need to define their clearing strategy in order to remain competitive.”

Malavika Shekar, GreySpark senior consultant and report co-author, added: “As Asia-Pacific firms prepare to comply with global OTC reforms, it presents both a cost and an opportunity to all capital markets participants. The cost of clearing OTC trades is borne by the buyside and sellside alike, but the ability to implement an end-to-end automated clearing solution presents an opportunity to streamline process and reduce operational bottlenecks. Buyside firms should ensure they are prepared to identify the best scalable and long-term solution that will suit their specific needs.”

For further information on GreySpark’s research, please e-mail: