New access models for the buy side ISA DIRECT

Transcription

1 New access models for the buy side ISA DIRECT London, May Matthias Graulich, Chief Strategy Officer, Member of the Eurex Clearing Executive Board

2 Why ISA Direct Responding to Change 1 2 Capital Rules Concentration Increasing regulatory pressure on capital requirement RWAs and Leverage Ratio (LR) Net Stable Funding Ratio (NSFR), Liquidity Coverage Ratio (LCR) Increase margin, haircut and collateral requirements Traditionally CCPs direct membership was limited to banks Clearing member exits and limited new entrants driven by capital rules Increasing concentration on a fewer number of clearing firms offering client clearing 3 Porting ISA models already increased the porting likelihood over traditional OSA models However, operational obstacles and increased capital requirements are significant challenges to effectuate porting under the traditional client clearing arrangements In order to unlock the full benefit of central clearing, sell- and buy-side participants need to unlock capital-, margin-and collateral efficiencies 2

3 Overview of ISA Direct model ISA Direct model combines elements of direct clearing membership and the traditional service relationship in client clearing, tailored specifically for the buy side. Traditional client clearing ISA direct model Client Clearing Member ISA Direct client Direct contractual relationship Clearing Agent Transaction management Cash management Collateral management Default fund contribution Default management obligation Optional transaction processing services between Client and Clearing Member resp. ISA Direct client and Clearing Agent Clearing agent and clearing member core tasks 3

4 Scope: Participants & Asset Classes Who can become an ISA Direct Client? Insurance & Financial Service Companies Pension Funds Investment Funds Domiciled in a member state in the European Union or in Switzerland Domiciled in a member state in the European Union or in Switzerland Domiciled in a member state in the European Union or in Switzerland Subject to local insurance or banking law Subject to pension act Subject to local investment fund law Supervised by the local competent authority, governmental ministry or governmental institution Supervised by the local competent authority, governmental ministry or governmental institution Supervised by the local competent authority, governmental ministry or governmental institution Who can become Clearing Agent? What Asset Classes are covered? Eurex Clearing Members Any General Clearing Member of Eurex Clearing for the respective market OTC IRS Secured funding and financing - Repo Secured funding and financing Securities Lending Listed derivatives Summer 2016 Future release 4

5 Significant benefits around efficiency and safety Core benefits of ISA Direct 1 Reduction of capital requirements for banks Improved conditions for the buy-side Enhanced segregation and portability New business opportunities Increasing safety and robustness via reduced concentration and improved portability Additional benefits of ISA Direct across Asset Classes 5 Cross product margining 6 7 Single collateral pool Interlinking derivatives and securities finance 5

6 ISA Direct membership builds on the existing ISA segregation of Eurex Clearing Traditional Client Clearing Segregation Models OSA 24% ISA Direct Easy migration from ISA to ISA Direct possible Clearing Member (CM) relationship facilitates switch to a Clearing Agent (CA) relationship ISA 76% 103 Registered Customers on-boarded 25 Registered Customers currently in onboarding process ISA is the preferred model chosen by clients of Eurex Clearing to date ( ) ( ) Technical connection / reporting infrastructure Client Member ID and production setup with existing CM re-usable under CA structure Transaction and position account structure setup at Eurex Clearing Existing cash account setup with CM / CA Collateral account infrastructure at Clearstream Banking Account infrastructure for settlement of Repo transactions Clearing Agent agreements Prove of ISA Direct admission requirements 6

7 ISA Direct service milestones Capital Opinionby E&Y Opinion in regards to capital rules (RWA and Leverage ratio) Opinion confirms capital benefits of ISA Direct membership Available on Eurex Clearing Member Section Risk Committee A comprehensive risk management framework has been established in order to identify and manage credit, concentration and wrong way risks ISA Direct model fully confirmed by Risk Committee Achieved Q4 2015;Q Regulatory Review Regulatory review under EMIR has been conducted on ISA Direct No regulatory objections on ISA Direct Achieved Q Clearing Rules Creation of legal framework in cooperation with sell- and buy-side Clearing Conditions published and official consultation period finished Legal framework final and ready before Go-Live Circular 042/16 ; 30 Mar Target effectiveness: June 2016 Client agreements Creation of new bilateral clearing agent agreement in cooperation with sell- and buy-side and external legal council Target availability: June 2016 Testing & Simulation Conduction of individual onboarding workshops to ensure smooth migration process Onboarding of pilot clients and Clearing Agents Functional simulation to ensure operational readiness Ongoing since Nov 2015 Started March 2016 Target start in June 2016 Finalized Work in progress on track 7

8 Onboarding Incentive Program OTC IRS REPO SEPT 30 NOV 31 MAR 30 JUN 30 SEPT 31 DEC 31 JUL Early Mover Phase Pilot Phase General 1) On-boarding finalized and first trades conducted 3 2) Limited to 10 ISA Direct Members/ 5 Clearing Agents 4 On-boarding finalized and first trades conducted 3 No admission and license fees 1/5 Full Fee Waiver 2 Full Fee Waiver 6 Full Fee Waiver 2 Full Fee Waiver 6 Request your Declaration to Participate 1 No license fees for ISA Direct Members, no admission fee for all admitted ISA Direct Members and Clearing Agents in 2016 and 2017; 2 No booking and maintenance fees for ISA Direct Members; no securities collateral charge applies; 3 Minimum cumulated volume of 25 mn EUR under the ISA Direct model for OTC IRS; 4 Selection on a first come first serve basis, participation conditions to be defined; 5 Grant a fee waiver for Annual Fee, Infrastructure Fee and Admission Fee, in line with Repo DCM membership; 6 No Repo Clearing and Trading fee for ISA Direct Member; Counterparty pricing not waived 8

9 Thank you Clients, Products & Core Markets U.K. Representative Office Westferry House 11 Westferry Circus, Canary Wharf London, E14 4HE United Kingdom T [email protected] Eurex Repo Sales & Relationship Management T [email protected] 9