1 / 6

Exhibit 1 Overview

CPSS Report New Developments in Clearing and Settlement Arrangements for OTC Derivatives (www.bis.org/publ/cpss77.pdf) Joint Bank of England/ECB Conference ECB, Frankfurt 13 November 2007. Exhibit 1 Overview. 1998 Report Progress Since 1998 Areas Where Further Progress is Needed

lot
Download Presentation

Exhibit 1 Overview

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CPSS ReportNew Developments in Clearing and Settlement Arrangements for OTC Derivatives(www.bis.org/publ/cpss77.pdf)Joint Bank of England/ECB ConferenceECB, Frankfurt13 November 2007

  2. Exhibit 1Overview • 1998 Report • Progress Since 1998 • Areas Where Further Progress is Needed • Issues Associated with Evolution Toward a More Centralized Infrastructure

  3. Exhibit 21998 Report • Settlement Arrangements and Risk Management Practices • Largely decentralized processing • Bilateral risk management • Master agreements (including netting provisions) • Collateral agreements • Documentation Backlogs • Unsigned master agreements • Outstanding confirmations • Risks Associated with Expanding Use of Collateral • Legal risks • Operational risks • Funding liquidity risks • Potential Benefits and Risks of CCP Clearing • Risk management challenges associated with relatively illiquid products

  4. Exhibit 3Progress Since 1998 • Documentation Backlogs • Unsigned masters greatly reduced • Variety of electronic confirmation services now available (SWIFT, SwapsWire, DerivServ, eConfirm) • Credit derivatives backlogs have declined markedly since September 2005 • Collateral Usage and Risks • Usage has expanded greatly • Legal and operational risks have been mitigated • Funding liquidity risks better understood • CCP Clearing • SwapClear now clears 40 percent of interdealer interest rate swaps • Participants emphasize that SwapClear reduces operational risks as well as counterparty risk • In September 2006 SwapClear modified its default procedures to recognize relative illiquidity of swaps • Other Significant Enhancements to Infrastructure • Prime brokerage • Multilateral termination services (TriOptima) • DTCC’s trade information warehouse

  5. Exhibit 4Areas Where Further Progress is Necessary • Confirmation Backlogs for Instruments Other than Credit Derivatives • Equity derivatives • Interest rate and commodity derivatives • Report recommends broader use of economic affirmations and portfolio reconciliations • Potential Market Impact of Closeouts • Of significant concern to market participants and to policy makers • Report concludes that risks can be reduced through more systematic portfolio reconciliations and voluntary terminations • Report recommends that market participants should explore further steps to mitigate market impact

  6. Exhibit 5Issues Associated with a More Centralized Infrastructure • Interoperability and Open Access to Essential Services • Interoperability defined as the ability of a system or product to be used in conjunction with other systems and products without imposing unnecessary costs on users • CPSS and CPSS-IOSCO standards for payment and settlement systems require “fair and open access” • Operational Reliability of Providers of Essential Services • Application of CPSS or CPSS-IOSCO standards for operational reliability may be appropriate • Safety and Efficiency of Centralized Payment Arrangements • CPSS standards for systemically important payment systems or CPSS-IOSCO standards may be relevant • Plans for CLS to offer payments services to DTCC’s trade information warehouse is an example of more centralized arrangements

More Related