Clear on-board?

There has been much discussion in the media of an impending ‘collateral crunch’ in central clearing, but less talked about is the likelihood of an ‘on-boarding crunch’.

It’s interesting to see that the latest Financial Stability Board (FSB) progress report on market reform, published last Monday, picks up this point and reflects some of our own observations.

You don’t have to wade far into the 115 page report before you discover the FSB’s observation that “on-boarding new clients can be slow”.  There’s a simple supply-and-demand point to be made. Demand for clearing and collateral management services is likely to increase further as we approach the various deadlines. But supply – both of technical capacity and commercial interest – is unknown, and largely fixed. 

Many firms have identified their preferred clearing agents and Futures Commission Merchants (FCMs), but have not yet started the on-boarding process, assuming they will get the support they need in due course. But for all except ‘platinum’ clients, if you leave it too late there is no certainty you will find a clearing agent with the time or even interest in your business.

There are ways to streamline and accelerate on-boarding, but these need focus and disciplined project management. The time to act is now!