20 October 2017
Find out more

Exchanges lobby for cuts in clearing collateral

28 November 2012  |  1312 views  |  0 Source: World federation of Exchangeas

The World Federation of Exchanges (WFE), representing 59 publicly regulated stock, futures, and options exchanges and associated clearinghouses, today called on international regulatory bodies to modify capital standards to appropriately reflect the liquidity and efficiency of exchange traded derivative (ETD) markets.

In a letter to the Financial Stability Board and other policy organizations, WFE encouraged global standard setting bodies to demonstrate continued support for the G20 commitments to bring greater transparency and central clearing to derivative markets by ensuring that the costs of ETD markets are not unnecessarily increased.

The Basel Committee on Banking Supervision (BCBS) has issued an Interim Capital Standards proposal that "seeks to apply a blanket 5-day margin period or risk standard to highly liquid and transparent ETDs," the WFE says in a letter from Hüseyin Erkan, Chief Executive Officer, and Jorge Alegria, Chairman of The International Options Markets Association (IOMA) which is the WFE's global association of options and futures exchange leaders.

If adopted by the BCBS and implemented by national bank regulators, the 5-day capital standard would conflict with current margin standards for highly liquid ETDs, resulting in increasing costs for users of exchange-traded markets. "This may force exchange users (e.g. manufacturers, food producers, employee pension funds, and investors) to either discontinue critical hedging practices or move activity to the less transparent OTC derivative markets. Such outcomes would clearly undermine the G20 OTC market reform commitments," the WFE letter states.

The Financial Stability Board (FSB), an international body established by the G-20 nations in 2009 after the global financial crisis, is working in coordination with other international organizations such as the International Organization of Securities Commissions (IOSCO) and the Basel Committee on Banking Supervision (BCBS) to develop global capital and margin standards for both exchange traded and "over-the-counter" (OTC) derivative instruments. "The WFE respectfully requests global standard setters to eliminate the 5-day margin period of risk banking capital standard for exchange traded derivatives and demonstrate international support for the more approprpropriate current standards for the highly liquid, transparent, and efficient exchange traded derivative markets. Such action by global standard setters will be instrumental in advancing the G20's commitment to bring increased transparency and the safety and soundness of central clearing to the global derivatives market and broader financial system."

Comments: (0)

Comment on this story (membership required)

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.fivedegrees.nlRegister nowvisit www.capgemini.com

Who is commenting?

Top topics

Most viewed Most shared
Ripple looks to drive bank adoption with $300m XRP rebate programmeRipple looks to drive bank adoption with $...
15923 views comments | 12 tweets | 4 linkedin
Swift positive on blockchain, but big challenges remainSwift positive on blockchain, but big chal...
9022 views comments | 16 tweets | 23 linkedin
satelliteGates Foundation backs Ripple collaboratio...
8162 views comments | 13 tweets | 10 linkedin
IBM uses blockchain to improve cross-border payments processingIBM uses blockchain to improve cross-borde...
7196 views comments | 9 tweets | 17 linkedin
Santander InnoVentures leads $6m funding round for Mexico's ePesosSantander InnoVentures leads $6m funding r...
6337 views comments | 6 tweets | 3 linkedin

Featured job

Competitive base + commission + benefits
New York City, NY - USA

Find your next job