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Clearing a path through the derivatives maze

Tuesday 13 July 2010 - by Edmund Lakin


There is still another concern for end users in the proposed Basel III reforms, where higher capital requirements could be used to push more non-centrally cleared OTC transactions into central clearing. The risk for end users is one of liquidity, and the uncertainties over how much is required.

A large part of the consultation deals with requirements for CCPs in order to achieve robust arrangements. Commenting on the requirements, Rory Cunningham says that “some CCPs see some issues as to whether all requirements are necessary for all asset classes” in particular on segregation and portability he comments that it might be “harder in securities markets, as opposed to pure derivative markets”.

In terms of the initial capital, he understands “the drive for there to be a number there – but there are many smaller CCPs in Europe who would even find €5m too much – they have enough capital in their businesses already and have enough to survive wind downs. This is extra capital they don’t need.”

The short time frame for the consultation suggests something of the immediacy of the Commission’s desire to get a proposal out by September 2010. By limiting the scope to post trade aspects, the Commission will have time to review submissions over the summer, normally a quiet period in Brussels, and be able to present again in September.


The short time frame, and the absence of clarity on a number of areas though does raise issues as to whether there are a lack of answers in the Commission or whether it is simply holding its cards close to its chest.


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