The industry needs collateral solutions that work across different business lines, while buy-side firms are waiting to see the impact of regulations.
Chair: Simon Murray, independent analyst
David Brown, derivative operations manager, Royal London Asset Management
Richard Deroulede, head of trading, equity finance, Societe Generale Corporate and Investment Banking
Richard Glen, head of global financing sales - UK, Ireland & Americas, Clearstream Banking
Sebastian Reger, partner, Sackers
Philip Simons, head of sales and relationship management, Eurex Clearing
Chair: What are the main regulatory developments impacting collateral?
Reger: The collateral rules for non-cleared transactions have been pushed out. Variation margin was supposed to come in from December 1 this year but this is being delayed until September 1 2016, for parties with derivatives in excess of ¤3trn ($3.39trn). For the buy side, most affected entities will have to provide variation margin for new non-cleared transactions from March 1 2017. On the clearing side, we are expecting mandatory clearing for banks from early next year, with the rest of the market to follow. By Q1 or Q2 2017, mandatory clearing for interest rate derivatives should be in place for all affected parties. Pension schemes may be able to delay clearing further, if they want, until the second half of 2017 when the clearing exemption expires. For interest rate swaps, the relevant regulatory technical standards on mandatory clearing should be published in due course, and that will start the timetable.
Simons: Yes, mandatory clearing could start around April 2016 for category one banks. The banks will probably start early 2016 due to front loading, and the category-two firms are likely to start a few months later. The majority of the asset management funds are either category three or four. The problem is that the big asset managers often have one or two funds in category two, and they quite often execute on block. So will they execute those category-two funds in one way, and those funds that are category three or four in another way? This will potentially pose best execution issues for them, and how they allocate trades. Some bigger funds may start earlier for these reasons.