Guide to OTC Activities
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Transcript of Guide to OTC Activities
Pre & Post activities into OTC
Welcome to:
LEARNING UNIT 3 | GUIDE TO OTC ACTIVITIES
‘Activities, offering sample, CCPs’
INTRO
Managing OTC activities has become increasingly complex , costly and demanding. The main for this are:
Increased regulatory requirements
Growing reporting burden
Heightened focus on counterparty risk
Also closer interaction and connectivity with central banks, CCPs, derivative exchanges and repositories is on the rise.
In this context, a basic knowledge of these activities is convenient.
With this purpose, we´ll be looking at Commerzbank as a practical example of OTC activities,
Pre- & post-trade activities
Other than trade execution
Within an investment bank
Pre & Post activities into OTC
ROAD MAP TO THIS PRESENTATION
I. OTC ACTIVITIES, Expanding from plain custody to advanced post-trade services
II. OTC ACTIVITIES (cont.), Areas affected by regulation
III. OTC ACTIVITIES (cont.), Insight into collateral management
IV. COMMERZBANK OVERVIEW
V. CCP POWERHOUSES
VI. triOptima
Pre & Post activities into OTC
Direct Market Access
Derivatives Clearing
Custody
Collateral Solutions
Trade Reporting
Cash & Financing Solutions
Post-trade Outsourcing Solutions
LCH Swapclear
CME
ICE
EUREX CLEARING
I. OTC ACTIVITIES, Expanding from plain custody to advanced post-trade services
Around OTC trade executionthere are plenty of
pre- & post- activities
Pre & Post activities into OTC
II. OTC ACTIVITIES (cont.), Areas affected by regulation
The most important areas are:
Collateral management
OTC Clearing
Trade Reporting
Mainly, OTC players are focusing on improvingcollateral management…
…as a way to keep regulation costs and resource pressures as light as possible.
In terms of allocation velocity, selection of assets and margining processes.
Pre & Post activities into OTC
And secondarily, efforts are dedicated to:
Real-time processing and STP of trade lifecycle processes.
Fully integrated data management and workflows.
III. OTC ACTIVITIES (cont.), Insight into collateral management
OTC markets are growing at a time of significant changes as…
New regulatory regime of central clearing
And demand for high-quality liquid assets
…has risen to record levels.
Regulation affects how investors manage their resources in terms of reserves, capital and liquidity.In this sense, the collateral management of assets to comply with this has a significant impact on:
The pricing of OTC derivatives.
The profit and loss account of investors.
With a finite market of eligible securities available, active collateral management is now critical for market participants to trade freely, compliantly and on competitive terms.
Pre & Post activities into OTC
IV. COMMERZBANK OVERVIEW
This chart summarizes Commerzbank OTC offering.
Here, we can see how the bank on its own is capable of providing certain services, the ones in orange,
…And then, other services just in co-operation with its clearing partner CLEARSTREAM, in blue,
Pre & Post activities into OTC
COMMERZBANK OVERVIEW: DIRECT MARKET ACCESS
Pre & Post activities into OTC
GOAL, Global access to trade in world exchanges,
BRIEF, DMA enables non-exchange members to,
Submit buy or sell orders directly to an exchange’s orderbook
Via multiple connection protocols
Without going via a broker’s proprietary trading desk
‘Get fast, cost-efficient, controllable and direct trading access, without the expense and commitment of exchange membership.’
FEATURES,
Order management Facilitating client executions on an order basis. Best execution Full commitment to best execution, including Smart. Order Routing (SOR) Order handling support & resolution of client queries across the full trade
lifecycle, from booking, to settlement. Special care orders Execution tailored to specific requirements, as VWAP, orders in line with
market volumes & anonymous orders. Emergency order processing and cancellation In the event of an outage or disruption.
COMMERZBANK OVERVIEW: DERIVATIVES CLEARING
Pre & Post activities into OTC
GOAL, Meet european regulatory requirements for derivatives clearing (EMIR),
BRIEF, Derivatives Clearing enables non-clearing members to comply in OTC,
‘Comply with EMIR reqs with minimal impact on business activities, internal resources and infrastructure without the effort of being a clearing member.’
Access to multiple CCPs (central counterparties) Connectivity with Europe’s leading EMIR authorised CCPs. Advise on the most suitable CCP for your needs, based on
available products and factors such as the CCP’s collateral requirements, margin modelling and account segregation.
Dedicated clearing support
Streamlined onboarding service
Ongoing insight
Customised reporting
FEATURES, thru its online Client Portal
Real-time collateral management Margin scenario analysis ‘what if’ & market data repositoriesTrade reporting flexible and adaptable
All thru ‘step by step’ eSupport with,
COMMERZBANK OVERVIEW: CUSTODY
Pre & Post activities into OTC
GOAL, Full client protection from physical safekeeping to sophisticated services,
BRIEF, Custody enables efficient clearing and settlement of assets, whether a client operates in one market or many,
with customised operational coverage and support from local specialists
tailored to a client’s needs and markets,
Multi-jurisdictional Adaptable, Flexible and Customizable Integrated with Clearstream Dedicated client service support German markets specialist
FEATURES,
COMMERZBANK OVERVIEW: COLLATERAL SOLUTIONS
Pre & Post activities into OTC
GOAL, Manage collateral demands compliantly, efficiently and confidently with a support team managing your collateral flows and optimising available assets.
BRIEF, Our holistic service is
Collateral Management
Advisory – bespoke adviceGuidance in terms of CSA, Regulation, CP risk and its impact on the P&L.
Optimisation – helping clients use and finance collateral
Efficient and continuous asset allocation and reallocation improving financing & liquidity.
FEATURES,
Adaptable (combines well with other Commerzbank solutions).
Customer focussed, impartial and hands-on advice.Tailor-made services to meet clients’ specific needs and circumstances.
Valuation Services – calculating OTC derivative mark-to-market values, exposures and liabilities
COMMERZBANK OVERVIEW: TRADE REPORTING
Pre & Post activities into OTC
GOAL, Ensure regulatory reporting compliance though our cost efficient delegated reporting offering.
BRIEF, Comply with compulsory reporting of all derivative transactions to an authorised trade repository in our covered jurisdictions,
UE client can choose Commerzbank’s solution and/or partners’ solutions for EMIR compliance.
US and Switzerland just thru partners’ solutions for Dodd-Frank and FinFRAG compliance.
FEATURES,
Efficient and cost effective Secure communications Portfolio reconciliation included
COMMERZBANK OVERVIEW: CASH & FINANCING SOLUTIONS
Pre & Post activities into OTC
GOAL, Bespoke financing and liquidity solutions to enhance yield and / or minimise financing costs.
BRIEF, Assist our clients in optimising financing costs and / or achieving higher yields through market access.
FEATURES,
FX Cash Management Securities financing and lending Cash optimisation Tri-party Repo GC pooling Collateral Financing
Links:
http://www.eurexrepo.com/repo-en/markets/gc-pooling-market/
http://www.clearstream.com/clearstream-en/products-and-services/global-securities-financing/global-liquidity-hub-csd-services/triparty-collateral-services--xemac-/gc-pooling
COMMERZBANK OVERVIEW: OUTSOURCING SOLUTIONS
Pre & Post activities into OTC
GOAL, Back and middle office functions in order to assist our clients in reducing overhead costs.
BRIEF, The offering is by nature unique to each client and is tailored after the needs of our clients,
Collateral Management FX processing Dealing Services Securities settlements
FEATURES,
V. CCP POWERHOUSES
Pre & Post activities into OTC
LCH GROUP ‘London Clearing House’
LCH is the leading independent clearing house, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including,
Here attached a LCH collateral service brochure to click in,
GOAL: MARKET STABILITY
Risk management is at the heart of what LCH does. Committed to setting and maintaining the highest standards across all asset classes cleared, our world-class risk management framework provides the markets with exceptional levels of protection.
V. CCP POWERHOUSES
Pre & Post activities into OTC
CME GROUP ‘Chicago Mercantile Exchange’
As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk.
CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago.
CME Group exchanges -CME, CBOT, NYMEX and COMEX- offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate
V. CCP POWERHOUSES
Pre & Post activities into OTC
CME GROUP ‘Chicago Mercantile Exchange’
CME Clearing, one of the world’s leading central counterparty clearing provider in the world, which offers clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®.
These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.
Here attached a brochure to click in,
Initially, a single electronic exchange for commodities, The ICE has now expanded into,
A network of 12 exchangesmore Asset Classes
OTC& Listed dervs
Pre & Post activities into OTC
THE ICE ‘The Intercontinental Exchange’
GOALS
‘In each of our clearing houses, we work to optimize capital efficiency for clearing participants around the world while maintaining optimal levels of initial and intraday margin to safeguard market stability.’
Clearing services
Margin models
Risk management solutions
And 6 clearing houses
V. CCP POWERHOUSES
Pre & Post activities into OTC
THE ICE ‘The Intercontinental Exchange’
Here follow The ICE clearing solutions chart
V. CCP POWERHOUSES
Europe's leading CCP clearing house, with fully-automated, straight-through post-trade services for derivatives, cash equities, repo and fixed income transactions including the clearing of bilaterally agreed off-exchange transactions.
Eurex Clearing is the world's only major clearing provider to manage risk continuously by recalculating position riskin real-time.
Pre & Post activities into OTC
EUREX CLEARING
V. CCP POWERHOUSES
EUREX CLEARING: EurexOTC Clear
WHAT Eurex solution for the clearing of ETD & OTC trades on IRS|FRAs|Inflation Swaps, etc.
HOW IT WORKS In the first place reducing
…and at the same time offering
Here follows a detailed account on the clearing of IRS & FRA,
PROFITSBy clearing both ETD & OTC trades thru EurexOTC Clear, clients benefit from significant margin offsets where there are appropriately correlated risk reductions.
Pre & Post activities into OTC
Counterparty risk
Margin and Collateral requirements
Client Asset Protection (thru segregation)
Legal certainty
V. CCP POWERHOUSES
EUREX CLEARING: Product catalogue supported by EurexOTC Clear
Pre & Post activities into OTC
Here follow other characteristics also supported,
V. CCP POWERHOUSES
triOptima provides critical post-trade infrastructure and risk management services for the OTC world. It’s main solutions are following after this video
triReduce It’s a multilateral portfolio compression service that reduces outstanding notionals (or principals) and line items across asset
classes: rates, credit, FX and commodities.
Pre & Post activities into OTC
https://youtu.be/3u8fJObGe8E
triCalculate High performance, centralised XVA, counterparty valuation and risk analytics for your OTC derivatives portfolio.
triResolve It’s a network community service that provides counterparty exposure management solutions for Portfolio reconciliation
Collateral management Reporting validation
triBalance A counterparty risk rebalancing service for those with multiple clearing relationships.
VI. triOptima
Pre & Post activities into OTC
Q & A
End of presentation,
Thank you.Fonetic Trading Unit
LEARNING UNIT 3 | GUIDE TO OTC ACTIVITIES
‘Activities, offering sample, CCPs’
Pre & Post activities into OTC