CCPs

On August 23rd, the UK government issued a series of papers covering large swathes of the British economy with guidance for preparedness in the event of a no-deal Brexit next March, and so an abrupt rupture in its relations to the 27 remaining EU member-states.

Given the centrality of regulation to the firm’s information and monitoring services, the changing nature of financial markets these past twenty years and longer, the continuous adaptation of participants to new IT and evolving economies and geopolitics, Thomas Murray has always kept a sharp eye on risk affecting our clients and how its own services have enabled them to assess their appetite for it. When nothing is stable for long, the nature of risk is never fixed, either.

Risk outlook is the central point of the firm’s monitoring and assessment work. As a result of this its first topic at the inception of the business was on defining risks involved in establishing proper bank custody services for US institutional money outflows, and determining appropriate and adequate responses, all as per United States SEC regulation.

As the market in Europe prepares for the commencement of mandatory clearing, new clearing structures are being devised by CCPs (central counterparty clearinghouses) to make the process smoother, more cost efficient and, perhaps most pertinently, more collateral efficient for clients.

With increased demands being placed upon collateral, collateral management and optimisation has never been more important. Being able to source the right collateral at the right time is vital.

There are still only 16 authorised CCPs (central counterparty clearing houses) in Europe. Each clearing house in Europe had to reapply for authorisation under EMIR (the European Market Infrastructure Regulation), as far more importance has been placed upon them by way of the global regulatory response to the financial crises.

The ever increasing demands on collateral in the post financial crisis regulatory landscape have, increasingly, called into question whether or not there is sufficient collateral of sufficient quality to safely and efficiently oil the cogs of the post-trade world. Collateral has taken centre stage and the industry, almost universally, has been discussing potential shortfalls prior to the implementation of key regulatory mandates such as central clearing of trades.

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