Too Late to Change Swaps Clearing Say Experts
Despite presidential and congressional campaign promises fromthe stump, the swap industry has passed the ìpoint of no returnî when it comesto meeting the Dodd-Frank Actís clearing and reporting requirements, agreedswaps market representatives who spoke at todayís Futures Industry Association(FIA) Expo NY.
ìEveryone is getting ready for their initial tier of clientsto clear their trades in the fourth quarter - itís too late to turn back now,îsaid Cassandra Tok, vice president, head of North America OTC clearing sales atGoldman Sachs.
Even if the US Congress repealed the Dodd-Frank Act, itsclearing and reporting requirements probably would still remain, she added.
In the meantime, various clearinghouses have seen a dramaticincrease in cleared swaps trades in the run-up to Dodd-Frankís still undefinedclearing deadline.
ìWeíve cleared dealer trades for the past 12 years and sincethe ëSummer of Lehman,í the swaps notional value of weíve cleared hasdoubled,î said Floyd Converse, executive vice president, head of SwapClearSales at LCH.Clearnet. ìThe clearing early adopter were the stars of the 2008movie and they do not want to reprise their roles.î
Yet many buy-side firms remain wary of allocating capitalfor initial margin, which they many have never paid before.
ìOne of the common concerns are the margin inefficienciesfor cleared and uncleared trades with multiple clearing houses and FCMs,î saidAl Marino, co-founder and COO of Claren Road Asset Management.
Exchanges and clearing firms are stepping into the void to with new tools and offerings. Last week Eris Exchange launched a margin-offset toolannounced Kevin Wolf, managing director and head of product development at theexchange.
This is on top of existing tools, such as Goldman Sachísìwhat-ifî margin tool that estimates client clearing costs acrossclearinghouses.
ìAs a clearing broker, we can provide clients with a singlenetted margin clearing call rather that making margin calls for each individualclearinghouse,î added Tok.
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