Will OTC derivatives clearing in Asia mirror the US and EU model?

Standard Chartered’s Giles Elliot says it will surely have a big impact in the market, though not all players can afford the capital charges for extensive memberships in different markets.

ABF: Have you made any improvements in STP efforts? What are your views on moving from OTC to Exchange traded for derivatives? Is this something that Asia will have to face to comply with International Rules or will Asia be largely exempted?

Standard Chartered: Giles Elliott, Global Head of Product Management, Investors & Intermediaries
STP is naturally a key priority for us and other custodians. Our new Transaction Management layer increases automation and customization of instruction flow by client.

The plans for OTC derivatives clearing in Asia are still evolving, and the clarity on whether these will mirror the US or European model is still unclear. However, the impact will be significant for existing and new entrants to this market. Not all players will be able to afford the capital charges for extensive memberships in different markets, so there will be increased demand for agents that can provide 3rd party clearing services here. On top of this the efficient use of liquidity will grow demand for integrated liquidity and collateral solutions – as derivatives become more transactional – we expect the buying criteria to elevate other factors and this will put custodians and cash operating banks in an interesting new area in these services.

HSBC: Ian Banks, Head of HSBC Securities Services, Asia
HSBC places huge importance on STP to ensure timeliness and accuracy of processing and is already one of the largest users of SWIFT worldwide. HSBC has worked both on client side and market side to enhance STP levels, an example of which is development of multiple communication channels in addition to SWIFT and investments into HSBCnet to enable diverse set of clients to integrate efficiently with HSBC systems.