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derivatives regulatory reform

Capital markets structure, particularly with regard to the OTC derivatives market has been in the throes of major change for nearly a decade.

These changes arise from the G20 policy response to the global financial crisis.

The regulatory reform agenda has impacted most aspect of the derivatives market: the capital regime, regulations around trading, mandatory clearing and increased transparency.

The scale and magnitude of the changes has required the wholesale redesign of business models. 

Over the last 8 years I have been involved in a series of projects closely connected to the derivatives reform legislation - EMIR and MiFID in Europe and Dodd Frank in the US.

These reforms are intended to bring more transparency to the OTC derivatives market and seek to force that market to operate akin to the listed, exchange traded derivatives (ETD), or futures markets.

The core principles of the legislation being to increase the penetration of, and transparency associated with, electronic trading and to ensure derivatives are cleared within the more risk averse environment of a Clearing House or Central Counterparty structure (CCP).

I have been deeply involved in a series of high profile programmes involving critical market infrastructure and regulatory reform.

I have participated in the design and build of a derivatives CCP. This led to my involvment in all functions of a clearing house:

  • Account structures and the collateral model arising from the segregation and portability requirements of EMIR
  • Risk management model, including margin methodologies, default fund waterfall, payment models and CCP liquidity
  • Trade reporting obligations
  • CCP organisation design, including Board and Risk Committees
  • Regulatory engagement and CCP applications
  • Definition of the commercial model to reflect the new business model

I have also been fortunate enough to have been involved in detailed engagement with clearing members, regulators and central banks across Europe.

Outside the world of the CCPs, I have an excellent network within the broader market infrastructure arena. I understand the exchange industry and the world of IDBs; both of which have undergone profound change.

I also have a good network amongst service providers to CCPs, such as custodians, payment banks and clearing technology providers.

I have many buyside relationships and can therefore apply my background and knowledge in helping users of the derivatives market re-engineer their businesses in anticipation of the ongoing changes to the market model.

The last few years have brought profound change to all participants in market infrastructure; exchanges, CCPs, IDBs, clearing members service providers and, of course, end users.