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


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


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


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.


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.


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,


COMMERZBANK OVERVIEW: DIRECT MARKET ACCESS


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


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


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


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


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


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


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


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


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


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


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


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.


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.


Counterparty risk

Margin and Collateral requirements

Client Asset Protection (thru segregation)

Legal certainty

V. CCP POWERHOUSES

EUREX CLEARING: Product catalogue supported by EurexOTC Clear


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.


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

https://youtu.be/3u8fJObGe8E


Q & A

End of presentation,

Thank you.Fonetic Trading Unit

LEARNING UNIT 3 | GUIDE TO OTC ACTIVITIES

‘Activities, offering sample, CCPs’


guide to otc activities

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