1. As we start this new decade, please could you outline the ways in which BME Clearing is future-proofing its business, to enable it to meet the challenges of the next ten years?
We will continue building upon our 30 years’ experience in managing counterparty risk and streamlining our CCP’s risk models and methodologies.
In more general terms - and in accordance with BME’s 2019-2021 Strategic Plan - we aim to sustain and further grow our core busines. We intend to optimise our clearing system, provide services to firms that are not part of big liquidity pools and further grow in recently launched products (e.g., xRolling FX). We also continue work on new connections with different trading platforms and CSDs.
In addition, we wish to offer additional services to existing and potential customers: e.g. the introduction Rolling Spot Futures as a substitute to retail CFDs and the incorporation of other sovereign debt repos into the product portfolio.
2. What kind of fintech is disrupting the clearing ecosystem today, and can you please tell us how you’re actively using fintech at BME Clearing?
Software vendors have always been very competitive in the area of clearing and they are at the forefront of technology; the same goes for infrastructure technology, so, in that respect, it is not a new situation. Fintech may be more disruptive in retail-oriented services, while clearing is by nature a wholesale business. We have no problem to solve in areas like fund transfers or payment systems, financial investment advice or product distribution.
In any case, at BME we are exploring how to use new technologies, BME DLT Lab, developed entirely by the company, is a laboratory in which the use of Blockchain technology is analysed.
Be DLT is our proprietary platform for developing all Blockchain projects. Be DLT-Prenda digitises the process of client collateral pledges using DLT technology to eliminate physical certificates and manual intervention. BME Clearing is the first beneficiary to join Be DLT-Prenda to manage pledges on client’s securities collateral.
Within the BME Group we own the Openfinance fintech, a leader in Spain in the supply of Wealth Management technology.
3. How do you integrate sustainability issues within your business?
As the manager of Spain’s financial markets and systems, BME and its subsidiaries, among them BME Clearing, carry out their activities efficiently, responsibly and sustainably, in compliance with ESG best practices.
The company carries out a wide range of sustainability actions, which follow the principles of the UN’s Global Compact, which the company joined in 2011. It has also participated in the Code of Good Tax Practices since 2010, and since 2015 in the UN’s SSE Initiative. Other initiatives are the FTSE4GOOD IBEX index and the National Registry of Greenhouse Gas Emission Rights. Recently we announced that BME has renewed its mandate as manager of this registry.
In addition to this, through MARF, BME’s Fixed Income market, we are also committed to sustainability through the admission of issues linked to sustainability factors.
Within the renewable energy sector we have started to see operations on MARF linked to ESG criteria with the issuance and labelling of green bonds. Thus, in October last year MARF admitted to trading a Green Bond Programme by energy company Grenergy Renovables, which was the first green bond transaction in this Fixed Income market operated by BME.
4. And finally, what’s the most important lesson you’ve learned over the past ten years?
CCPs have become central to the global financial system, the shift to central clearing has made CCPs both larger and more systemic and it has made derivative markets more transparent and risks better managed. At the same time, it is critical to understand CCPs as an integral part of an interconnected global financial system. This understanding is equally important for the proper design of CCP risk management.
No matter how ready you think you are for a shock or how advanced you think your technology is, as a CCP we must always be prepared. But technology is only a tool that cannot replace sound risk management design. What I have seen is that CCPs are well prepared, more than the current regulatory drive suggests, and any potential weakness is more related with simple risk management decisions than any other reason.