This month’s CEO letter is written by Pedro Gurrola-Perez, the WFE’s Head of Research .
Welcome to the April 2024 issue of WFE Focus.
In this edition, we bring you a few highlights from WFEClear 2024, the WFE Clearing and Derivatives conference that took place in Madrid at the end of March, hosted by BME (Bolsas y Mercados Españoles) and SIX Group.
At the splendid Palacio de la Bolsa de Madrid, industry leaders from central clearing houses (CCPs), academics, regulators and policymakers met to share ideas on the opportunities and challenges we face in central and bilateral clearing. Without exception, the contributions to the conference were all of extraordinary quality. In fact, many participants approached me to tell me how WFEClear has become a conference like no other, praising the depth and breadth of the discussions.
We start this special edition of Focus with the opening speech by Javier Hernani, CEO of BME, who reminds us of the macroeconomic environment in which CCPs operate, and reflects on the specific challenges the sector faces, highlighting the importance of CCPs for the smooth functioning of financial markets.
In his article, The Wrong War, Sir Dermot Turing, Visiting Fellow at Kellogg College, Oxford, argues that everything in not quite what it seems in the UK-EU squabble over where OTC derivatives should be cleared.
CFTC Commissioner Summer Mersinger explains why the Basel III Endgame proposals to increase risk-based capital requirements for banks providing client clearing services would have a significant – and negative – impact on derivatives markets.
José Manuel Ortiz-Repiso, Head of Clearing & Repo Operations at SIX, reflects on how CCPs are responding to evolving market trends, changes in regulation (like the proposed revision of EMIR), and the emergence of digital assets.
Within the context of the recent BIS-CPMI-IOSCO consultative reports, Richard Haynes, Deputy Director, Risk Surveillance at the CFTC, and Nancy Doyle, Senior Special Counsel at the CFTC, share their thoughts on the proposals and why, in their view, they are best framed as an enhancement of current transparency levels, which to a larger or smaller degree can build from an already strong base.
In the context of new technologies, an interesting avenue to explore when considering the optimisation of debt-raising processes in traditional markets is the integration of Distributed Ledger Technologies (DLT). The Tel-Aviv Stock Exchange has taken an important step in this direction, which culminated in the live experimental issuance and post-issuance allocation of a dummy government bond series on a DLT. Orly Grinfeld, EVP, Head of Clearing at TASE, explains how it works and discusses the benefits.
The Depository Trust & Clearing Corporation (DTCC) is leading two of the most significant enhancements to U.S. market structure in decades: the multi-year project to accelerate the securities settlement cycle to T+1, and the expansion of central clearing to U.S. Treasuries. In his note, Brian Steele, Managing Director, President, Clearing & Securities Services at the DTCC, explains how the DTCC has successfully managed the first of these projects and what steps it is taking to meet the deadlines for the second.
Rounding out this issue, Gerard Smith, Nasdaq’s head of post trade product strategy, discusses six key trends that financial market infrastructures need to know all about.
I hope you enjoy this selection of articles. If you are interested in reading the academic research papers presented at the conference, I invite you to download the full papers from the SSRN WFEClear conference website here.
Finally, I would like to thank all of the participants for their contributions to the success of the conference, and invite you to watch this space, as we will soon publish our Call for Papers and information about next year’s conference, WFE Clear 2025, which will be hosted by the Korea Exchange (KRX) in Seoul.
We very much look forward to meeting you again next year.
Nandini Sukumar
Chief Executive Officer
The WFE