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STRICTLY PRIVATE AND CONFIDENTIAL. Global trends in post trade Implications to CIS and CEE region Yerevan, October 2011. cONTENTS. NASDAQ OMX CLEARING and CSD today and in the future. Post trade capabilities Product offering Key initiatives. Regulatory changes - PowerPoint PPT Presentation
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© Copyright 2010, The NASDAQ OMX Group, Inc. All rights reserved.STRICTLY PRIVATE AND CONFIDENTIAL
GLOBAL TRENDS IN POST TRADEIMPLICATIONS TO CIS AND CEE REGION
YEREVAN, OCTOBER 2011
CONTENTS
2
Post trade capabilities
Product offering
Key initiatives
NASDAQ OMX CLEARING AND CSD TODAY AND IN THE FUTURE
Regulatory changes
Increasing importance of clearing, CCP
Introduction of variety of new products
Interoperability, cross-margining
Technology playing a key role
TRENDS IN POST TRADE INDUSTRY
LATEST DEVELOPMENT IN ARMENIAN CSD
Pension System
Settlement model
CSD technology
IMPLICATIONS TO CIS AND CEE
Internationalization and standardization
Derivatives and clearing
Technology requirements
WHAT DRIVES THE FUTURE ?
Algorithmic / High Frequency Trading- High performance position handling - DMA / Sponsored access- Advanced risk monitoring and control- Netting across clearing venues- Collaborative environment
Financial Crises – Infrastructure challenges- Focus on Counterparty risk- OTC Derivatives being cleared- Need for prudent environment
• Regulatory supervision• Transparent risk management• Controlled processing
- Expansion of FI products
Increased focus on technology– Functional requirements – Cost efficiency
Competition / Desire to grow business- Unbundling of services- OTC Trading service- Underlying cash/spot market cleared with
derivatives- Serving Multiple markets- Product Innovation
Competition / Globalization- International Investor Community- Foreign products and currencies- Multi time-zone operation- Cross-boarder settlement- “Level playing field” / Interoperability
Regulatory- T2S- OTC Derivatives- Repository (exchange traded and OTC)- Compliance and surveillance- ESMA, EMIR, IOSCO, G20
4
EUROPEAN LANDSCAPE FOR EXCHANGE TRADED EQUITY CASH AND DERIVATIVES
Luxem-bourg
Cash Der Cash Cash Der Cash Der Cash Der Cash Der Cash Der Cash Der Cash Der Cash
TradingNASDAQ OMX
NASDAQ OMX
NASDAQ OMX
NASDAQ OMX
Eurex (Deutche Börse&SWX)
NASDAQ OMX
NASDAQ OMX
Borsa Italiana (LSE)*
Italian Derivatives Market IDEM (Borsa Italiana) LSE
Liffe (Euronext)
Euronext (NYSE)
Liffe (Euronext)
Euronext (NYSE)
Liffe (Euronext)
Euronext (NYSE)
Liffe (Euronext)
Euronext (NYSE)
Euronext.Liffe (Euronext)
Luxembourg Stock Exchange
Clearing EMCFNASDAQ OMX EMCF
NASDAQ OMX
Eurex clearing (Eurex) EMCF
NASDAQ OMX
Cassa di Compensazione e Garanzia (Borsa Italiana)
Cassa di Compensazione e Garanzia (Borsa Italiana)
LCH.Clearnet
LCH.Clearnet
LCH. Clearnet LCH.Clearnet
LCH.Clearnet
LCH.Clearnet
LCH.Clearnet
LCH.Clearnet
LCH.Clearnet
LCH.Clearnet
LCH.Clearnet S.A
CSD
Monte Titoli (Borsa Italiana) N/A
Clearstream and Euroclear
Italy NetherlandsFinlandDer
UKDenmark PortugalBelgium France
Euroclear France
Sweden
Euroclear Sweden Euroclear Finland VP InterbolsaEuroclear UK and Ireland Ltd (former Crest)
Euroclear Belgium
Chi-X Turq BATS NEUROCash Der Cash Der Cash Der Cash Der Cash Der Cash Der Cash Der Cash Cash Cash Cash
TradingDeutche Börse
Eurex (Deutche Börse&SWX) SWX
Eurex (Deutche Börse&SWX)
The Irish Stock Exchange (ISE) LSE
Borsas y Mercados Espanoles (BME)
MEFF (BME)
Wiener Börse (WB)
Wiener Börse
Warsaw Stock Exchange (WSE)
Warsaw Stock Exchange (WSE)
Athens Exchange (Hellenec Exchanges (banks))
Athens Exchange (Hellenec Exchanges (banks))
Oslo Börs
Oslo Börs Chi-X
Turqouise BATS NEURO
Clearing
Eurex clearing (Eurex)
Eurex clearing (Eurex)
X-clear (SWX)
Eurex clearing (Eurex)
Eurex clearing (Eurex)
LCH.Clearnet None
MEFFCLEAR (MEFF)
CCP Austria (ÖKB+WB)
CCP Austria (ÖKB+WB)
KDPW Clearing House (Treasury, WSE, National bank)
KDPW Clearing House None
Hellenec Exchanges SA (banks) N/A
VPS Clearing (VPS) EMCF
Euro CCP EMCF EMCF
CSD Local CSDs
Cash
Euroclear UK and Ireland Ltd (former
Crest)
Spain AustriaGermany Switzerland Ireland Poland Greece Norway
VPS (Oslo Börs)Clearstream (Deutche Börse) SIS Segasettle (SWX) Iberclear (BME)
Oesterreichische Kontrollbank (ÖKB)
National Depository of Securities (KDPW)
Hellenec Exchanges SA (banks)
NASDAQ OMX POST TRADE TODAY
NASDAQ OMX Post-Trade capabilities today cover the whole post-trade chain• Central Counterparty Clearing (CCP)• Central Security Depository (CSD)
CCP Capability• Derivatives on cash market and commodities• Plan to implement Cash CCP in 2012• Integrated with NASDAQ OMX trading systems
– Genium INET Trading– X-Stream INET
• Product coverage today– Genium INET Clearing– X-Stream INET Clering– Genium INET Risk Manager
CSD Capability• Both equities and bonds• Integrated with NASDAQ OMX clearing systems• Product coverage today
– Genium INET CSD
5
FOCUS AREA
Clearing and CSD business and technology development is one of the key focus areas in NASDAQ OMX
NASDAQ OMX operates 4 clearing houses and 4 CSD’s.
NASDAQ OMX Nordic Derivatives Markets Clearing, Europe’s 3rd largest derivatives clearinghouse
Nordic, Baltic and Russian Equities (Standardized and Flex/Tailor Made)Futures, Forwards and Options on Single Stocks and Depository ReceiptsFutures, Forwards and Options on Tradable IndexesFutures, Forwards and Options on Custom Made Indexes
Nordic Fixed Income (Standardized and Flex/Tailor Made)Forward Rate AgreementsBond Forwards and FuturesPolicy Rate Futures Options on Bond ForwardsIRS
Clearing for NASDAQ OMX Commodities Europe, the world’s largest power derivative exchange
Nordic, German, Dutch and UK Commodities (Standardized)Futures, Forwards and Options on Electricity
Contracts for Difference (CfDs) on Electricity
Futures, Forwards, Options and Spot Contracts on Carbon Allowances
NASDAQ OMX CLEARING CURRENT PRODUCT SCOPE
6
KEY INITIATIVES
7
• EMIR will require mandatory member sponsored default funds
• New business will require increased safeguard requirements
• To be introduced in Q1 2012
• Introduce new in-house Collateral Management solution and replace current custodian institution model
• Solution based on International standard
• Deliver enhanced risk management procedures and services
• Launch in Q3 2012 in parallel with existing solution
COLLATERAL MANAGEMENT SYSTEM
• Provide clearing of all Nordic derivatives and selected non-Nordic derivatives that are mandated for clearing by EMIR/ESMA
• This includes trades created on NASDAQ OMX exchanges as well as trades coming from external trading venues and trades created outside organized trading facilities (OTC trades)
OTC CLEARING
DEFAULT FUND
• Migrate commodities to same technical platform as financials markets
• Will enable all members to trade and clear commodities using their existing memberships
• Common collateral management, common settlement flows etc.
INTEGRATION COMMODITIES/FINANCIALS
IMPLICATIONS OF GLOBAL TRENDS TO CIS AND CEE REGION
DMA and remote access require standardized and easy access to post trade services
• CCP a preferred solution but only if its cost efficient
• Globally accepted DvP model for settlement
• High standard risk management functionalities
• Post trade interoperability or linkages
OTC Clearing
• Important especially on fixed income and FX derivatives
• Typically complicated due the nature of OTC market
Technology
• Multi-instrument, multi-currency, multi-market, multi-time-zone
• Rich in risk management functionalities and interfacing capabilities
• Compliant with best practices
8
Globalization requires standardization
IOSCO, G30, EMIR etc. set the standards.
Efficient use of collateral.
Cross-border capabilities are needed.
Product variety and serviced currencies will increase.
LATEST DEVELOPMENT IN ARMENIA
Armenian Pension System
• Three pillar system. Second pillar to be centrally operated by NASDAQ OMX Armenia
• Launch in 2014
Central Depository Infrastructure
• Changes to settlement model
• Improved registry functionalities
• Guarantee fund to be established
New services
• Credit Resource market
• Product development initiatives together with CBA covering tradable monetary policy and government issued securities
9
Building infrastructure and services
Financial literacy is still one of the main development barrier in Armenia.
Pension system forces investors, market participants and media to educate themselves.
CBA in a key role to realize the goals.
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