GLOBAL TRENDS IN POST TRADE
IMPLICATIONS TO CIS AND CEE REGION
YEREVAN, OCTOBER 2011
© Copyright 2010, TheSTRICTLY
NASDAQ OMX
Group, Inc.
All CONFIDENTIAL
rights reserved.
PRIVATE
AND
CONTENTS
Regulatory changes
TRENDS IN POST
TRADE INDUSTRY
Increasing importance of clearing, CCP
Introduction of variety of new products
Interoperability, cross-margining
Technology playing a key role
NASDAQ OMX
CLEARING AND
CSD TODAY AND
IN THE FUTURE
Post trade capabilities
Product offering
Key initiatives
Internationalization and standardization
2
IMPLICATIONS TO
CIS AND CEE
Derivatives and clearing
LATEST
DEVELOPMENT IN
ARMENIAN CSD
Pension System
Technology requirements
Settlement model
CSD technology
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
EUROPEAN LANDSCAPE FOR EXCHANGE TRADED EQUITY CASH AND DERIVATIVES
Sweden
Cash
Der
NASDAQ
Trading OMX
NASDAQ
OMX
Clearing EMCF
NASDAQ
OMX
CSD
Euroclear Sweden
Germany
Cash
Der
Trading Börse
Eurex
(Deutche
Börse&
SWX)
Eurex
clearing
Clearing (Eurex)
Eurex
clearing
(Eurex)
Deutche
CSD
Clearstream (Deutche
Börse)
Finland
Cash
Denmark
Der
Cash
Italy
Der
Cash
NASDAQ
OMX
Eurex
(Deutche
NASDAQ Börse&
NASDAQ NASDAQ
OMX
SWX)
OMX
OMX
EMCF
Eurex
NASDAQ clearing
OMX
(Eurex)
Euroclear Finland
Switzerland
EMCF
Ireland
Der
SWX
Eurex
(Deutche
Börse&
SWX)
The Irish
Stock
Exchange
(ISE)
LSE
X-clear
(SWX)
Eurex
clearing
(Eurex)
Eurex
clearing
(Eurex)
4
Cash
Der
Italian
Derivative
s Market
Borsa
IDEM
Italiana
(Borsa
(LSE)*
Italiana)
Cassa di
Cassa di
Compensa Compensa
zione e
zione e
Garanzia Garanzia
(Borsa
(Borsa
Italiana)
Italiana)
Monte
Titoli
(Borsa
Italiana)
VP
Cash
SIS Segasettle (SWX)
NASDAQ
OMX
N/A
Spain
Cash
Borsas y
Mercados
Espanoles
(BME)
LCH.
Clearnet None
UK
Der
Cash
Der
LSE
Liffe
Euronext
(Euronext) (NYSE)
Cash
LCH.Clea LCH.Clear LCH.
rnet
net
Clearnet
Poland
Oesterreichische
Kontrollbank (ÖKB)
Cash
Der
Portugal
Cash
Liffe
(Euronext)
Euronext
(NYSE)
Liffe
(Eurone Euronext Liffe
Euronext
xt)
(NYSE) (Euronext) (NYSE)
LCH.Clearnet
LCH.Clear LCH.Cle LCH.Clea LCH.Clear LCH.Clear LCH.Clear LCH.Clearn
net
arnet
rnet
net
net
net
et S.A
Interbolsa
Greece
Norway
Der
Cash
Athens
Exchange
(Hellenec
Exchange Oslo
s (banks)) Börs
Hellenec
Exchange
s SA
(banks)
N/A
National Depository of Hellenec Exchanges SA
Securities (KDPW)
(banks)
Cash
Der
Luxembourg
Der
Euroclear
Belgium
Der
France
Cash
Cash
Athens
Warsaw Warsaw Exchange
Wiener
Stock
Stock
(Hellenec
MEFF
Börse
Wiener Exchange Exchange Exchanges
(BME)
(WB)
Börse
(WSE)
(WSE)
(banks))
KDPW
Clearing
House
CCP
CCP
(Treasury,
Austria
Austria WSE,
KDPW
MEFFCLEA (ÖKB+WB (ÖKB+W National
Clearing
R (MEFF) )
B)
bank)
House
None
Euroclear UK and
Ireland Ltd (former
Crest)
Iberclear (BME)
Der
Belgium
Der
Euroclear UK and Ireland Ltd (former
Crest)
Austria
Cash
Netherlands
Euronext. Luxembour
Liffe
g Stock
(Euronext) Exchange
Euroclear France
Chi-X
Turq
Cash
BATS
NEURO
Der
Cash
Cash
Oslo
Börs
Chi-X
Turqouis
e
BATS
NEURO
VPS
Clearing
(VPS)
EMCF
Euro
CCP
EMCF
VPS (Oslo Börs)
Cash
Clearstre
am and
Euroclear
EMCF
Local CSDs
Cash
NASDAQ OMX POST TRADE TODAY
FOCUS AREA
NASDAQ OMX Post-Trade capabilities today cover the whole post-trade chain
• Central Counterparty Clearing (CCP)
• Central Security Depository (CSD)
Clearing and CSD
business and technology
development is one of
the key focus areas in
NASDAQ OMX
CCP Capability
• Derivatives on cash market and commodities
• Plan to implement Cash CCP in 2012
• Integrated with NASDAQ OMX trading systems
NASDAQ OMX operates
4 clearing houses and 4
CSD’s.
• Product coverage today
– Genium INET Trading
– X-Stream INET
– 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
NASDAQ OMX CLEARING
CURRENT PRODUCT SCOPE
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 Receipts
Futures, Forwards and Options on Tradable Indexes
Futures, Forwards and Options on Custom Made Indexes
Nordic Fixed Income (Standardized and Flex/Tailor Made)
Forward Rate Agreements
Bond Forwards and Futures
Policy Rate Futures
Options on Bond Forwards
IRS
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
6
KEY INITIATIVES
DEFAULT FUND
• 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
COLLATERAL
MANAGEMENT
SYSTEM
• Solution based on International standard
• Deliver enhanced risk management procedures and services
• Launch in Q3 2012 in parallel with existing solution
OTC CLEARING
• 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)
INTEGRATION
COMMODITIES/
FINANCIALS
7
• 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.
IMPLICATIONS OF GLOBAL TRENDS TO CIS AND CEE REGION
DMA and remote access require standardized and easy access to post trade
services
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.
• 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
LATEST DEVELOPMENT IN ARMENIA
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.
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