Jun 29, 2012
New Chilean derivatives CCP targets Q2 2013 launch
A new central counterparty (CCP) for OTC
derivatives being built by a consortium of Chilean banks is expected to begin
clearing non-deliverable forwards (NDFs) from Q2 2013.
The banks have asked Combanc,
operator of the country’s high-value payments system, to lead the project, but
will establish a new company to run the CCP once live, with Combanc providing
ongoing IT support. The new clearing house will run on a platform provided by Calypso
Technology, a global financial software and services provider. Work will start
on the project in August and Combanc expects the CCP to start clearing NDFs
from May 2013, with interest rate swaps being added six
months later. The details of the project were confirmed by Felipe
Ledermann, CEO of Combanc, at SWIFT’s Latin American Regional Conference, held
in Rio de Janeiro, Brazil, earlier this week.
The move will bring Chile in line with Group-of-20
mandated reform and standardisation of OTC derivatives resulting from the financial
crisis. Globally, all major markets are developing mechanisms to standardise
derivatives so they can be traded on exchange-like platforms with centralised
clearing, designed to remove the traditionally perceived risks arising from
bilateral trading of derivatives contracts.
Chile’s new CCP will follow principles laid out by the
Bank for International Settlements (BIS). Message types have already been
defined. Combanc is hoping to leverage SWIFT’s experience and expertise in
working with other CCPs globally to exceed the BIS guidelines and is currently
defining the role of the bank-owned global message network provider on the
project. The current priority is to clear domestic instruments but the new CCP
will include functionality to meet future cross-border clearing needs. In
accordance with G-20 guidelines, Chile will also build a trade repository.
The CCP will need to accommodate an NDF market of approximately US$120.000 million
in outstanding notional. The approximate collateral required by the CCP for a
market of this size is US$650 million. The local and international banks
backing the CCP have yet to confirm whether they will be direct or non-clearing
members. It is estimated that banks will save US$210 million in capital
requirements from clearing centrally compared with continuing to trade
bilaterally.
Eliana Schwartz