Nomura has joined the growing list of brokers to pull out of providing OTC clearing services due to continued regulatory uncertainty.
The rising costs of OTC clearing have already forced BNY Mellon and Royal Bank of Scotland out of providing the service, while other brokers have been scaling back their businesses by managing the number of new clients they accept.
Nomura will exit OTC clearing in both the Americas and Europe, a spokesperson confirmed. The company will continue to provide the service in Japan.
“Due to the evolving and uncertain regulatory and market environment associated with OTC client clearing, we are exiting the OTC derivatives client clearing businesses in the Americas and EMEA,” the Nomura spokesperson said.
The mandatory clearing of OTC derivatives stems from the G20 requirements set in motion during the Pittsburgh meeting in 2009, however six years later Europe still awaits the rollout of the rules.
The costs of providing the service has been increasing substantially for clearing brokers, and many are maintaining the business as it is offered in line with other services such as execution.
Industry experts have told theTRADEnews.com that while the largest buy-side firms have already signed up with clearing brokers, many are still on the lookout.
Nomura has said it will now focus on other areas of its derivatives business.
“Our focus is to continue growing our execution business across OTC and listed derivatives products globally, and estimate that the two notch upgrade of Nomura to Baa1 by Moody’s last October will lead to $250 million of additional revenues annually,” said the Nomura spokesperson.
“Much of this will be the result of increased derivatives activity with institutional investors, sovereign wealth funds, corporates and other clients.”