In other FinTech news, FINCAD targets the buy side as ESMA Approves Two Third Country CCPs
CFTC Blesses Eurex Clearing
U.S. regulator CFTC has authorized Eurex Clearing’s registration as a derivatives clearing organization (DCO), which will allow Eurex Clearing to provide clearing services for swaps for U.S. clearing members, officials say.
The authorization makes Eurex Clearing the 16th DCO registered with the CFTC and the sixth registered DCO based outside the United States, say CFTC officials.
Eurex Clearing will be able to function under the Commodity Exchange Act (CEA), section 5b, and this endorsement helps the CFTC facilitate working across borders to promote central clearing, officials say.
“The registration will become effective after Eurex Clearing meets CFTC’s ‘straight-through processing’ requirements,” say CFTC officials. Eurex Clearing officials requested that CFTC issue a conditional registration, “as it preferred to comply with those requirements in the future, at the same time as it complies with the expected European requirements for straight-through processing. Those requirements have not been issued due to the delay in the implementation of the European Commission’s Markets in Financial Instruments Directive II (MiFID II).”
In light of the delay, CFTC officials extended previously provided relief to permit Eurex Clearing to continue to clear proprietary positions in interest rate swaps for U.S. clearing members, officials say. CFTC’s Division of Clearing and Risk (Division) has provided Eurex Clearing this relief since July 2013.
“After Eurex Clearing complies with the straight through processing requirement and its order of registration becomes effective, Eurex Clearing may begin clearing FCM [futures commission merchant] customer positions, as well as continue clearing proprietary positions for U.S. clearing members,” CFTC officials say.
The Division also offered no-action relief that permits Eurex Clearing to use a modified version of the acknowledgment letter required under CFTC Regulations 1.20(g)(4) and 22.5 for customer accounts maintained at the Deutsche Bundesbank, the central bank of Germany, officials say.
“Last week, the CFTC signed a memorandum of understanding with Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and Deutsche Bundesbank, the domestic regulators of Eurex Clearing, to facilitate information sharing and cooperative oversight,” according to the CFTC.
FINCAD Targets Buy Side via System Enhancements
FINCAD, a vendor of valuation and risk analytics for multi- asset, multi-currency portfolios, has enhanced F3, its object-oriented valuation and risk platform, officials say.
“These enhancements benefit buy-side firms searching for alpha in a low-yield environment and pursuing multi-asset, multi-currency strategies,” argues FINCAD officials. The streamlined workflow is intended to help the front office trade new instruments and asset classes.
The vendor also released application programming interfaces (APIs) and compatibility support for clients’ proprietary models so that they can “plug in their own valuation algorithms and ensure consistent models, data and fixings are used across the enterprise,” officials say.
The pre-built modeling components in F3 encompass coverage for multi-currency, multi-asset strategies, including MBS with static prepayment and LPI swaps, officials say. The enhancements include a diagnostics tool for model validation in real-time through visualization and error tracing functions.
In addition, FINCAD has announced a strategic partnership with derivatives experts John Hull, PhD, and Alan White, PhD, professors of derivatives and risk management at the University of Toronto’s Rotman School of Management, officials say. This partnership will include regular commentary on key issues in derivatives, valuation and risk management, made available exclusively via blog of FINCAD.
ESMA Approves CDCC and NGX as Third Country CCPs
The European Securities and Markets Authorities (ESMA) has recognized NGX, a North American energy exchange and central clearing counterparty (CCP), and the Canadian Derivatives Clearing Corp. (CDCC), as third country CCPs under European Market Infrastructure (EMIR) rules.
NGX and CDCC, Canada’s national CCP for exchange-traded derivative products, can now provide clearing for some over-the-counter (OTC) products and repos. The EMIR rules govern CCPs from outside of the E.U. to provide clearing services to clearing members or trading venues established in the E.U.
The EMIR E.U. capital requirements regulation also gives CCPs “the status of being qualifying CCPs (QCCPs) in the E.U.,” officials say. “Clearing members are subject to lower capital requirements with respect to exposures to QCCPs relative to non-QCCPs.”
“Third country CCP recognition is an important achievement for CDCC and MX as we continue to work to efficiently serve our existing European client base and attract additional clients to our market,” said Alain Miquelon , president and CEO, Montréal Exchange and Group Head of Derivatives, TMX Group, which owns NGX.
CDCC is a wholly-owned subsidiary of the Montréal Exchange (MX), part of the TMX Group, and acts as the central clearing counterparty for exchange-traded derivative products in Canada.
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