Sernova Financial, a new capital markets utility for post-trade futures and derivative clearing, has launched with FirstRand Securities Limited as their initial client, clearing via LCH SwapClear.
Sernova is now live and integrated at FirstRand Securities, providing the real-time services that enables the clearing of OTC interest rate derivatives at LCH.Clearnet Ltd. FirstRand Securities is owned by FirstRand Limited, the largest financial institution by market value in South Africa. FirstRand and its investment banking brand RMB are innovative leaders in supporting the development and adoption of local and international financial markets infrastructure. Using Sernova’s solution enabled the Group to complete the transition from being a client of a clearing broker into a direct clearing LCH member for South African rand (ZAR) interest rate swaps. The Sernova service enabled FirstRand Securities to reduce the time and cost of this transformation.
The implementation of the wave of regulations such as EMIR, Dodd-Frank and MiFID 2, combined with the requirements arising from CRR/CRD IV (embedded in Basel III), has significantly affected the structural economics of the global derivatives market. The more robust capital requirements, increased intra-day funding requirements and Leverage Ratio considerations have added to the balance sheet, infrastructure and support cost of CCP connectivity. The altered economics of clearing and trading in the new environment could imply higher end-user costs and/or lead to a reduction in market competition for a variety of clearing services offered. These challenges, faced by almost all clearing service providers and market participants, has created the demand for alternative, innovative solutions that addresses these challenges – the kind that Sernova offers.
Venkatesh Ramasamy, Sernova CEO said: “Sernova is very pleased to have FirstRand Securities as an anchor client. This is an important step towards achieving our mission of democratising global capital markets. By leveraging Sernova’s cost effective, scalable, adaptable multi-CCP solutions, clients will be able to efficiently and scaleably operate in fast-changing global markets.”
Stephen Linnell, RMB Global Market’s COO, said: “The Sernova solution, especially the creative CCP ‘driving test’ and ‘fire drill’ functionality, are valuable innovations for the market. Sernova’s offering and approach align closely with our broader strategic goals of gaining efficient access to international liquidity pools. The reduced upfront spend and the speed and ease of execution with both Sernova and LCH made the project all the more compelling.”
