Senior derivatives clearing executives have voiced their opposition to the EU’s plans to mandate minimum clearing activity in Euro-denominated products at clearinghouses in the bloc — warning that costs will rise, the latest Acuiti Clearing Management Insight Report has found.
The Q2 Acuiti Clearing Management Insight Report, which is published today, is based on a survey of the Acuiti Clearing Expert Network, a group of over 100 senior executives from across the global market. Each quarter, members of the network give their views on a range of topics suggested by Acuiti and other members of the network.
This quarter’s report found that just 8% of the network supported the European Commission’s plans to mandate that firms clearing certain Euro-denominated products must clear a portion in the EU and retain an “active account” at an EU-based clearinghouse.
There is still much uncertainty about what the parameters of active account requirements will be, which is causing concern about the potential market impact of the rules.
The network showed a range of opinion on how the active account should be defined.
Some believe it should be defined as an account that trades at least once every certain period in a certain size. Others suggested a continuity facility without a minimum threshold which can be activated promptly should porting be required.
However, most firms warned against mandating quantitative thresholds, arguing that they could force firms to take on uncompetitive trades to meet requirements.
Almost 90% of the network think that the active account will result in rising costs for clients. A majority also think that costs will rise for their house business. A quarter of respondents thought that competition for clearing EU products would decrease.
“The EU’s goals of increasing the competitiveness of clearing houses under its jurisdiction is understandable but the findings of this survey suggest that a mandate to clear euro-denominated products risks increasing costs for end users,” says Ross Lancaster, head of research at Acuiti.
The Q2 Clearing Management Insight Report also analysed the outlook for 2023 and found that senior clearing executives were bullish about the year. Almost half predicted a better year than 2022 and just 21% expected lower revenues.
Members of the Expert Network were most expectant of growth in low touch execution and OTC clearing services. However, expectations of contraction in listed clearing and US options clearing had increased significantly since Q2 2022.
Other topics covered in this quarter’s report include:
- How will the ION hack change regulation of vendors
- Attitudes towards the merger between UBS and Credit Suisse
- The outlook for clearing over the next three months
Download the full report here: https://www.acuiti.io/q2-2023-clearing-management-insight-report
