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Derivatives exchanges slam regulators over open clearing 

June 15, 2015

Elliott Holley, Banking Technology

Regulators should not define how markets are structured when it comes to innovation and open access to clearing. Instead, it should be left up to the market to define how services are provided, according to speakers at the IDX FIA Europe conference in Europe this week.

“There are cases where it makes sense for clearing and trading services to be connected, and others were it does not,” said Sunil Cutinho, president, CME Clearing. “Remember what happened to Hong Kong in 1987? The CCP and the market did not coordinate, the market shut down and there was significant risk left hanging. So when it comes to open access, why should a regulator define how services are provided?”

Under MiFID II, exchanges and clearing houses will have to offer open access to any participant that meets the minimum criteria. The legislation is intended to prevent exchanges from holding a monopoly on trading and clearing, opening up user choice and competition. But some of the larger exchanges are opposed to what they see as undue meddling from the regulator. Other speakers highlighted the difference between equities and derivatives clearing, arguing that open access could introduce new risks.

“I don’t see what the problem is to be fixed here,” said Thomas Book, chief executive at Eurex Clearing Europe. “You can build links and open access to the CCP if there is a business case. But to put in place mandatory rules to force it to do so? Derivatives carry a completely different risk implication to equities, and I think we should be careful not to create rule set that will create more risk in the market.”

Read more: BankingTechnology

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