STRICTLY PRIVATE AND CONFIDENTIAL Global trends in post tradeImplications to CIS and CEE regionYerevan, October 2011
cONTENTS NASDAQ OMX CLEARING and CSD today and in the future Post trade capabilities Product offering Key initiatives Regulatory changes Increasing importance of clearing, CCP Introduction of variety of new products Interoperability, cross-margining Technology playing a key role Trends in post trade industry Internationalization and standardization Derivatives and clearing Technology requirements Pension System Settlement model CSD technology Latest development in Armenian CSD Implications to CIS and CEE
What drives the future ? • Algorithmic / High Frequency Trading • High performance position handling • DMA / Sponsored access • Advanced risk monitoring and control • Netting across clearing venues • Collaborative environment • Financial Crises – Infrastructure challenges • Focus on Counterparty risk • OTC Derivatives being cleared • Need for prudent environment • Regulatory supervision • Transparent risk management • Controlled processing • Expansion of FI products • Increased focus on technology • Functional requirements • Cost efficiency • Competition / Desire to grow business • Unbundling of services • OTC Trading service • Underlying cash/spot market cleared with derivatives • Serving Multiple markets • Product Innovation • Competition / Globalization • International Investor Community • Foreign products and currencies • Multi time-zone operation • Cross-boarder settlement • “Level playing field” / Interoperability • Regulatory • T2S • OTC Derivatives • Repository (exchange traded and OTC) • Compliance and surveillance • ESMA, EMIR, IOSCO, G20
NASDAQ OMX Post trade Today • NASDAQ OMX Post-Trade capabilities today cover the whole post-trade chain • Central Counterparty Clearing (CCP) • Central Security Depository (CSD) • CCP Capability • Derivatives on cash market and commodities • Plan to implement Cash CCP in 2012 • Integrated with NASDAQ OMX trading systems • Genium INET Trading • X-Stream INET • Product coverage today • Genium INET Clearing • X-Stream INET Clering • Genium INET Risk Manager • CSD Capability • Both equities and bonds • Integrated with NASDAQ OMX clearing systems • Product coverage today • Genium INET CSD FOCUS AREA Clearing and CSD business and technology development is one of the key focus areas in NASDAQ OMX NASDAQ OMX operates 4 clearing houses and 4 CSD’s.
NASDAQ OMX Clearing Current Product scope • Clearing for NASDAQ OMX Commodities Europe, the world’s largest power derivative exchange • Nordic, German, Dutch and UK Commodities (Standardized) • Futures, Forwards and Options on Electricity • Contracts for Difference (CfDs) on Electricity • Futures, Forwards, Options and Spot Contracts on Carbon Allowances • NASDAQ OMX Nordic Derivatives Markets Clearing, Europe’s 3rd largest derivatives clearinghouse • Nordic, Baltic and Russian Equities (Standardized and Flex/Tailor Made) • Futures, Forwards and Options on Single Stocks and Depository Receipts • Futures, Forwards and Options on Tradable Indexes • Futures, Forwards and Options on Custom Made Indexes • Nordic Fixed Income (Standardized and Flex/Tailor Made) • Forward Rate Agreements • Bond Forwards and Futures • Policy Rate Futures • Options on Bond Forwards • IRS
Key initiatives • EMIR will require mandatory member sponsored default funds • New business will require increased safeguard requirements • To be introduced in Q1 2012 Default Fund • Introduce new in-house Collateral Management solution and replace current custodian institution model • Solution based on International standard • Deliver enhanced risk management procedures and services • Launch in Q3 2012 in parallel with existing solution Collateral Management System • Provide clearing of all Nordic derivatives and selected non-Nordic derivatives that are mandated for clearing by EMIR/ESMA • This includes trades created on NASDAQ OMX exchanges as well as trades coming from external trading venues and trades created outside organized trading facilities (OTC trades) OTC Clearing Integration commodities/ financials • Migrate commodities to same technical platform as financials markets • Will enable all members to trade and clearcommoditiesusingtheirexistingmemberships • Commoncollateral management, common settlement flows etc.
implications of Global trends to CIS and CEE region Globalization requires standardization IOSCO, G30, EMIR etc. set the standards. Efficient use of collateral. Cross-border capabilities are needed. Product variety and serviced currencies will increase. • DMA and remote access require standardized and easy access to post trade services • CCP a preferred solution but only if its cost efficient • Globally accepted DvP model for settlement • High standard risk management functionalities • Post trade interoperability or linkages • OTC Clearing • Important especially on fixed income and FX derivatives • Typically complicated due the nature of OTC market • Technology • Multi-instrument, multi-currency, multi-market, multi-time-zone • Rich in risk management functionalities and interfacing capabilities • Compliant with best practices
Latest development in Armenia Building infrastructure and services Financial literacy is still one of the main development barrier in Armenia. Pension system forces investors, market participants and media to educate themselves. CBA in a key role to realize the goals. • Armenian Pension System • Three pillar system. Second pillar to be centrally operated by NASDAQ OMX Armenia • Launch in 2014 • Central Depository Infrastructure • Changes to settlement model • Improved registry functionalities • Guarantee fund to be established • New services • Credit Resource market • Product development initiatives together with CBA covering tradable monetary policy and government issued securities