Presentation is loading. Please wait.

Presentation is loading. Please wait.

Toronto, Montreal November 2010 OTC Derivatives Execution and Central Clearing Forum.

Similar presentations


Presentation on theme: "Toronto, Montreal November 2010 OTC Derivatives Execution and Central Clearing Forum."— Presentation transcript:

1 Toronto, Montreal November 2010 OTC Derivatives Execution and Central Clearing Forum

2 1 Core Principles: Adapting the Futures Model to CCP OTC Derivatives  Risk based capital and risk based margin –Broadens participation, enhances liquidity –Open access principles –No artificial barriers  History of safety and soundness; protection in crises  OTC clearing and execution venues not new for Futures Commission Merchants, some Clearinghouses or Newedge –ClearPort, ICE Europe, Singapore Exchange, IDCG, Eris

3 2 Benefits of Centrally Cleared Derivatives  Takes debt out of system  Provides transparency of OTC participants’ obligations  A structure favored by regulators to reduce systemic risk Systemic Benefits Buyside Benefits Sellside Benefits  Substantially eliminates counterparty risks  Eliminates or reduces direct and indirect costs of bi-lateral OTC, including: –Uncertain credit charges –Transaction unwind-related charges –Potential replacement cost in event of counterparty failure –Counterparty credit valuation haircuts  Enjoy position portability  Transact with more dealers  Benefit from clearinghouse performance guarantee; security of futures market protections  Independent valuation / transparency from CHs  Ease of documentation: no ISDA/CSA required  Substantially eliminates counterparty risks  Reduces capital use; eliminates need to hedge bi-lateral counterparty credit risk  Ease of documentation: no ISDA/CSA required  Reduced operational risk; ease of administration  Viable OTC CCP platforms for largest OTC derivative asset class – IRS  Preserve market bid / ask

4 3 Clearing and Execution Platform - Client Considerations  Platform objective –Clearing –Execution  Market adoption –Contract design – implicit target market –Product scope – potential margin / capital efficiencies -OTC -Futures -Securities  Governance –Clearing member criteria -Access principles, access implications for: -FCMs / Clearing Brokers -Other Liquidity Providers -End Users -Incumbent Dealers –Economic interests –Product adoption –Independence

5 4 Clearing and Execution Platform - Client Considerations  Financial resources –Margin methodology –Default fund  Regulatory –Status –Jurisdiction  Default Management  Operations scalability  Fee disaggregation -Clearing house fees -Clearing firm fees -Liquidity provider (dealer) bid / ask, exclusive of credit and bi-lateral OTC operations  Execution Facilities –Sponsorship –Clearing platform Integration –Format -Voice -RFQ -CLOB

6 5 IRS: Execution and Credit Intermediation trend

7 6 CCP IRS Platforms CME OTC IRSIDCGEris Futures LCH SwapClear US FCM CCP LCH SwapClear Incumbent (UK) Newedge Member:In discussion TBDCA and SG Product OTC IRSOTC IRS  Cleared Future / OTC IRS coming OTC IRS Futures Exchange CME Cleared OTC IRS Cleared Volume ~$660MM~$600MM ~$500MM Newedge brokered $10 B Largely among Founding Members; Newedge cleared Not launched$229 T Membership Criteria $1B ANC or Parent Guarantee Capable FCMCME MemberTBD$5 B capital or Parent G’tee; Internal Default Mgt capability; $1T swap book Initial Default Fund $50MM $2.5MM Futures / $5MM OTC account class None (CME futures pool) TBD£[125]MM

8 7 CCP On-boarding Requirements  Global Terms of Business Clearing Account –Accommodates futures, OTC, securities –Newedge credit approval –KYC review –Client authorizations; approved traders  Clearing house Terms of Use or registration / participation agreement  Estimated on-boarding time – 3 to 5 weeks

9 8  Capital flows and trades have moved to point where capital is deployed  Customers seek cross border trading  Alpha available in emerging markets Newedge is at the Intersection of 3 Secular Trends in Financial Services REGULATION  Increased liquidity on exchanges  Open and broad access to reduce systemic risks  Lower transaction costs and spreads  Unlike equities, futures markets are presently, vertically integrated  Dodd-Frank OTC Clearing / Transparent Execution OTC Clearing / Transparent Execution  Customers  Exchanges  Products Electronification & SEFs Electronification & SEFs Globalization

10 9 Leading Global Multi-Asset Broker  Formed in 2008 from the merger of Fimat and Calyon Financial businesses  History going back over 30 years  50/50 ownership by Société Générale and Crédit Agricole CIB  Agency model  Leader in market share on most Global exchanges  2,800 employees  23 locations in 17 countries  85+ exchanges  €40 billion in client assets  Futures, Options & Equities Clearing and Execution –Leading Futures, Equities and OTC execution –Leading CME market share  Fixed Income, Currencies & Commodities –Clearing and execution across a Broad range of products and services that include Fixed Income strategies, inter-dealer brokerage, commodities, energy, metals, FX, repos, derivatives and margin financing  Clearing & Professional Trading Group –Provides global clearing services to the world’s largest banks, financial institutions as well as high frequency / DMA firms –New liquidity providers for OTC derivatives with CCP  Prime Brokerage –Robust prime brokerage offering and ability to further leverage VAR margining capabilities Newedge Group Business Lines

11 10 MARKET COVERAGE Futures Fixed Income / Rates Foreign Exchange Equities and Indexes Options and Repos Agricultural and Softs OTC/Listed Energy Metals Institutional Asset Managers Hedge Funds / CTAs / Investors Financial Institutions Corporations Professional Trading Groups CLIENTS PRODUCTS EUROPE & MIDDLE EAST London Paris Frankfurt Zurich Geneva Madrid DubaiASIA-PACIFIC Hong Kong Singapore Shanghai Taipei Tokyo Seoul Sydney MumbaiTHEAMERICAS Chicago New York Kansas City San Francisco Sao Paulo Montréal Toronto Calgary LOCATIONS BROKERAGE SERVICES Execution Clearing Prime Brokerage Financing / Margining Capital Introductions Advisory Electronic Trading / DMA Research Newedge Has a Complete Global and Multi Asset Platform

12 11 Newedge: a Leading Clearing Broker (1) Source : CFTC (2) Prior Sep data reflects Newedge Financial Inc., Newedge USA LLC., Calyon Financial Inc., and FIMAT USA LLC Top FCMs Based on Client Segregated Funds

13 12 Leading Market Share in Both Execution and Clearing MARKETSSERVICERANKING AMERICAS CME GROUP Execution / Clearing CME1 / 1 Execution / Clearing CBOT1 / 1 KCBTClearing1 MXExecution3 EUROPE EUREXClearing 2* NYSE LIFFE EURONEXT PARISExecution 2* LONDON Execution Commodities2 Clearing Commodities1 Execution financials5 ASIA PACIFIC HKEXExecution1 OSEExecution / Clearing 1 / 1* SFEExecution / Clearing2 / 5 SGX-DTExecution / Clearing1 / 3 TSEExecution / Clearing 1 / 1* Newedge global market share in listed derivatives 11.1% Financials 17.1% Commodities * Rankings as of 31 January 2010 Source: Rankings provided by derivatives markets. Market share computed internally using our own methodology as of 30 June 2010.

14 13 Benefits of Agency Model / Non-Proprietary Trading  Clients interests first –Newedge acts as a pure intermediary without economic interests in clearing platforms –Facilitate with unbiased information –Diverse range of platforms ensures best access and execution and best of breed technology  Expertise in many platforms supported by Newedge – agnostic Liquidity Provider Clients X, Y, Z, … Finds interest in the market Crosses the deal in the Exchange –bi-laterally or –directly intermediates Exchanges & Clearinghouses CME Clearport

15 14 Recognized Market Leader #1 Futures Broker – Futures Magazine, December 2009  Best Multi Asset Prime Broker Award – 2010 HFMWeek US Hedge Fund Services Awards  Newedge Prime Brokerage agency model ranked #7 overall, #5 Europe – 2010 HFMWeek  “Most innovative prime broker” – 2009 HFMWeek Service Provider Award Best in Class in 8 out of 10 categories – Global Custodian, June 2009 Top 5 Futures Commission Merchants by Customer Funds Source: CFTC (U.S. regulator) as of 31 August 2010

16 15 Diversified Financial Strength Source: Newedge Financial Report Net Banking Income € 949 million 2009 Net Banking Income € 949 million 2009 Net Banking Income by Business Line 2009 Net Banking Income by Business Line

17 16 Newedge Contacts  Marc Katz, SVP Newedge USA, LLC 550 W. Jackson Blvd, Suite 500 Chicago, IL Phone: (312)  Rod Wilmer, CEO Newedge Canada Inc. Exchange Tower, Suite King Street West Toronto ON M5X 1B1 Phone: (416)


Download ppt "Toronto, Montreal November 2010 OTC Derivatives Execution and Central Clearing Forum."

Similar presentations


Ads by Google