CONTENTS 2 Post trade capabilities Product offering Key initiatives NASDAQ OMX CLEARING AND CSD TODAY AND IN THE FUTURE 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 LATEST DEVELOPMENT IN ARMENIAN CSD Pension System Settlement model CSD technology IMPLICATIONS TO CIS AND CEE Internationalization and standardization Derivatives and clearing Technology requirements
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
4 EUROPEAN LANDSCAPE FOR EXCHANGE TRADED EQUITY CASH AND DERIVATIVES
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 5 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 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 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 CLEARING CURRENT PRODUCT SCOPE 6
KEY INITIATIVES 7 EMIR will require mandatory member sponsored default funds New business will require increased safeguard requirements To be introduced in Q1 2012 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 DEFAULT FUND Migrate commodities to same technical platform as financials markets Will enable all members to trade and clear commodities using their existing memberships Common collateral management, common settlement flows etc. INTEGRATION COMMODITIES/ FINANCIALS
IMPLICATIONS OF GLOBAL TRENDS TO CIS AND CEE REGION 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 8 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.
LATEST DEVELOPMENT IN ARMENIA 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 9 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.