THOUGHT LEADERSHIP impact becomes clearer – as with other phases – over the course of the next 12 months .
In what way is the buy-side ’ s relationships with counterparties evolving with respect to clearing and why is this happening ? There are several lenses to the current evolution . A key challenge for clients impacted by UMR is maintaining the set up with their bilateral counterparties to ensure they are all compliant - this can be onerous . On the other hand , clients who have access to LCH ForexClear have access to many global NDF dealers via one set-up , as clearing is a one-to-all model . This ensures wider market access and has materialised as one of the big value adds of clearing in the context of UMR . Once clients are set up then they have the flexibility to choose tactically whether to clear or transact bilaterally – which may be one way of managing UMR thresholds . To support this , we have capability to illustrate estimated margin requirements from clearing as well as compare likely margin implications of clearing versus trading with existing counterparties .
Those clients who see prime broker related charges as high or have reduced access to credit lines see clearing as a potential solution . Where capital is a concern for bank counterparties , clients are being encouraged to clear to help alleviate those constraints . Those savings may be passed back to the buy-side through competitive pricing . The LSEG group , of which Refinitiv Matching , FXall and LCH ForexClear are part , are scheduled to launch a Singapore-based NDF matching platform that will be connected to LCH ForexClear for clearing next year where buy-side and banks alike should benefit from reduced spreads .
What is the current execution venue connectivity landscape like and how is this changing ? In order to move forward with our offering , we need to ensure the entire experience is efficient . That includes relationships with order management system ( OMS ) providers as well as execution venues . There is progress in this space , particularly with respect to use of execution venues as a channel for clearing . Currently , the workflow for active execution venues means that FX clearing is a posttrade activity . If the clearing decision for FX was a pre-trade activity then we would expect to see further efficiencies , for example , participants being able to access a pre-cleared price . With the development of the LSEG NDF Matching platform this is one of the results we hope to see .
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