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December 6, 2012
SIFMA SmartBrief
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The Economy 
The Future of Derivatives Clearing -- Part 2
Welcome to Part 2 of the SIFMA SmartBrief Special Update on the Future of Derivatives Clearing. Regulatory reform efforts and market trends indicate clearing is set to become an even more integral part of the structure of financial markets.

In Part 1 of this Special Update, published yesterday, we looked at the regulatory landscape as it pertains to clearing and shared legal analyses from some of the best law firms in the financial services industry.

In today's Part 2 we review market trends related to clearing and bring you an exclusive Q-and-A with William A. Coppel, Managing Director and Chief Client Growth Officer for First Clearing Correspondent Services.
Correction 
  • Derivatives play an important role in capital markets and the broader economy. Companies in every state use derivatives to protect against many types of risk that are inherent in their businesses. In the wake of the financial crisis of 2008, Congress sought to strengthen regulatory oversight of derivatives through the Dodd-Frank Act, due to their important role in the markets.

    While SIFMA believes that Dodd-Frank took several important steps with respect to improving transparency in derivatives markets, in some respects the Act goes too far and could limit the availability and/or increase the cost of these valuable risk-management tools for American business, agriculture, and state and local governments. The Act establishes a broad, new regulatory regime that requires numerous rulemakings that are likely to have profound effects on the market, including provisions governing swap dealers, major swap participants and end-users such as manufacturers, financial institutions, and agricultural concerns.

    SIFMA is working with the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and other regulators that are undertaking rulemakings to implement the derivatives-related provisions of the Act. SIFMA remains committed to educating legislators, regulators and others about the types and uses of derivatives, as well as the integral role they play in our economy. LinkedInFacebookTwitterEmail this Story
Leading With Insight.
Discover a white paper series from First Clearing, designed to provide insights, strategies and business solutions for the challenges firms must address on growth. Learn more here.

First Clearing, LLC is a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. 1112-04385
Industry News & Trends 
  • Another roadblock emerges in clearing
    EU buy-side firms plan to meet central-clearing rules by using indirect clearing. However, the Commodity Futures Trading Commission allows only one kind of collateral protection, and it is not one of two allowed in Europe for indirect clearing. Lawyers say the matter can be resolved if European Securities and Markets Authority rules are interpreted a certain way, but it is unclear whether ESMA will allow that. Risk.net (subscription required) (11/7) LinkedInFacebookTwitterEmail this Story
  • Pension funds, asset managers not ready for OTC clearing
    William Filonuk, a managing director at Bank of New York Mellon's asset servicing arm, said buy-side entities, including pension funds and asset managers, aren't ready for the clearing of over-the-counter derivatives through central counterparties. "The benefits for the buy-side are standardized collateral and standardized documentation, but this isn't as obvious as, for instance, multilateral netting for the sell-side," ICE Clear Europe President and Chief Operating Officer Paul Swann said at the Sibos 2012 banking conference in Osaka, Japan. The Trade News (U.K.) (tiered subscription model) (11/5) LinkedInFacebookTwitterEmail this Story
  • Markets need a better understanding of CCPs, report finds
    Based on central counterparties' critical and growing role in derivatives trading, market participants need to develop a deeper understanding of them and how they conduct their businesses, according to a report by research firm Finadium. Ownership of CCPs is highly diverse and it will not be easy for regulators to place their operations and risk management within a single unified framework, the report found. The Trade News (U.K.) (tiered subscription model) (11/16) LinkedInFacebookTwitterEmail this Story
  • OTC derivatives clearing takes hold in IRS and CDS markets
    A look at clearing of interest-rate swaps and credit default swaps at large clearinghouses in September shows the progress being made, Dan Mannetti writes. For example, LCH.Clearnet's volume of interest-rate swaps clearing in September was about 43% higher than it was during the same month a year ago. Futures Industry (11/2012) LinkedInFacebookTwitterEmail this Story
  • Move to organized trading facilities raises concerns
    A lack of resources and dealer involvement may inhibit the future required trading of some derivatives in Europe on organized trading facilities, panelists said at the OTC Derivatives Clearing Summit Europe. Of particular concern was the prospect that banks would not have a part in developing the necessary infrastructure. Risk.net (subscription required) (11/7) LinkedInFacebookTwitterEmail this Story
 Are you prepared for the Invisible Opportunity?
Read our new white paper, "Women and Wealth: The Invisible Opportunity" to learn more about engaging women investors and earning their trust.

First Clearing, LLC is a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. This material is for broker-dealer and financial professional use only. First Clearing does not provide services to the general public. 1112-04385
 

Risks to Growth 
William A. Coppel, First Clearing Correspondent Services
  
William A. Coppel
SmartBrief recently caught up with William A. Coppel, Managing Director and Chief Client Growth Officer for First Clearing Correspondent Services, to discuss the future of clearing as well as other trends and research affecting the financial services industry. Below is an excerpt of that interview. Read the full interview here.

What does the future of clearing look like?

We are taking the clearing business in a new direction. While independent broker-dealers are still going to need the traditional services we've always provided to run their businesses, today it's all about growth and growing their firms. We believe First Clearing is in a unique position because we can leverage the knowledge, the experience and the intellectual capital as well as the operational resources of a large-scale, stable financial institution with deep experience in serving the needs of brokerage firms -- namely Wells Fargo Advisors. This is going to help us help our firms remain relevant and competitive in the marketplace.

What I say to folks today is that we're really in the brokerage business. We just happen to clear because it's a function that we need to provide in order for us to process our business. First Clearing, in the future, is all about innovation around growth. That means helping firms grow organically, helping them differentiate their business in a changing financial environment, helping their key assets -- namely their advisors -- keep up their skills in ways they may not have envisioned before, so they're able to serve the needs of affluent investors today. It also means sharing our collective wisdom about managing risk and navigating the regulatory environment so that our firms can continue to protect their businesses effectively, while growing.

We believe that the work we've been doing to empower clients to grow is redefining the clearing space. Just one of our innovative programs -- called Growth Accelerator™ -- has been shown to give advisors the skills they need to meet the changing expectations of affluent investors. These days, affluent investors are less concerned about what an advisor knows about products and financial data, because the Internet has made that kind of information ubiquitous. Instead, affluent investors are looking for advisors who can build a relationship and learn more about them -- the investor.

We can bring our collective insight to bear in other key areas, as well, from business planning and succession planning to relationship marketing and relationship management. We also offer expertise in risk management relative to new technology. So that's how we see the state of the business.

Which aspects of regulatory reform efforts will have the greatest impact on the future of clearing?

One is that client firms are going to turn to us more to help them deal with the impacts. The good news is things are moving relatively slowly. The changes associated with Dodd-Frank have not necessarily come to fruition. Some have, and it's cost a lot of money to put in place the systems to meet the regulatory requirements.

We're in a unique situation at First Clearing because, in addition to the 88 firms we clear for, we support the third-largest brokerage firm in America. So we're focused on building the systems and support to meet requirements around transparency and documentation. All of us in this industry face the challenges of meeting both Congress' and regulators' expectations.

Read the rest of the interview.

SmartBrief/SmartBlog on Finance (12/4)
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More Resources 
  • Dodd-Frank Rulemaking Progress Report -- December 2012
    As of Dec. 3, 2012, a total of 237 Dodd-Frank rulemaking requirement deadlines have passed. Of these, 144 (61%) have been missed and 93 (39%) have been met with finalized rules. In addition, 133 (33.4%) of the 398 total required rulemakings have been finalized, while 132 (33.2%) rulemaking requirements have not yet been proposed. Although no rulemaking requirements were met in November, there was a flurry of regulatory activity in the form of no-action relief and other guidance, particularly by the CFTC with regards to Title VII implementation. Download the full progress report from Davis Polk & Wardwell LLP. LinkedInFacebookTwitterEmail this Story
Upcoming Events 
  • EARLY BIRD SPECIAL: SIFMA 40th Annual Operations Conference & Exhibit 2013 at 2012 prices!
    SIFMA's 40th Annual Operations Conference + Exhibit in Boca Raton, Fla., from April 28 to May 1, 2013 will bring together senior professionals from all corners of the marketplace at the premier event for financial services operations. Take advantage of early-bird pricing so you can engage expert thought leaders to examine the most critical operational, risk management and regulatory issues affecting your firm. In addition, you will gain unique insights and actionable solutions from senior industry professionals, regulators and service providers. LinkedInFacebookTwitterEmail this Story
  • IOSCO Secretary-General David Wright to speak at SIFMA/GFMA LEI Seminar -- Dec. 11 -- NYC
    SIFMA and GFMA are partnering to present the "Implementing a Global LEI Framework -- Ready. Set. Go." Join IOSCO Secretary-General David Wright, U.S. Treasury representatives, and financial services leaders as they address preparation for the December LEI deadline in the U.S. and the future of the global LEI standard. Don't miss your chance to learn more about the impact these regulations and processes will have on your firms starting this month! Register today. LinkedInFacebookTwitterEmail this Story
Editor's Note 
  • Disclaimer
    THIS IS A PAID PRODUCT ANNOUNCEMENT. Product announcements appearing in SmartBrief are paid advertisements and do not reflect actual SIFMA endorsements. The news reported in SmartBrief does not necessarily reflect the official position of SIFMA.
  

Product announcements appearing in SmartBrief are paid advertisements and do not reflect actual SIFMA endorsements. The news reported in SmartBrief does not necessarily reflect the official position of SIFMA.
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