Since the Dodd-Frank Bill was signed into law on July 21, 2010, mandatory central counterparty (CCP) clearing has been set to transform the securities industry. The rule change will mean that OTC and exchange-traded derivatives will have to be cleared by a CCP, which is meant to reduce systemic risk.
Meanwhile, Europe and Asia are following closely behind, as the second review of the Markets in Financial Instruments Directive (MiFID) is meant to enforce similar rules, while in Hong Kong, for example, regulators have said that central clearing will be in legislation by 2012.
Global Custodian’s Lianna Brinded spoke to Rowena Romulo, head of direct custody and clearing at J.P. Morgan, to see what positives and negatives CCPs will have on the securities industry, what physical costs investors will face and, of course, what custodians are doing to prepare for this change.
Click here to watch the video.
(LB)