Japanese Banks Prepare for OTC Derivatives Clearing, Says Calypso Survey

With the expectation that Japan will require OTC derivatives clearing in 2014, Calypso Technology, a capital markets software provider, found that 20% of Japanese financial institutions surveyed are operationally ready for such requirements, while 80% are working towards compliance.

In order to be prepared, over 50% of polled firms said they are actively looking for a new system that can help with clearing.

“OTC clearing can impose significant strains on existing derivatives systems,” said Sanela Hodzic, managing director, strategy and marketing at Calypso Technology. “It’s a paradigm shift in derivatives management. Firms have to develop new processes and technology for managing connectivity, margining, collateral management and regulatory reporting requirements.”

The survey also found that 61% of respondents view the breadth of services offered by clearing brokers as the most important factor in choosing a partner. 46% said that operational support around connectivity is the most valuable clearing service, while 22% put risk and margin management at the top of the list.

“The survey confirms that the Japanese market is well aware of the client clearing challenges ahead. Clearing firms recognize the need to implement solutions to support new stringent compliance requirements such as the 60-second limit checking rule,” said Hodzic.