Sapient Survey Reveals Industry Concerns Regarding Derivatives Clearing

The cost of complying with central clearing regulations, and uncertainty surrounding these rules, has been cited as the overriding fear amongst market participants, according to a survey by Sapient Global Markets.

Out of 153 delegates from the FIA Expo in Chicago last November, 81% said uncertainty surrounding regulations, the enforcement of a new technology solution, and the cost of complying with new clearing mandates were amongst their greatest worries.

Respondents believe central clearing mandates are jeopardising firms’ abilities to produce the necessary reporting, due to volume and complexity issues. This factor is also connected to participants’ concerns regarding costs of clearing, as the new regulations are adding to financial pressures: particularly for sell-side firms, whose profits may be outweighed by the costs needed to continue operating.

However, the majority of survey respondents also demonstrated positive interest in the formation of purpose-built market utilities, which they believe would help them meet the unique buy-side clearing requirements.

“The industry is on the brink of transformation”, says Jim Bennett, managing director at Sapient Global Markets. “This is especially true as firms consider how to increase efficiencies, reduce costs and improve returns while addressing the global nature of these regulations.”

Last year BNY Mellon opted to exit the derivatives clearing business in both Europe and the U.S., as well as State Street which shut its U.S. swaps clearing business and cancelled the launch of a European OTC clearing service.