A level of standardisation will emerge as
clearing houses with global reach establish regional entity tie-ins with
clearinghouses in the rest of the world, TABB Group research has found.
Radi Khasawnesh, the Group’s research analyst
and author of the new report, explains that as clearing has become the main
priority for buy-side firms trading in fixed income, there is now a bifurcation
between clearing houses with global reach and those with a domestic focus.
He points out that this domestic focus can
lead to a natural domestic bias, specifically for European entities that have
the widest universe of accepted collateral.
Global efforts to increase fixed-income
trading regulation have thus increased regionalisation in the handling of
The report, 'Global Collateral Standards
2014: Breaking Through Regional Silos', highlights an expected trend towards
the voluntary standardisation of fragmented collateral by clearing houses.
This standardisation is happening on the
The study involved the comparison of current
and expected treatment and acceptability of collateral by region and entity,
based on the public disclosures of 12 clearing houses regarding acceptable
collateral, margin treatment and risk modelling.
Khasawnesh says this process has led him to
believe that there is now a distinct divergence between global and domestic
clearing houses, given the disproportionate levels of focus towards their
This discrepancy in focus can lead to
domestic bias amongst those clearing houses with a domestic, rather than global,
reach, he argues.
The report includes graphically represented
data based on published margin schedules and methodologies, as well as margin
circulars and risk calculators.