Buy-side sees greater acceptance of swaps clearing

Large buy-side companies have less than six months to prepare for incoming clearing rules for derivatives.

Europe’s asset managers are gradually accepting clearing of interest rate swaps and are preparing to establish connections to clearing houses.

Speaking at The Trade Derivatives Webinar on swaps clearing, industry experts agreed asset managers and certain investment funds have begun to make changes to their operating model in order to comply with European central clearing rules.

“The fund I work on at Old Mutual is categorised as category two. The ops guys and the project team have done a great job in readying the fund for clearing. We have appointed two clearing brokers and one CCP to date,” said Ricky Maloney, business manager, rates and absolute return, Old Mutual Global Investors.

Barry Hadingham, head of derivatives and counterparty risk, Aviva Investors, agreed that most asset managers he works with are prepared for the 21 December clearing mandate.

“There are some teething issues that we have with particular clients that has delayed them going live prior to the frontloading obligation but there is a clear understanding that this is a mandatory obligation,” said Hadingham.

Haddingham also said Aviva Investors has already begun to engage with its pension fund clients, which are currently exempt from the clearing obligation until August 2017.

“They [pension funds] are also listening to the fact that pricing and liquidity is moving to cleared swaps, so we are seeing them engage with clearing,” added Haddingham.

With increased adoption of cleared derivatives among the buy-side, this could open up for non-bank firms to expand their client base.

“We are speaking to some of the category two clients about providing liquidity for cleared swaps,” said Brian Oliver, European head of institutional sales & relationship management, Citadel Securities.

“We are also talking to many of the platforms that provide electronic trading venues.”