Clearing brokers considering exiting the market have been urged to weather the storm by one industry expert who can see the capital rules changing in the coming years.
New capital intensive rules such as the supplementary leverage ratio is forcing intermediaries to reconsider their client clearing businesses. As a result, RBS, BNY Mellon and most recently Nomura have pulled away from offering OTC client clearing services.
With other rumours of banks deboarding clients and re-pricing, one industry expert has urged clearing brokers to ‘hang in there’ as he is optimistic that the capital rules may change in years to come.
“In my personal opinion, in two years, the capital rules will change and this will turn around,” a source, who preferred not to be named, told theTRADEnews.com.
“For people who are panicking and getting out now, and killing client relationships, I think that is the wrong thing to do because there seems to be a lot of support within the regulators to get these capital rules changed.”
Many buy-side firms are still selecting their initial brokers, while the major firms are now considering their second and third choices as well. Opting for more than one broker has become increasingly important with many scaling back their businesses.
Mandatory central clearing is still yet to come into force in Europe, though is likely to take effect in the next two years for buy-side firms.