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[ M A R K E T R E V I E W | D E R I V AT I V E S C L E A R I N G ] “The move towards voluntary clearing will lead to organisations being more strategic towards their clearing brokers.” ROB SCOTT, HEAD OF CUSTODY AND CLEARING, COMMERZBANK in moving to clearing. Commerzbank’s Scott believes it is up to their sell-side partners to provide these tools and help facilitate this move. “It is therefore incumbent upon the service community, i.e. custodians that offer clearing services, to be able to help clients in both under- standing and impact assessment,” says Scott. “Once the commercial and counterparty risk benefits are better understood, there should be no reason why you wouldn’t move most of your activities and operate in a cleared world. “Early on Commerzbank developed a ‘what-if’ scenario capability where clients can backload or frontload their portfolios and see the specific impacts in terms of balance sheet and pricing. However, across the buy-side community this capability is generally lacking, as they do not have sufficient tools and expertise to properly assess and for many it’s not mandatory for them to do so.” It is also on banks and other clearing infrastruc- tures to provide both the access and the capa- bilities for the buy-side to move into clearing. Direct clearing models are large step to help this, but take-up has been very slow. Furthermore, liquidity will continue to be one of the main determinations for where the buy-side clear and what banks they use. “Given these new products are being estab- lished all the time, there are more clearinghouses expanding in to OTC. However, some clearers are struggling with scale, and this is where more 48 // TheTrade // Summer 2018 client clearing volumes will concentrate with the top FCMs,” adds JP Morgan’s Rustad. BNP Paribas’ Smith says it has become easier for banks to clear bilateral derivatives, given most banks went through a learning phase with the first set of products. However, there remains chal- lenges on the risk manage- ment side for client clearing, such as whether the default management processes are appropriate for certain products. “FCMs and CCP’s will have to adapt their products, but clients will want their banks to be able to clear a wide range of models and be involved in various access models to CCPs,” Smith says. To a large extent, the ability to venture into voluntary clearing is there amongst the buy-side. The tools are there for the larger players that have the scale