ISDA Analyzes Impact of G20 Regulations on Clearing

In a series of white papers, ISDA analyzed how G20 regulations affect clearing with regard to central counterparty ("CCP") growth, market access and incentives to clear. The series of studies were conducted in conjunction with the analysis of incentives to centrally clear OTC derivatives by the Financial Stability Board Derivatives Assessment Team.

The four published white papers are:

• Incentives and Impediments to Clear for Clients: A comparison of the incentives and obstacles involved in different methods of accessing clearing for clients. This paper makes the following recommendations, among others, for further study: (i) a full review of capital requirements relating to central clearing, (ii) a review of the global systemically important banks framework and how it affects clearing; (iii) consideration of the willingness of clearing members to underwrite CCP risk; (iv) the potential to increase "portability" - i.e., to allow clients to move among clearing brokers more easily.
• Architecture of Clearing: An analysis of how clearing and the "architecture" of the global clearing market support "frictionless trading."
• Clearing in Small or Closed Jurisdictions: A study of clearing in jurisdictions with "relatively smaller or closed derivatives markets." This paper recommends, among other things, that small markets need to implement a "clean" netting regime prior to implementing mandatory clearing requirements.
• Quantitative Impact Study on Multilateral Netting: An estimate of the impact of multilateral netting and its role in providing incentives to clear.

In addition, ISDA indicated that a fifth white paper on uncleared swap margin requirements will be published at a later date.