Tips for future employability: learn about optimal OTC derivatives clearing
Centralised clearing of, what are currently, OTC derivatives can only increase. The US government is implementing it and so is the EU, albeit with a few key differences.
Understandably, banks are getting in on the game. Bank of America has started its own Global Futures and Derivatives Clearing Services (GFDCS) business. Goldman Sachs, Deutsche, Citigroup, and JPMorgan are doing the same thing already.
Rather than laboriously setting up their own derivatives clearing services, banks are acting as agents, giving clients access to and the choice of a selection of existing clearing houses such as LCH.Clearnet and ICE. The goal in future will be to incentivise clients to both execute and clear trades.
How much hiring will this necessitate? Initially, not much.
"Banks offering these services will simply become members of various clearing houses and then offer a consolidated service to their customers, who will have a relationship with the bank rather than each clearing house. It's unlikely this will create many jobs," says Barney Reynolds, a partner at Shearman & Sterling.
This is not to say there will be no recruitment at all in the land of OTC derivatives clearing.
Jeff Zoller, Executive Sponsor of the Derivatives Working Group at ISITC (International Securities Association for Institutional Trade Communication), says banks' participation may require the development of new systems or the modification of existing systems, as well as the development of new order management processes.
Longer term, there may also be a need for people with full knowledge of executing and clearing OTC trades to sell the merits of banks' systems.
"It's still at a very early stage in the regulatory change process: there's a lot of detail that needs to be finalised," says Emma Davey, a director at the Futures and Options Association. "But if you're in at the beginning and know the relative strengths and weaknesses of each clearing house, you will be in a strong position in future."
