Asia Risk’s Collateral Management Japan | 7 June 2017 | Shangri-La Hotel Tokyo
With O’Delle Burke of JP Morgan joining the panel of Seiichi Tanaka of Mitsubishi UFJ Morgan Stanley Securities and Masahiro Ehara of Goldman Sachs, it turned out to be an interesting session with much of the focus on meeting the increasing challenges of non-cleared margin and the continuing need for greater efficiency through standardisation and automation.
Some photographs of the day with the kind permission of Asia Risk.
Asia Risk’s Collateral Management Japan | 8 June 2016 | Shangri-La Hotel Tokyo
Hopefully the irony of the following Risk.net article regarding the delay in implementation of the European non-cleared margin rules will not be lost on those who attended the Collateral Management Japan conference: Europe set to delay variation margin regime
Margin for non-cleared derivatives is being phased in from September this year. From September 2016 the posting of initial margin is required by the largest financial institutions, with progressively more being added each September until 2020 when all but the smallest OTC counterparties will be included. The exception is March 2017 when all counterparties will be required to exchange daily variation margin. Focusing on initial margin, how prepared is the market in Japan, how has the 9 month delay that has already been allowed effected attitudes and what do you see as the consequences of not being ready on time?
Looking forwards to March next year, the short, regular VM settlement requirements are a significant challenge. Given that all counterparties will have to be able to value their own positions, handle disputes and both pay and receive margin, how do you see those challenges being overcome? It is known that not all counterparties have ISDA Master Agreements and suitable CSAs executed between them, how big a task is getting them in place in time?
Margin requirements are not just subject to Japanese rules but also to those of the counterparty’s jurisdiction. What do you see as the key challenges and how do you see this added complexity being managed?
Looking at this from a slightly different angle, with the introduction of non-cleared margin and the licensing of two additional CCPs in Japan (LCH and CME), although they are limited in the currencies they can currently clear, do you anticipate any changes in the market? In particular, the choice of counterparty and clearing venue due to collateral eligibility, concentration limits and so on? Are you seeing any migration from non-cleared OTC instruments to combinations of cleared instruments, even though their characteristics may not be a perfect match?
Delays in MiFID 2 (The Markets in Financial Instruments Directive) were announced in February. The regulations will now come into force in January 2018. Although most of the RTS (regulatory technical standards/rules) relate to execution there are some related to post-trade. Focusing on Japan, what have the effects been?