Clearing No Panacea For Risk Mitigation, Panelists Agree

LONDON-The industry must work alongside regulators to ensure central clearing of new asset classes is not regarded as a universal remedy for risk, according to speakers at the SunGard clearing event held in May in London.

While the regulatory authorities continue to push the concept of central clearing as an enhancer of risk mitigation, panelists agreed one solution doesn't fit all asset classes.

Richard Wilkinson Director, futures clearing at royal Bank of Canada Europe and speaker at the event said: "While clearing houses do mitigate risk, the industry should work with the regulators to ensure clearing isn't regarded as the solution for all asset classes."

Meanwhile, client queries regarding clearing services for new asset classes are on the rise but the panelists agreed over the counter (OTC) should not always be discarded as an option in favour of central clearing.

"We certainly see queries from clients regarding swaps and CDSs asking whether we are going to offer clearing services in those particular asset classes," said Wilkinson.

The industry is still waiting for regulatory action and in the meantime firms will have to decide what the best option is for each asset class.

"There are so many initiatives coming from different clearing houses it is difficult to back all the voices, so you need to look at what the markets are doing, take a step back to question whether it is right for those products to go into clearing or not," said Wilkinson.

Carla Mangado