Vanaja Indra, Insight Investment
n Buy-side view
exemption, as it stands today,
is a temporary exemption, so
we need to put all our energy
into finding a long-term
solution for clearing for pension funds. We are engaging
with various market participants on this front but any
solution is likely to take time
to develop.
Industry associations
have made a lot of
progress on updating
common protocols
and standardising
documentation. Are there
any areas where you’d
like to see more progress
collectively by the
industry?
Although in the long term I
expect this work will pay off,
in the short term there are
issues that need to be ironed
out. The main architects for
most of these protocols and
documentation solutions
are the sell-side community
and therefore they do not
really represent the interests
of the buy-side well.
We take the approach of
producing our own solu-
tions for clients which we
believe represents their
interests better. As such, after
a long negotiation process
with our clearing brokers we
have created our own inno-
vative documentation solu-
tion for client clearing. n
clarity on the rules is not
helpful. It always takes time
to develop the final rules,
but during that timeframe
it’s difficult for market
participants to make firm
plans. The uncertainty lead-
ing up to the 12 July CFTC
deadline on the cross-
border rules created a lot of
uncertainty. At one extreme,
some market participants
were considering temporar-
ily pulling trading lines with
some bank counterparties if
further breathing space was
not provided to carry on
trading with these entities.
Although we are getting
more and more clarity over
time, the pace of the rule
making in terms of finalising the detail and providing
interpretative guidance is
often slower than the clarity
that the market needs.
From Insight’s perspec-
tive, what we really need for
our clients is a solution to
the cash variation margin
issue and better collateral
transformation services that
are both cost efficient and
do not introduce too many
new risks. The pension fund
Dodd-Frank. Clearly the
Commodity Futures Trading
Commission’s (CFTC) 12
July deadline for the expiry
of the exemptions relating
to the cross-border rules
was really important for us,
as it was for the rest of the
market, because we needed
to know whether we could
carry on trading with some
of the entities of US banks
without being brought into
the scope of Dodd-Frank.
It now appears there is a
bit more breathing space,
but until we know how the
substitutable compliance
rules shall be interpreted for
clearing, this risk has not
been fully eliminated. There
is a risk that because the
temporary pensions exemption does not exist in Dodd-Frank, they do not recognise
EMIR to be equivalent for
this component. We are
constantly monitoring the
regulatory landscape and
evaluating the domiciles of
the entities we trade with to
protect our clients’ interests.
What kind of regulatory
developments would most
put your mind at rest in
terms of enabling Insight
to continue to deliver its
solutions to clients?
Two things stand out. From
an implementation perspective, I think the lack of
n “We’re also discussing with clearing houses how
they can further improve
asset protection.”
