Clearing Services for Global Markets A Framework for the Future Development of the Clearing Industry_14 pdf

Eurex Clearing LCH.Clearnet OMX MEFF CCG Others Average fixed monthly fees in 2005 EUR 7. Please specify the average monthly clearing fees charged to your firm by the following clearing houses in 2005: EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR Average monthly infrastructure/ line/connectivity fees in 2005* Average monthly transaction-driven fees in 2005 (before rebates)** Average monthly event-driven fees in 2005*** Average monthly fees charged for additional services in 2005**** * Infrastructure/line or connectivity fees are charged by clearing houses for connecting a specific customer location to the clearing house – either through the internet or via dedicated lines. These lines are commonly leased to the customer for the time he holds his specific clearing member status. The line fee then covers the usage and initial installation of the line(s). Some clearing houses outsource this service to dedicated telecommunications companies, which in turn directly charge clearing members. ** Transaction-driven fees refer to the per-transaction fees charged by clearing houses. Please specify the average of total transaction fees charged, excluding rebates or differences of fees charged for product or product groups (e.g. stock indexes, currencies, etc.), but including minimum fees per month. If clearing fees are not itemised separately, please specify the all-in fee. *** Event-driven fees result from any “event” affecting a derivatives transaction. Such event-driven fees may thus be charged for option exercises, assignments and adjustments, futures contracts tendered, assigned, cash settled, etc. *** Additional services can include the service provision for give-up executions, allocations, claims, EFPs, APS executions, transfers, specialised account structures, reports, etc. Eurex Clearing LCH.CIearnet OMX MEFF CCG Others Monthly average of other charges and depreciation in 2005* EUR EUR EUR EUR EUR EUR * Other clearing-related charges can include penalty payments, e.g. for delayed payments or deliveries, as well as possible charges for service level upgrades, such as non-gratuitous network or bandwidth upgrades (insofar as this service is not outsourced to another service provider), etc. Clearing-related depreciation can result from investments to clearing-house-specific hardware and software requirements (i.e. servers, routers and operating software). 9. What kind of rebates did you receive on the fees charged by the following clearing houses and how high were these in 2005? Please specify: 8. Please specify the monthly average of other clearing-related charges and depreciation in 2005: Eurex Clearing LCH.Clearnet OMX MEFF CCG Others Kind of rebate (transaction fee, infrastructure fee, etc.) % of % of % of % of % of % of Average monthly fee rebate (either in percentages or absolute figures) fee fee fee fee fee fee EUR EUR EUR EUR EUR EUR 463 Appendix 4 10. Which of the following intermediaries do you employ for the internal organisation of derivatives clearing services and how many of each? No Yes If yes – how many firms? Back-office vendors CSDs/ICSDs Custodians (Correspondence) banks Central banks Telecommunications companies Others (i.e. consultants, etc.) Comments: 11. Please specify your average monthly fees paid to the following intermediaries in 2005: Average Monthly Fee in 2005 Back-office vendors EUR CSDs/ICSDs EUR Custodians EUR (Correspondence) banks EUR Central banks EUR Telecommunication companies EUR Others EUR Comments: 12. Please specify your cash/collateral tied to the respective clearing houses in 2005: Eurex Clearing LCH.Clearnet OMX MEFF CCG Others Contribution to default fund in 2005 EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR Average daily cash margin at clearing house in 2005 Average daily collateral margin at clearing house in 2005 Average daily credit lines/capital tied to ensure funding of intra- day margin calls in 2005 Funding effort for minimum capital requirements in 2005 GCMs: funding effort for non-segregated business in 2005 Comments:……………………………………………………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………………………………………………………………… 465 Appendix 4 13. Do you maintain excess collateral at the following clearing houses to reduce the number of margin calls? If yes, please specify : NO YES Eurex Clearing If yes, how high was this on a daily average in 2005? EUR LCH.Clearnet If yes, how high was this on a daily average in 2005? EUR OMX If yes, how high was this on a daily average in 2005? EUR MEFF If yes, how high was this on a daily average in 2005? EUR CCG If yes, how high was this on a daily average in 2005? EUR Others If yes, how high was this on a daily average in 2005? EUR Comments: 14. When you initially became a clearing member of the respective clearing house … did you have any funding effort for regulatory capital requirements? … did you have to hire additional qualified back-office personnel? … did you have to adapt your operational/back-office procedures? did you have to adapt your risk management structures and architecture? No Yes No Yes No Yes No Yes Eurex Clearing If yes, how high were these? If yes, how many additional headcounts? If yes, pls. estimate the effort in man- days If yes, pls. estimate the effort in man- days EUR EUR EUR EUR EUR (no. of headcounts) (no. of man-days) (no. of man-days) LCH.CIearnet (no. of headcounts) (no. of man-days) (no. of man-days) OMX (no. of headcounts) (no. of man-days) (no. of man-days) MEFF (no. of headcounts) (no. of man-days) (no. of man-days) CCG (no. of headcounts) (no. of man-days) (no. of man-days) Comments:…………………………………………………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………………………………………………………………… 15. Please specify your risk-management-related costs for the respective clearing houses in 2005: Eurex Clearing LCH.Clearnet OMX MEFF CCG Others How many headcounts did you employ for the risk management of the respective clearing house business in 2005? GRAND TOTAL: How high were your average monthly customer losses (i.e. compensation or default) in 2005? EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR PARTS: Did you outsource parts of your clearing-related risk management to a third party in 2005? If yes, pls. specify which parts and the average monthly costs involved. PARTS: PARTS: PARTS: PARTS: PARTS: EUR EUR EUR EUR EUR EUR 16. Please specify your IT costs for the respective clearing houses in 2005: Eurex Clearing LCH.CIearnet OMX MEFF CCG Others How many headcounts did you employ for maintaining technical interfaces to the clearing house in 2005? Did you outsource parts of your derivatives-clearing- related IT to a third party in 2005? If yes, pls. specify which parts and the average monthly costs involved. PARTS: PARTS: PARTS: PARTS: PARTS: PARTS: 17. How high were your clearing-related back-office costs in 2005? Please provide figures per clearing house or indicate the grand total: Eurex Clearing LCH.Clearnet OMX MEFF CCG Others How many headcounts did you employ in the derivatives clearing back- office in 2005? GRAND TOTAL: PARTS: PARTS: PARTS: PARTS: PARTS: PARTS: Did you outsource parts of your derivatives clearing back-office to a third party in 2005? If yes, pls. specify which parts and the average monthly costs involved. EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR Average monthly error account in 2005 GRAND TOTAL: Comments:……………………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………………………………………………… 18. In this section, you are asked to compare total clearing costs with total trading and settlement costs. Please consider that the ‘total’ should include both direct and indirect transaction costs.* STEP 1 STEP 2 Total trading costs are higher by a factor of roughly Clearing costs vs. trading costs Total trading costs are higher than total clearing costs OR OR Total trading costs are lower than total clearing costs Total trading costs are lower by a factor of roughly Clearing costs vs. settlement costs Total settlement costs are higher than total clearing costs Total settlement costs are higher by a factor of roughly OR OR Total settlement costs are lower by a factor of roughly Total settlement costs are lower than total clearing costs *Total trading/settlement costs therefore also comprise indirect costs such as maintenance of IT infrastructure and other operational costs. NO YES Do you regularly compare total trading costs to total clearing costs? If yes, how often (monthly, quarterly, yearly, etc.)? Do you regularly compare total settlement costs to total clearing costs? If yes, how often (monthly, quarterly, yearly, etc.)? Do you regularly compare total settlement costs to total trading costs? If yes, how often (monthly, quarterly, yearly, etc.)? 470 Appendix 4 Part 3 Scale effect analysis 19. Various network initiatives (mergers/alliances/partnerships, etc.) could be implemented to harmonise/consolidate the clearing service industry in the future. Some of the potential benefits of harmonisation/consolidation are listed below. On a scale from 1 (very low importance) to 5 (very high importance), please rate their importance. Not Very Very Important Low Low Medium High High 0 123 4 5 Clearing fee reductions Reduction of no. of involved intermediaries Increased scope for cross-margining Harmonised collateral arrangements Single margin approach per product Optimised default fund contributions Lower capital costs Enhanced netting opportunities Enhancements to risk mgmt. best practices Reductions of risk mgmt. costs Simplification and rationalisation of back-office processes Increased choice of trading location Increased choice of settlement location Increased speed of innovation Single interface to multiple markets Single membership gateway Choice of jurisdiction in which to clear Reduction of the no. of technical interfaces Harmonisation of systems and procedures Enhanced straight-through processing [...]... were calculated r No comparable information on LCH.Clearnet’s or OMX’s fees was publicly available For the purpose of this study, it was thus assumed that fixed costs of a clearing membership at LCH.Clearnet roughly equal the fixed charges incurred by a clearing member through its membership at Eurex Clearing OMX clearing house charges are accounted for at a later stage of the calculation of total clearing. .. calculation was built on the status quo of the cost structures for the benchmark clearing members and the remaining 213 European clearers, as classified in Appendix 7 This assumption was due to a lack of data that would have allowed for an accurate assessment regarding the changes in the composition of the all-in clearing costs due to these network strategies European clearing links: Low volume clearers:... six benchmark clearing members; 2 Calculation of total costs for the remaining 213 European clearing members 3 Calculation of total European derivatives clearing costs Step 1: Calculation of total clearing costs for each of the six benchmark clearing members;1 Step 1.1: Calculation of fixed costs per clearing house and clearing member: r The fixed clearing house charges borne by these six clearing members... calculated r Summarising the variable clearing house charges for the benchmark products, the ‘rest volume’ charges, and the option exercise and future settlement charges resulted in the total variable clearing house charges per clearing house and clearing member Step 1.3: Calculation of total clearing house charges per clearing member: r Summarising the fixed charges and the variable clearing house charges resulted... European clearing member types.3 Based on the insight provided by the analysis of the benchmark clearing members and publicly available lists of clearing members of the different European clearing houses, the residual 213 European clearing members (i.e the total of 219 European clearing members minus the six benchmark clearing members) and the composition of their all-in clearing costs were subdivided as... comparison of clearing house fees in Appendix 6 (except for OMX’s clearing house charges, which are accounted for at a later stage of the calculation of total clearing house charges; refer to step 1.3) r Based on the publicly available information on the number of cleared contracts in the selected benchmark products in 2005, the benchmark clearing member’s market share and the respective clearing fees charged... cent, and the average rate of index futures settlements was assumed to be 7 per cent r Together with publicly available data on the average open interest at Eurex Clearing, LCH.Clearnet, MEFF and CC&G, the market share of the benchmark clearers and the respective fees charged by the clearing house, the option exercise and future settlement charges per clearing member and clearing house were calculated... in many markets They were assumed to maintain a single direct clearing relationship, which is with their domestic clearing house To clear their transactions in the other (foreign) markets, these members were defined as utilising one or several other GCMs as clearing intermediaries Due to the lack of publicly available data and the complexities of including the costs associated with these intermediary... Clearing, LCH.Clearnet, OMX, MEFF and CC&G r Based on the outlined information, the fixed costs per clearing house and benchmark clearing member were calculated Step 1.2: Calculation of variable clearing house charges per clearing house and clearing member: r Based on information provided by Eurex Clearing, which was extended and adapted with the help of the interviewees, the European market share for. .. were assumed to represent merely 70 or 80 per cent of the actual charges and were adjusted accordingly Step 2.4: Calculation of service provider charges, cost of capital, risk management costs, IT costs and back -of ce costs per clearing member type: r Based on the assumptions regarding the composition of the all-in clearing costs for the remaining 213 European clearers and the amount of the total clearing . EUR Average daily cash margin at clearing house in 2005 Average daily collateral margin at clearing house in 2005 Average daily credit lines/capital tied to ensure funding of intra- day margin calls. headcounts) (no. of man-days) (no. of man-days) LCH.CIearnet (no. of headcounts) (no. of man-days) (no. of man-days) OMX (no. of headcounts) (no. of man-days) (no. of man-days) MEFF (no. of headcounts). Eurex Clearing and CME The merger of LCH and Clearnet A merger of LCH.Clearnet and Eurex Clearing Comments: 26. How do/would you estimate the impact of the Global Clearing Link, Phase I on the