IMN: CCPs gain speed 27 January 2015San Francisco Reporter: Mark Dugdale
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Some of beneficial owners’ biggest questions about central counterparties (CCPs) for securities lending are yet to be answered, but there are proven benefits that they should take note of right now.
CCPs returned to the agenda at the Beneficial Owners’ International Securities Lending and Collateral Management Conference in San Francisco.
Panellists included Tim Gits of Eurex Clearing, as the CCP representative, and Jeffrey Petro of Federated Investors, who was the panel’s beneficial owner.
While questions around how indemnification will be affected by putting securities lending through a CCP were not fully answered, the panel said, in theory, the risk for which it is employed in the first place would be largely mitigated.
Beneficial owners should, for now, concern themselves with the main benefits of using a CCP, which include increasing borrower networks at a time when broker-dealers’ balance sheets are shrinking in reaction to new capital rules.
New demand does not necessarily need to be found, said the panel, but it must be protected in the face of regulatory changes.
Putting bilateral counterparty risks into the hands of a select number of CCPs is also a positive for beneficial owners, according to the panel.
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