Better efficiency and higher costs will be two key trends in the clearing of swaps trades in 2014, according to a Greenwich Associates report on global derivatives markets issued Wednesday.
Trends that were “front and center in 2013 as swaps went from a 10-day clearing cycle to a 10-second clearing cycle” would continue to drive changes in market structure in 2014, Kevin McPartland, principal in Greenwich's market structure and technology advisory service, said in the report.
Among the efficiencies, according to the report, “infrastructure will finally come up to speed with the opportunities presented by the clearinghouses, and customers will begin to realize how expensive clearing is.”
However, 2014 will see an end to underpricing at swaps clearinghouses to gain market share, with charges for capital usage, overnight funding and position maintenance all raising swaps clearing costs, the report said.
Among the other 2014 trends noted in the report are voluntary trade clearing in Europe while efforts to make trade reporting mandatory on the Continent continue; marginal changes in corporate bond trading; and increased use of the FX futures market by financial and corporate clients for cheaper access to foreign-exchange exposures.
The full report, “The Top 10 Market Structure Trends to Watch for in 2014,” is available on Greenwich's website.
