Global CCPs gathering in Shanghai to draw blueprint of OTC market development

2014-09-30 22:00 1014

SHANGHAI, September 30, 2014 /PRNewswire/ -- On 25th September 2014, Seminar on Reform and Innovation of OTC Market after Crises was convened in Shanghai, by Shanghai Clearing House (SHCH), CCP12 and National Association of Financial Market Institutional Investors (NAFMII). CCP12 Special General Meeting, Sept 2014 was convened by SHCH in the meantime. Mr. YANG Xiong, Mayor of Shanghai Municipal Government met with the delegates from CCP12 during the seminar. Mr. LIU Shiyu, Deputy Governor of People's Bank of China (PBC); Ms. WU Xiaoling, Vice Chairman, Financial and Economic Committee of the National People's Congress; Mr. WANG Xiaoyi, Deputy Administrator of State Administration of Foreign Exchange (SAFE); Mr. JIN Xingming, Deputy Secretary-General of Shanghai Municipal Government and other senior officials attended the seminar.

Mr. LIU Shiyu, Deputy Governor of PBC emphasized at the keynote speech that the establishment of central counterparties (CCPs) is a major breakthrough of financial market infrastructure. Centralized clearing through CCPs can reduce costs, improve efficiency and transparency, and facilitate information integration and frontline monitoring. Centralized clearing, which maintains effective operation and overall stability of the financial market, is a core objective of the reform on international OTC derivative market. SHCH, established in November 2009 to provide professional and independent clearing services, has played an active role. Mr. LIU indicated that over the years, China has always encouraged financial innovation and vigorously propelled the development of the financial market. Currently, the financial market in China has great potentials from both aggregate and structural perspectives. PBC will stick to market-oriented reform, respect the objectivity of the financial market rules, nurture diversified investors, promote the innovation of the derivatives market with manageable risks, enhance cooperation and coordination of international financial regulators, strengthen financial market infrastructure, and actively support SHCH's role in providing comprehensive centralized clearing services to ensure the security, efficiency of the financial market and to prevent risks.

Mr. WANG Xiaoyi, Deputy Administrator of SAFE pointed out when reviewing the development of China's foreign exchange (FX) market that in the decade following the reform of the RMB exchange rate pricing mechanism in July 2005, China's FX market witnessed major breakthroughs. The average annual growth rate of trading volume of the FX market from 2005 to 2013 stood at 33.1%. In 2013, the volume of various products reached 11.2 trillion USD, 10.7 times more than that of 2004. The existing trading and clearing models of China's FX interbank market are in line with the trend of international supervision reforms after the financial crisis. In the following years, China's FX market will relax trading restrictions, enrich trading vehicles, expand trading institutions, accelerate the opening up process, improve infrastructure, safeguard efficient market operations, transform supervision approaches, boost market innovation capacities, strengthen cross-border regulation coordination and promote steady development of the global FX market.

Mr. JIN Xingming, Deputy Secretary-General of the Shanghai Municipal Government, in his speech on behalf of the Shanghai Municipal Government, extended welcome and congratulations on the convening of the Seminar on Reform and Innovation of OTC Market after Crises & CCP12 Special General Meeting, Sept 2014 in Shanghai. He wished that all participants from across the world to feel the atmosphere of Shanghai in accelerating the development of the international financial center and China (Shanghai) Pilot Free Trade Zone, speak out freely, and discuss the challenges and opportunities of the OTC market after crisis with a view to boosting the sound development of financial market.

Ms. WU Xiaoling, Vice Chairman, Financial and Economic Committee of the National People's Congress attended the panel discussions. Around 150 attendees participated in panel discussions, focusing on "function and prospect of the OTC market in developing the multi-level capital market system", "establishment of qualified investors mechanism and the development of OTC market", and "risk management and CCP clearing in OTC market". The attendees include officials from overseas regulators, such as Federal Reserve Bank of New York, Federal Reserve Bank of Chicago, European Commission, Autorite des Marches Financiers, senior management from international organizations and companies, such as International Capital Market Association, Citigroup, HSBC, CME Group, Hong Kong Exchange & Clearing Ltd., renowned overseas experts and scholars, as well as delegates from Chinese government, financial regulators, market players and intermediaries. The agenda on 26 September also covered mandatory CCP clearing which the international regulators and market players attached great importance to, as well as the opportunities of developing OTC commodity derivative market in China (Shanghai) Pilot Free Trade Zone.

After the panel discussions on 25 September, the attendees hold that the precious experience after the crisis over promoting OTC market reform and innovative development needs to be carefully studied. The sustainable development of the international financial market lies in the accurate positioning of OTC market, the development of qualified investors, the introduction and expansion of CCP clearing mechanism and systemic risk management, and the establishment of trade repository for OTC financial derivatives. Mr. XU Zhen, Chairman of SHCH elaborated on the experience of developing CCP clearing mechanism in China's OTC market: Firstly, introducing CCP clearing at the initial development stage of OTC derivatives. Secondly, starting from spots and then gradually involving OTC market derivatives which are more complex in terms of risk management. Thirdly, promoting mandatory clearing of financial derivatives step by step according to market development and sentiment. Fourthly, giving priority to risk prevention and establishing sound risk management mechanism in line with international standards. He stressed that in the next two years, SHCH will step up its efforts in developing more products and continuously expanding CCP clearing mechanism for OTC derivatives in China's financial market.

CCP12 Special General Meeting is by far the first time that CCP12, which is the only international CCPs organization holds a conference in mainland China. This reflects not only the attentions that the international community attaches to the development of China's financial market and Shanghai international financial center, but also the recognition of the international peers to SHCH.

This seminar, as a key task for the development of Shanghai international financial center in 2014, gained great attentions from Shanghai Municipal Government.

About Shanghai Clearing House (SHCH)

Shanghai Clearing House (SHCH), established on 28 November, 2009, was authorized by the People's Bank of China (PBC). It is the exclusive Central Counterparty (CCP) for OTC market in China. SHCH is committed to becoming a standardized, market-oriented and international clearing service provider. Based on a strong sense of risk prevention and an effective risk management framework, SHCH offers centralized and standardized RMB and foreign currencies clearing services for financial market spot and derivatives transactions as well as RMB cross-border transactions approved by PBC. Business of SHCH includes: new issue and custody, clearing, settlement, margin management, collateral management, information services, consultation services and other services approved.

About CCP12-The Global Association of Central Counterparties

CCP12, a global organization formed in 2001, has been working to further the industry's dialogue on the adoption of best clearing and risk management practices, and support strategic progress on regulatory harmonization and the enhancement of global standards. The group frequently invites regulators and representatives from other clearing and settlement organizations, exchanges and marketplaces, financial firms and other industry associations around the world to join its meetings to foster dialogue on issues of mutual interest and concern. With its membership having expanded to 35 Member organizations, CCP12 has been meeting at least bi-annually, via Annual General Meeting and Special General Meeting respectively, as well as working in smaller teams to advance risk management awareness and analyze industry and regulatory developments.

About National Association of Financial Market Institutional Investors (NAFMII)

National Association of Financial Market Institutional Investors (NAFMII) was founded on 3 September, 2007, under the approval of the State Council of China. NAFMII is a self-regulatory organization in the interbank market joined on a voluntary basis by market participants in the interbank bond market, interbank lending market, foreign exchange market, commercial paper market and gold market. By the end of July 2014, 4915 market participants had joined NAFMII's membership, representing an increase of 23% year on year. Members include: banks (both local and foreign banks), credit unions, insurance companies, securities houses, mutual funds, financial companies, trust companies, credit guarantee institutions, and other enterprises.

Source: Shanghai Clearing House