The Lifecycle and Clearing of OTC Derivatives Trade
The GFMI one-day OTC Derivatives Training Program provides participants with an introduction to the trade lifecycle and the clearing of OTC derivatives trades. Participants will explore the functional building blocks of middle and back-office operations that support the OTC derivatives trade lifecycle, as well as both deal and end-user trades and activity. The areas of operational risk and exposure will be highlighted throughout the length of the program.
The content in this program includes an introduction to the basic lifecycle stages of an uncleared or bilateral swap; however, the main focus is placed on Central Counterparty Clearance (CCP) clearing for both client and dealer trades. The industry as a whole is still in transition as the trade lifecycle of an OTC derivative requires re-engineering to comply with the demands of CCP. This program will cover the issues, challenges, and questions that are still to be addressed, as well as emerging trends.
OTC Derivatives Course Objectives
By the conclusion of our OTC Derivatives Training Course, participants will be able to:
- Analyze the functional building blocks of the trade lifecycle of an OTC derivatives trade
- Identify the participants and their roles, including the customer or end-user, bank broker/dealer, interdealer broker, exchanges and SEF’s (Swap Execution Facilities), clearing houses, custodians and prime brokers
- Distinguish the role of Clearing Houses and the margin process
- Evaluate the collateral management process for swaps
- Be able to explain why novations are done and how they are processed
- Consider the impact of industry regulatory changes, such as Dodd-Frank regulation on OTC derivative central counterparty clearance (CCP)
OTC Derivatives Training Course Sessions
- Session 1: Trade Lifecycle of Uncleared Swaps will teach participants the basic functions of trade execution, confirmation, collateral management, and payment for bilateral, uncleared swaps. Participants will learn how to differentiate between the perspective of the dealer and the client within the four aforementioned areas.
- By the end of Session 2: CCP Clearing for OTC Derivatives, participants will be able to understand the need for Central Counterparty Clearing of OTC derivatives and summarize the impact of regulatory changes in the United States, European, and Asian markets, including Dodd-Frank, EMIR, MiFID, and others. Participants will be able to differentiate OTC CCP systems, such as CME Clearing, ICE Clear, LCH Clearnet and Eurex, according to the products cleared, the business model, membership eligibility criteria and margin requirements.
- Session 3: CCP Clearing for Dealers will describe the changes to the source of trade activity and regulatory definitions of participants such as Swap Execution Facilities (SEF’s), Swap Dealers and Major Swap Participants. The impact of new regulatory reporting requirements and how this reporting is done will be identified and the process of submitting to CCPs will be explained. The linkage between Confirm/Affirm and Matching providers, as well as the relationships between executing and clearing firms will be compared and contrasted. Liquidity risk management for CCPs will be reviewed and an examination of the flow of settlement payments for cleared swaps will also be discussed.
- The final session of the course, Session 4: Impact of CCP Clearing for Clients will examine the lifecycle of a cleared swap from the perspective of a client or end-user, including the differences in the workflow to support CCP agency versus principal models, trade portability and interoperability requirements, legal documentation, margin calls and collateral segregation criteria (LSOC).