Nasdaq published a white paper on the implications for central clearing counterparties (CCPs) of a changing landscape shaped by dynamic and rapid forces. The global collateral management paradigm is shifting as new regulations come into play and CCP member firms seek more services for optimization as the collateral function evolves.
At the center of this transformation is also the enduring theme of technology modernization and its role in helping CCPs navigate rapid change with operational agility and competitive opportunism.
New assets offer new revenue opportunities, and the US Securities and Exchange Commission’s (SEC’s) mandate for US treasury and repo clearing starting in 2025 has triggered interest in mandated clearing in other jurisdictions around the world.
The motivation is improving systemic risk management via the centralized clearing of traditionally noncleared assets, like treasuries and repos. This has benefits of stability via standardization, transparency, and oversight of the clearing process of these assets.
While LCH, Eurex and the Fixed Income Clearing Corp. (FICC) already clear repo transactions, ICE and CME have both announced their intention to launch central clearing for US Treasuries and repo transactions. Competition in this space will likely increase between 2026 and 2030.
In any case, the signs portend that the centralized clearing mandate is expanding globally (or at least being considered), which will bring a tide of new volumes to an already highly competitive and dynamic CCP landscape, creating new revenue opportunities.
Collateral management and tech
To succeed and capture market share in this space, CCPs will need scale, competence and technology, including enhanced collateral management capabilities, that will provide them with a base from which to diversify into new asset classes and efficiently scale.
What’s really at work behind the scenes is the growing strategic importance of collateral management. Along with new regulations bringing more asset classes under central clearing mandates, margin requirements for uncleared derivatives are increasing as more firms come into scope, creating costs and challenges for market participants that are looking to CCPs for aid in onboarding and managing through change.
This change comes amid high interest rates and other pressing macro factors. CCPs are at the heart of collateral flows and thus must manage the exploding level of exchanged collateral to ensure the safe movement of liquidity while further empowering their clients. Pressures from all sides are now shaping the future of CCP ecosystems, emphasizing the importance of operation agility and expanded services in the face of rising costs and demands.
In such a disruptive environment, fragmented technology stacks become a liability. Siloed and aging systems, along with manual-based workflows, must be solved for if CCPs are to capitalize on increased collateral flows or attain the operational agility needed in today’s fast-moving environment. Client services will be especially important in the competitive landscape, as members and their clients demand functionality to replicate margin more accurately, optimize collateral and reduce risks of overcollateralization. While global CCPs already offer margining tools to offset risk, there is still room to simplify operations and generate more efficiencies by condensing and collapsing the myriad platforms they use.
The white paper covers: the increasing scope of regulatory regimes; modernization and the CCP ecosystem; growing priority for collateral optimization programs; data services and the requisite tech stack infrastructure; tokenization and new asset class opportunities.