October 2016

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Finadium’s inaugural survey of Asian bank managers shines a light on current and future OTC derivatives market conditions from the point of view of managers at 13 of the largest Asian banks. These firms include regional players as well as important branches of North American and European firms.

This report, produced by Finadium in partnership with Deriv Asia, will help banks, investors, regulators and service providers chart a course as OTC derivatives reforms become a reality in the Asian region. Although the US, Canadian and Japanese introduction of new initial margin rules on September 1, 2016 caused a split in the market, other countries should soon follow suit. This will force all market participants to increase their understanding of what the rules are, how to comply and what this means for their trading activities. It also shines a spotlight on the critical question: who pays for new regulations, banks or their clients?

Alongside margin rules, Asian banks and regional branches of international banks have an unequal playing field in complying with Basel III capital ratios. This causes trades to be more or less expensive due to each bank’s regulatory requirements. Soon however, banks in Australia, Hong Kong, Singapore and elsewhere will need to consider the Leverage Ratio and Net Stable Funding Ratio of Basel III, leading to a period of capital readjustment as we have seen in Europe and North America. Both banks and their clients may look closely at central clearing as a potential solution to increases in RWA costs.

This report should be read by trading managers, portfolio managers, product managers, CIOs and regulatory affairs managers at banks and investor firms. Regulators and third party service providers may also appreciate a view on how banks view current market changes.

This report is 27 pages with 21 exhibits.


■ Executive Summary

■ A Robust Market for Asian OTC Derivatives
– Methodology

■ Why Banks Trade OTC Derivatives
– Why Asian Clients Trade OTC Derivatives

■ Clients, Central Clearing and CSAs
– How Much of the Market is Covered by CSAs?

■ Regulations That Matter (and Those That Don’t)
– The View from Banks
– The Leverage Ratio Impact
– Opinions About Clients
– Impact of the HKMA’s Mitigation Rules

■ Ideas for Market Growth

■ About the Author

■ About Finadium

■ About Deriv Asia


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