Diana Chan, Chief Executive Officer of EuroCCP
There are many challenges for high frequency traders these days. Losing a prime broker in a Lehman Brothers failure or suddenly finding yourself with busted trades in another flash crash could totally disrupt your liquidity, just as you face unexpected margin calls. Diana Chan looks back on the tumultuous events of both September 2008 and May 2010 in the US markets, and tries to draw some conclusions. She notes that a sudden shift of fortunes intraday could now trigger intraday margin calls for clearing and execution brokers as well, with potentially systemic impact. So clearing-houses constantly need to monitor shifting exposures and weigh up the risks against the instability that could also flow from a trigger-happy margin manager over-reacting to an unexpected trading storm. As Diana Chan explains, in the end decisions will be based on that old fashioned concept of 'know your customer' and careful preparation.
However, big changes are also afoot in the European post trade system as the European Commission releases its consultation papers on clearing and settlement, derivatives and market infrastructures. The EuroCCP CEO contrasts the European with American practice and outlines the significant challenges for interoperability and competition that lie ahead.