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- Enhanced model introduces direct relationship between client and CCP, designed to increase cost efficiency and client protection on both sell and buy sides.
Nasdaq (Nasdaq: NDAQ) Clearing today announced the launch of a direct clearing client model, designed to minimize client driven capital costs, especially for repo transactions, while clients receive increased protection in case of a clearing member’s default.
“The management of client risks and costs related to client clearing have become increasingly important for participants of the global financial markets ever since the financial crisis,” says Julia Haglind, president of Nasdaq Clearing. “With a transforming regulatory landscape as well as changing client needs, we see an opportunity in shaping the financial markets of tomorrow. Nasdaq Clearing always strives to provide best in class protection and cost efficiency for both buy and sell side clients, and the direct clearing client model is a step in line with this ambition.”
More than 100 clients in the Commodities and Financials sectors stand ready to be transitioned into the new model. Nasdaq Clearing is one of few clearing houses who provides clearing for multiple markets and asset classes, and the new direct clearing client model is designed to work across the board.
The enhanced clearing model transforms the legal relationship from client-clearing member into client- central counterparty clearing house, which means the client is responsible for Initial Margin and Variation Margin. In the enhanced model, the clearing agent remains an important entity responsible for the entire transaction chain, including position management, collateral management and settlement. The previous Nasdaq Direct Pledge model will be phased out during a three month period.
