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This month, the World Federation of Exchanges (WFE), the global industry group for exchanges and central clearing counterparties, convened stakeholders at its annual clearing conference, WFEClear.
Industry leaders from central clearing houses, exchanges, and regulators met in Seoul, hosted by Korea Exchange, to share original research and exchange ideas on the opportunities and challenges for the future of central and bilateral clearing.
Day one consisted of a capacity building day, with a number of workshops on fundamental aspects of clearing. The technical assistance program provides foundational education on Central Counterparties (CCPs) and the concepts of clearing, and is taught by the leading practitioners in the industry.
The following two days of the conference featured panels, keynote speeches, and a selection of academic papers chosen by a Scientific Committee consisting of academics, regulators and industry experts, was presented and discussed.
Nandini Sukumar, CEO of the World Federation of Exchanges, said, “We thank Korea Exchange for enabling us to convene the industry in their vibrant and thriving market for WFEClear 2025. This conference is a unique forum, connecting our CCP members with leading academic researchers, reinforcing our commitment to deepening the understanding of market infrastructure. We are dedicated to expanding the pool of high-quality research, fostering innovation, and contributing valuable insights to the evolving landscape of clearing and CCPs."
Eun-Bo Jeong, Chairman & CEO, Korea Exchange, said, "It was a true privilege to host WFEClear 2025 and see it come to such a successful conclusion. I am deeply grateful to all participants for their thoughtful contributions and active engagement throughout the event. The discussions reaffirmed the vital role of clearing and derivatives infrastructure in ensuring global market stability. A special thanks to WFE CEO Ms. Nandini Sukumar and the Secretariat for their exceptional work in organizing the event – it wouldn't have been possible without their dedication. We are excited to build on the momentum of WFEClear 2025 and continue working together to shape the future of clearing.”
Many of our speakers have authored thought leadership articles for the April edition of WFE’s Focus Magazine.
Key highlights from Day 1 include:
The WFE’s CEO, Nandini Sukumar, chaired a capacity building session exploring the role, function and workings of the CCP. Sukumar was joined by Vikram Kothari, Managing Director and CEO, NSE Clearing, National Stock Exchange of India, Sang Uk Park, Executive Director, Derivatives Market Division, Korea Exchange (KRX), and Huan Zhang, Chief Risk Officer, Nodal Clear. Kothari began with an overview of the global CCP landscape, which holds USD 1.3 trillion in collateral. He likened the structure of a CCP to a medieval castle with multiple layers of defence. Referring to the outer layer - admission criteria such as capital requirement or position limits, for example, Kothari said these can defer to the needs of the specific jurisdiction and illustrated this with the example of the Indian market. NSE’s initial primary need was inclusion across the country, so Kothari said that they kept their capital requirements of the members at a lower level, but he cautioned that this doesn’t mean that NSE compromised on the risk in the ecosystem. He said, “there is a dynamic play when you are looking at a lower capital net worth requirement, you have your margining systems more stringent.” Demonstrating how well the ecosystem has developed due to this approach, Kothari said, “today almost 99% plus postal codes in India have capital market access.”
Another panel considered the stage at which creating a CCP could be beneficial. Jiyouji Ueda, Executive Director of CCPs, Securities and Derivatives, Grupo Bolsa Mexicana de Valores (Grupo BMV) chaired and he was joined by Abdul Hadie, Head of Strategic Planning and Enterprise Risk Management, IDClear, Dr. Randy Priem, Markets & Post-Trading Unit Coordinator, Belgian Financial Services & Markets Authority (FSMA), and Shohei Yamagata, Chief Manager, Listed Products Clearing Service, Japan Securities Clearing Corporation (JSCC), JPX. Hadie spoke about the process leading up to September 2024, when IDClear officially commenced its role as a central counterparty for the money market and foreign exchange market in Indonesia.
In fireside with Commodity Futures Trading Commission (CFTC) Commissioner, Christy Goldsmith Romero, Nandini Sukumar, CEO, WFE, asked what the Commissioner is expecting out of DC this year, to which Commissioner Goldsmith Romero said, “there’s a pattern in the US when there’s a Republican in the White House it usually means deregulation, and a Democrat means regulation. For CCP regulation, I don’t predict this will have a big impact on the CFTC and how we operate.” Commissioner Goldsmith Romero continued, “Our CCP regulation policy was set with Dodd-Frank, and we haven’t done much more CCP regulation in my tenure.” Commissioner Goldsmith Romero also said in talking about the CFTC, “A lot of what we do is principles-based. We’ve tried to promote responsible innovation, market stability and vibrancy.” Commissioner Goldsmith Romero highlighted the continued importance of the CFTC’s global relationships with both policymakers and industry. Following the discussion with the Commissioner at WFEClear 2024 last year, an audience member asked for the Commissioner’s thoughts on whether the prudential regulators would repropose Basel III, to which she said that although she is not the decision maker, “I would assume it would be reproposed and be different due to the amount of opposition to it.” The Commissioner also commented that she would want the direct clearing model to be changed in order to address gaps where the FCM provides customer protections and AML that are missed in the direct clearing model.
Richard Metcalfe, Head of Regulatory Affairs, WFE, chaired a panel discussion which set out the main features of the regulatory regime relating to CCPs, including the Principles for Financial Market Infrastructures (PFMI), the 2009 G20 reforms, and current policy discussions on margin practices, non-default loss arrangements, and recovery and resolution mechanisms. Metcalfe was joined by Laura Bayley, Head of Clearing Services, SIX, Sebastijan Hrovatin, Deputy Head of Unit in the Financial Markets Infrastructure Unit, DG FISMA, European Commission, Boon Gin Tan, CEO, Singapore Exchange Regulation, SGX. Bayley warned against more prescriptive guidance from anti-procyclicality tools, stating that “there is a fine calibration as to the procyclicality element to a CCP’s margins to ensure that your risk, and those of your members are covered without your member having to post margin again and again to account for volatility.” Bayley argued that there is a logical, commercial incentive to ensure that CCPs are not charging margin in a way that exacerbates the stress in the system saying, “as long as we can prove that our risks are covered, we also have an interest to ensure our members are happy and not introduce too much volatility. This is a market-driven balance.”
The final capacity building session of the day outlined how risk managers at CCPs approach risk management, focusing specifically on risk modelling as part of the overall methodology. Dr. Pedro Gurrola Perez, Head of Research, WFE chaired, and was joined by, Udesh Jha, Managing Director, Head of Post-Trade Services, CME Group, and Richard Wise, Group Chief Risk Officer, Hong Kong Exchanges & Clearing (HKEX). Jha reviewed filtered historical simulations and highlighted the limitations of vanilla VAR models, cautioning that effective risk management is not always purely data driven - as historical data can sometimes be inadequate before large stress events such as the pandemic. He said that risk management judgement is part of the process with the ability to supplement historical scenarios with others that are based on expert risk judgement. He also said that when it comes to asks on data, it’s easy to get drowned with too much information so what CMs and CCPs may sometimes need to provide are “clear and concise data”, that is not overbearing and can help with better understanding of risk in fast moving markets.
Key highlights from Day 2 include:
Delivering a keynote speech, Angelina Kwan, Senior Advisor, IMC Asia Pacific, discussed the mandatory central clearing of OTC derivatives. Kwan recalled her experience during the Global Financial Crisis and how Hong Kong Exchanges and Clearing helped market participants to successfully navigate the collapse of Lehman Brothers. Looking ahead at what’s in store for the clearing landscape, Kwan said, “Challenges remain. Cross-border rule conflicts persist, and the US supplementary leverage ratio still limits bank capacity for client clearing. I hope that this is something that will be addressed - reforms are up for discussion for 2026.”
Following this, a panel reflected on the lessons learned from the implementation of mandatory clearing for OTC derivatives and assessed its implications for broader financial markets, such as Treasuries. The panel was chaired by Richard Metcalfe, and the panel comprised of Summer Mersinger, Commissioner, Commodity Futures Trading Commission (CFTC), Dr. Jutaro Kaneko, Deputy Commissioner for International Affairs, Financial Services Agency Japan, Stéphane Janin, Head of Global Regulatory Developments and Public Affairs at AXA Investment Managers, and Tetsuo Otashiro, Director, Global Policy & Regulation, OTC Derivative Clearing Service, Japan Securities Clearing Corporation (JSCC), JPX. Janin commented that “not all NBFIs are treated equally under the law because some are regulated, whilst others are not. It is good to have overall reporting at the macro financial level, but we should consider if there are any gaps in regulation at the micro level for some players, at least for some types of currently non-regulated non-banks.” He continued that cross-border data standardisation and sharing between regulators is critical to spot potential stress events in the international ecosystem and there should be a mechanism to take prompt action when excessive build ups of risk are identified. Commissioner Mersinger said, “it is concerning that over the past decade, we have seen a 65% decrease in the number of Futures Commission Merchants (FCMs), and that approximately 60% of customer collateral is concentrated among the top five FCMs. Broadly speaking, in the US economy, we are seeing a lot of concentration across all sectors – Financial Services is not immune to that.” Commissioner Mersinger also said, “The biggest concern is making sure that customers that need to be in these markets to hedge and mitigate risk have access to the markets – that’s our biggest concern when it comes to FCM concentration.”
Selina Han, Economist at Cboe Global Markets, presented an academic paper on understanding retail investors' trading behaviour in the U.S. Options Market. The paper addressed misconceptions about retail trading practices, challenged assumptions and existing narratives. The research provided a comprehensive analysis using Cboe Option Exchange (C1) data related to retail trading. Han’s research found that retail traders exhibit more sophisticated behaviour than previously assumed, engaging in complex order strategies beyond single-leg options, as complex retail orders represent over half of retail open positions in terms of notional value. Furthermore, Han found that retail trading behaviour changes across different market conditions, and many retail investors hedge risk through structured option strategies. Dr. Jie (Jay) Cao, Professor, School of Accounting and Finance, Hong Kong Polytechnic University, praised the paper, suggested scope to expand the research and postulated whether the conclusions derived from refined analyses warrant a reconsideration or revision of existing regulatory policies or investor protection measures.
A panel chaired by, Gerard Smith, Vice President, Head of Post Trade Product Strategy, Nasdaq, explored the challenges and prerequisites for 24/7 clearing. The panellists comprised Huan Zhang, Chief Risk Officer, Nodal Clear, Viacheslav Fradin, EVP, Chief Risk Officer, Tel-Aviv Stock Exchange, Olivier Léon, Vice-President & Chief Risk Officer, TMX Post-Trade Services, TMX Group, and Pataravasee Suvarnsorn, Senior Executive Vice President, Head of Operation Management Division, and Managing Director, Thailand Clearing House, The Stock Exchange of Thailand (SET). Zhang said that some CCPs are ready to cater to 24/7 and technology is not a major challenge however, “when it comes to the technology of the ecosystem, tokenised collateral and some sort of tokenised payment system will be very beneficial for 24/7 trading and clearing, and trading and clearing in general by providing a much more efficient transfer of collateral on a real time basis.” Other participants highlighted that, at present, there isn’t the need for 24/7 in their markets. Léon said, “With the current set up we are able to adequately capture European and Asian hours overnight. With twenty hours trading we have sufficient time and capacity to implement necessary changes when appropriate.”
In the following session, Dr. Kaitao Lin, Senior Financial Economist at WFE presented his academic research paper, ‘The Effect of DLT Settlement Latency on Market Liquidity’. The paper concludes that uncertainty introduced by DLT settlement significantly reduces cryptocurrency trading liquidity and increases transaction costs. The results highlight the trade-off between decentralized, near-instantaneous DLT settlement cycles and the adverse impacts on liquidity. Julie Schoening, Head of Risk and Compliance at Graviton Research Capital, discussed the paper, underscored its strengths, and provided valuable suggestions for its improvement. The panellists emphasized the importance of trusted institutions overseeing the settlement process to minimize the uncertainty associated with it.
The next panel analysed how emerging technologies—such as Distributed Ledger Technology (DLT), disintermediated clearing, and auto-liquidation—may reshape the future of CCPs. Angelina Kwan chaired, and was joined by Dr. Randy Priem, Julie Schoening, and Massimo Morini, Professor of Blockchain & Cryptocurrencies, USI Lugano, Università della Svizzera italiana. Morini highlighted Dennis McLaughlin’s presentation from WFEClear 2024 which put forward that atomic settlement may not necessarily be the ideal outcome. Speaking on the European DLT pilot regime, Dr. Priem said, “I’m pleased to say we have two companies participating in the scheme and most likely some more in the pipeline.” Dr. Priem lamented, “there is, however, currently no experimentation with derivatives allowed. They can have their own risk, but it’s in an isolated manner, so I personally pose the question why not to allow the market to experiment with it and learn from it?”
Key takeaways from Day 3 include:
The first panel of the day was moderated by Charlie Ryder, Manager, Regulatory Affairs, WFE, and looked at Artificial Intelligence in clearing and how AI-driven solutions may influence operational efficiency and decision-making in central clearing. Burak Akan, CCP Director, Takasbank, Borsa Istanbul, Tao Chen, Group Head of Quantitative Risk Management, Hong Kong Exchanges & Clearing (HKEX), Dr. Alicia Greenwood, Chief Executive Officer, JSE Clear, and Director of Post Trade Services, Johannesburg Stock Exchange (JSE), and Boon Gin Tan (SGX), were on the panel. Chen opined on the prospect of incorporating AI into margining practices, outlining that maintaining transparency could be an issue. Chen highlighted that “To adopt AI driven initial margin models, it will be challenging to provide all the justifications on your modelling choices, such as the number of neural-network layers and all the hyper parameters calibration for the purpose of model validation and regulatory approval.”
Following this, Nicola Zaugg, Senior Researcher and Quant Engineer at swissQuant, delivered an academic presentation on his paper, ‘Covariance-Filtered Historical Simulation using Simultaneous Diagonalization’, in which he introduced an extension to filtered historical simulation (FHS) for risk-measure calculation, called Orthogonal-FHS. By applying an orthogonal transformation to the returns of the classical FHS, the Orthogonal-FHS automatically filters the correlation of the risk factors. In the paper Zaugg described a generic framework for the Orthogonal-FHS and showed under which conditions it offers robust risk measures. Using a simultaneous diagonalization algorithm, Zaugg implemented an Orthogonal-VaR to show its effectiveness on both simulated and empirical data.
The next panel explored how CCPs within market infrastructure groups align enterprise risk management (ERM) at the group level while maintaining subsidiary autonomy. Felicity Gibson, General Manager, Market Operations, NZX, Dulani Warnakulasooriya, Head of Enterprise Risk Management & Post Trade Settlement, Colombo Stock Exchange (CSE), Meshal Al-Homaid, Chief of Risk Management, Muqassa, Saudi Tadawul Group, and Rama Kumanduri, Managing Director & Head of Model Risk Management, Options Clearing Corporation (OCC), were panellists and Jay Rajarathinam, Chief Operating Officer, TMX Group, chaired. Warnakulasooriya shared her perspective on building a CCP whilst also overseeing the Enterprise Risk Management function at Group level. Gibson described how NZX operates a Group level risk appetite which acts as an upper bound for the Group’s subsidiary businesses, which can individually choose to have a lower risk appetite.
Aniket Bhanu (NSE) discussed his academic paper ‘The effect of clearing de-fragmentation on fragmented trading’, which examines the impact of choice of clearing model on trader behaviour under trading fragmentation. It investigates how CCP interoperability affects liquidity, price informativeness, bid-ask spreads, and overall market welfare. The results suggest that de-fragmenting clearing leads to concentration of trading on one exchange. Interoperability improves market efficiency, particularly in price discovery and liquidity allocation, through more concentration of trading activity in a single venue. Dr. Kaitao Lin then discussed the paper and said the findings have strong regulatory relevance, particularly for market structure reforms in emerging economies.
Laura Bayley, moderated a panel looking at the future of post-trade infrastructure, weighing the benefits of market consolidation and integration versus fostering interoperability and open access. Bayley was joined by Dr Pedro Gurrola-Perez, Cristina Di Luigi, Deputy Head of Post Trading Division, Markets and Payment Systems Oversight Directorate, Banca d’Italia, Sebastijan Hrovatin, and Vikram Kothari. Gurrola-Perez surmised that the presence of different kinds of market players, and their relative importance, should influence the CCP offering that needs to be available in that jurisdiction as there is no one clearing ecosystem that fits all markets. Hrovatin outlined the four main barriers to CSD consolidation, namely lack of harmonisation in corporate law, insolvency law, securities law and taxation law and discussed potential solutions in the European Union, such as a 28th regime.
Xintong Zhan, Professor of Finance at Fudan University School of Management, discussed her paper, ‘Betting against the crowd: option trading and market risk premium’, in which she found that aggregate equity call options order imbalance (ACIB) is a strong predictor of stock market returns from days to months. Zhan noted that further evidence indicates that ACIB tends to reflect sentiment from retail investors. Zhan put forward that market timing strategies based on ACIB can achieve superior performance compared to the buy-and-hold investment.
In closing the conference, WFE announced the host for WFEClear 2026: TMX Group.
The views of the panellists expressed are those of the speakers and do not necessarily reflect those of any entities they represent.
