In February I ran a public course via Marcus Evans to teach the new clearing ecosystem, and regulatory change. The attendees feedback can be seen here in a video made during the event. We are running the same event in New York with a 2+1 format, the first two days are delivered by myself with a guest appearance (see below), with the third day being specialist sessions on the legal aspects of clearing, and risk management.

Course outline – Day 1 & 2

OTC foundations [may be modified or reduced depending on the interest of attendees]

• An introduction to the structure, use and pricing of Interest Rate Swaps and Credit Default Swaps
• An introduction to FpML
• A guide to the OTC market infrastructure for trading, confirmation, compression and settlement
• What is ISDA? The architecture of the ISDA documentation framework, including the ISDA Master Agreement, Credit Support Documentation, Definitions and Confirmations

History of clearing, and exchanges [short background session]

• Japan & rice trading
• Chicago butter and egg board, now CME
• Futures & exchanges – tight coupling of anonymous trading and clearing
• CCP becomes the seller to the buyer
• Margin calculations

Direct membership [bank to bank clearing]

• Bilateral trade execution & market infrastructure, including trading, confirmation, send to clearing
• Direct CCP membership workflow, submission, margin runs, accept / reject,
• Margin calculations, Pricing & VM, IM, Default Fund
• Margin call and settlement cycles, end of day & intraday
• Eligible collateral
• Introduction to Filtered Historical Simulation & VaR, as used for IM at SwapClear
• Systemic Risks of CCPs, layers of defence, settlement issues
• Benefits to direct members

Indirect membership [buy-side clearing]

• US indirect membership workflow (including FCMs)
• EU indirect membership workflow
• Segregation
• Portability
• Collateral transformation
• Benefits to indirect members

Basic CCP legal documentation

• CCP rules and regulations for direct members
• CCP agreements for indirect members
• ISDA Master Agreements and CSAs for clearing

Global CCP activity and services

• Who are they, location, owners and plans
• Which products do they clear now / future
• What products are unlikely to clear
• Who offers client clearing

Market impacts

• Dodd Frank & EMIR, what they require you to do
• Mandated clearing, exemptions
• SEFs & OTFs, trading, RFQ vs CLOB
• Client relationships
• SEF aggregation

Follow on Check list A session on recommended follow up steps for firms:

• Registration under US law
• Trading at SEFs and OTFs
• Middle / Back Office operational changes
• Selecting a CCP amongst the global and regional offerings
• Selecting a Futures Commission Merchant (US FCM) or European Direct Clearing Organisation (DCO)
• Trade reporting to Swaps Data Repositories / Trade Repositories
• Integrating LEIs, UPIs into your systems
• Regulatory time line

Course outline – day 3

Advanced OTC documentation relevant to CCPs, delivered by Warren Davies (see below)

• A round peg in a square hole—the difference between cleared swaps and futures
• We are not in “ISDA-land” any more—risks associated with futures, cleared and uncleared swaps
• Safety of Customer Collateral—fellow-customer risk; investment risk and operational risk. The fallout from MF Global
• Interplay of three agreements contemplated for cleared swaps in the US—FIA/ISDA Cleared Derivatives Execution Agreement; Futures Customer Account Agreement; FIA Cleared Derivatives Transaction Addendum
• Why do we need an Execution Agreement? Structure of the Execution Agreement. Transactions not accepted for Clearing—who pays. Impact of CFTC final rules baring trilateral or quadrilateral Execution Agreements.
• The clearing relationship—documentation for cleared swaps is built upon underlying Futures Customer Account Agreements. Key features and provisions to negotiate.
• The Cleared Derivatives Transaction Addendum modifies the Customer Account Agreement to accommodate the clearing of swaps.
• A model Cleared Derivatives Transaction Addendum is currently being developed by the FIA
• Key provisions of the Addendum—representations and warranties of customer and FCM: “Applicable Law” defined; transactions not accepted for clearing; limitations of liability; transfer/porting of positions; close-out of customer positions upon default; allocation of tax risks
• Potential Addendum negotiation issues—events of default and cure periods; position limits; timing of margin requirements and limits on margin above clearing house requirements; clearing member “accountability events”; and affiliate issues.
• Timing issues—when must these agreements be in place? Should we be negotiating now?

Advanced risk management fundamentals for CCPs, delivered by Kevin Samborn (see below)

• Background on margin methodologies at CCPs including SPAN and introduction to VaR
• Run through of Filtered Historic Simulation VaR for rate swaps
• Run through of multi-factor VaR for CDS
• Monte Carlo VaR for Swaptions, Caps, Floors
• Introduction to CVA, and how CCPs impact it

For the New York event we have three partners involved:

• On clearing, CME will give a guest appearance on day 2 to talk about their OTC clearing services
• On legal, Warren Davies Of Counsel Sutherland Asbill & Brennan LLP will deep dive into the legal aspects on day 3
• On risk, Kevin Samborn of Sapient will do the details on VaR and CCPs, plus CVA, on day 3

More information

The contents of the event can be understood from this PDF, or from my Training page. If you are interested you can contact Marcus Evans using details in the PDF, or better, contact myself as I have the freedom to offer substantial discount on the advertised prices.

What you get

1. Two or three days of expert explanation of what the new OTC ecosystem will be like
2. Fully interactive sessions – the more you ask, the more you'll get out of it
3. Printed materials with room for notes – take away all the diagrams and information
4. A copy of Mastering Derivatives Markets 4th Edition (see amazon) with a chapter by myself (Bill) on central clearing
5. Unlimited follow up support post-course by myself