Clearing and Trading Platform Selection

Financial end users will be required to centrally clear many of their derivatives transactions and to trade them on new swap execution facilities. Capital and margin incentives may cause non-financial end users to consider optionally clearing their transactions. A host of new intermediaries will seek to lay claim to “the best” new way. Treasurers will need to evaluate the merits of these claims. Chatham can help.

Case Study for Clearing Member Selection

Our Client:
A regional bank that uses derivatives for asset-liability management and offers hedges to its customers in connection with variable-rate loans.

Situation:
The client, who will be required to centrally clear certain derivatives transactions, hired Chatham to evaluate and help in the selection of futures commission merchants (FCMs), with whom the client will need to establish a relationship in order to be able to access clearing houses for the central clearing of derivatives trades.

Solution:
Chatham conducted an independent RFP (request-for-proposal) process for the client involving eight FCMs. The RFP assessed fee schedules, creditworthiness, initial margin estimates and complementary services available to customers. The client received a full analysis and evaluation of the FCM proposals customized to align with the client’s specific needs. The RFP evaluation was presented to the client’s senior management team which, based on these findings, was able to select the FCM that was ideally suited to their specific needs. The client, with Chatham’s guidance, is currently in the process of negotiating clearing-related documents to formalize the relationship.