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AFM News:
FOW Conference “Derivatives World CEE” - AFM participation
3rd of November 2009, Warsaw
The second Derivatives World Central and Eastern Europe CEE Conference took place this year after the first conference in 2008. The Conference looked to the future to see how the derivatives industry can continue to move forward. The event provided a forum to explore the latest trends and developments in markets as well as to identify strategies for managing the opportunities and challenges currently facing the industry. The audience comprised around 150 fund and investment management professionals, local and international banks and brokers, exchanges, regulators, law firms, corporate treasurers and ISVs.
Key topics included the growth of derivatives markets in Central and Eastern Europe (CEE), the outlook for listed derivatives markets, the convergence of OTC products with the listed traded environment, regulatory aspects in the industry after recent economic upheaval, derivatives innovation in fund and investment management, hedging strategies for corporate treasurers and equity and index derivatives.
The Association of Futures Markets (AFM) was invited to attend the Conference and participated in the regulatory panel “Rethinking how the industry works in the face of economic upheaval”. Simona Simon, Executive Board Member, had the honour to represent the AFM.
The moderator Andrzej Stosio, lawyer at Clifford Chance, initiated the panel by introducing participants and giving an overview of topics. These included netting, collateralisation and central counterparties (CCPs).
Focusing first on CCP, Andrzej asked Simona to provide an overview of her thoughts on CCPs and their role in CEE.
Speaking as representative of the AFM, an exchange association with several members in CEE, Simona first emphasised the vital role of a CCP and clearing house (CH) in derivatives trading.
Concentrating on exchange traded derivatives, Simona pointed out the benefits of safe, transparent and robust markets in the light of recent economic turmoil. Speaking from personal experience, she suggested that exchanges in CEE often saw setting up a CH to act as a CCP as the biggest challenge in establishing market infrastructure. AFM members had set up a workshop in the past to examine in detail this very point – how to set up a CH for an emerging market exchange. It had to be said that the local market requirements are paramount in establishing a CCP.
Andrzej asked Simona if it was possible that CCPs would one day absorb all derivatives market volume or if there would always be a place for bilateral agreements.
Responding to this Simona agreed that to a certain extent a CCP will attract more and more volume for standardised contracts but, due to special needs, demand for tailor made products would always exist, hence bilateral OTC trade agreements would always be performed.
Turning to bilateral OTC markets, Andrzej asked Peter Werner, Policy Director at International Swaps and Derivatives Association Inc (ISDA), what the status quo in emerging economies from ISDA´s point of view was and what the latest European regulatory developments in this area looked like.
In terms of fallout from the financial crisis, Peter focused on several consultations in the CEE region on cross-border insolvency issues. The developments in Russia and Poland were discussed on a more detailed basis. Peter looked at some issues surrounding the collateral directive, recent initiatives from the European Commission in relation to the financial crisis and other financial law reform.
Andrzej focused on the regulatory reaction to the financial crisis ion Poland. The application of MiFID and other European directives were explained as a move to bring unity to the region. Andrzej also looked at the OTC side by talking about the impact on the regulatory framework and also at implementation of MiFID into Polish law.
