Matteo Bertotti, Head of Fixed Income Derivatives and Andrea Girometti, Senior IR Derivatives trader, MPS Capital Services
Abstract
The financial crisis has forced regulators to focus their attention on over-the-counter (OTC) derivatives in order to increase transparency in negotiations and reduce systemic risk. One of the key reforms being proposed is the principle of compulsory centralisation of standardised interest rate swaps through clearing houses. The aim of this article is to explain how a possible answer to the aforementioned development could be given, showing the MPS Capital Services business case. There will be a practical description of the application to the SwapClear Client Clearing Service (offered by the London Clearing House (LCH)) made by MPS Capital Services. After a brief description of the service, the benefits of clearing and the reasons for joining LCH are explained, and some highlights of developed activities and timings are presented, focusing on some of the details of the key operational, legal and contractual aspects. Finally, the determining factors in MPS Capital Services choice of the primary and back-up clearing members will be shown and some of the open issues that the size of the project necessarily involves. As far as future scenarios are concerned, the author believes that the OTC derivatives market will move towards greater segmentation, in which all players in a position to adhere to clearing facilities will do so, thereby gaining access to the professional market, by joining one or more Swap Execution Facilities as a swap dealer.
Keywords
OTC derivatives regulations, SwapClear Client Clearing Service, IRS derivatives market evolution
Matteo Bertotti is Head of Fixed Income Derivatives at MPS Capital Services. Through dynamic management of the various risk metrics, with respect to a series of limits imposed by the General Management division, he leads the Market Making activity on a wide range of fixed income derivatives, like IRS, Caps, Floors, Swaptions, Asset Swaps and Inflation Derivatives, mainly focusing on EUR and USD markets. He has been Head of Fixed Income Derivatives since 1998, when he joined Banca Monte Paschi. He moved to MPS Finance (the investment bank of Monte Paschi group) after the spin-off of the securities market activities of the group in a separate company in 2007 merged with MPS Capital Services. Previously Senior Rate Trader at Banca IMI, Matteo has over 20 years’ experience in this market segment. He graduated in Politics at the University of Padova, with a dissertation on the evolution of Islamic Finance in the Italian Market.
Andrea Girometti has been Senior IR Derivatives trader at MPS Capital Services, the Investment Bank of Gruppo Banca Monte dei Paschi di Siena, since October 2009. His duties concern Market Making in plain vanilla IRS, FRAs, Asset Swaps and Cross-Currencies Swaps for Corporates, Financial Institutions and Public Authorities, and in managing related risks. He was involved in a number of key projects such as the implementation of LCH Client Clearing. Formerly, Andrea worked for three years at Banca IMI Milano, the Investment Bank of Gruppo Intesa San Paolo, as Junior IR Derivatives trader, where he was involved in the IAS 39 project, in addition to Market Making of plain vanilla IRS. Andrea obtained a MSc in Finance in 2002 from ETH Zurich, following a BSc in Economics with honours from the University of Pescara.
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