Best provider of FX clearing: Citi

Waiting for a mandate to be established by the Commodity Futures Trading Commission (CFTC) could be likened to waiting for ages at a bus stop, looking expectantly for your double decker to come hurtling around the corner, only for two of the same number to come along in succession.

Once the CFTC issues a clearing mandate for non-deliverable forwards (NDFs), following an awfully long wait for the industry, swap execution facilities (Sefs) could follow shortly after with a made-available-to-trade (MAT) submission to the regulator in order for electronic NDF trading to be mandated on Sefs.

Despite this long wait and the expected quick industry action afterwards, participants are indeed clearing, albeit a very small percentage of the market. Many firms are also preparing for clearing, which is what Citi has made one of its top priorities for its OTC customer base. It wins the award for 'Best provider of FX clearing' category for the second consecutive year.

"We've continued to make significant investments in our technology over the last 12 months in order to help customers easily adapt to this changing regulatory environment. Our innovation has primarily focused on automation and providing our clients with access to liquidity, collateral efficiency and balance-sheet optimisation – all important capabilities in this new OTC clearing world," says Christopher Perkins, global head of OTC clearing at Citi in New York.

"Despite there being delays to NDF clearing mandates, there is no major concern that from a bank perspective, we won't be able to function once the CFTC makes its decision because we have begun clearing already. We are additionally focused on working with the various Sefs on pre-trade credit checking via hubs in order to provide clearing certainty for our clients," continues Perkins.

While NDF clearing is at least on the horizon, FX options clearing is still being figured out by the industry as central counterparties, banks and regulators work towards a solution. Perkins warns the right technology needs to be in place before a mandate is set down or risks will remain.

"There is still much work to be done to solve settlement risk when it comes to the clearing of FX options. As an industry, we need to make sure we have very automated solutions in place before we even begin clearing for clients. Otherwise, I think there will be systemic risk implications," he says.