WASHINGTON, DC – FIA today released its whitepaper on the transition to 24/7 trading and clearing. The paper helps identify the key issues to address so that the exchange-traded derivatives markets can expand both trading and clearing to 24/7 without jeopardising the safety, soundness and protections of these markets.
“With growing interest among exchanges in expanding trading hours into weekends, nights and holidays, we want to ensure this happens in a measured way that safeguards customers and the marketplace. Chief among these safeguards, we must align clearing with trading as the markets move to 24/7. This will ensure extended trading hours won’t increase customer or market risk,” said Walt Lukken, FIA president and CEO.
In highlighting the challenges of transitioning to 24/7 market access, the paper highlights the need for 24/7 clearing and risk management to accompany 24/7 trading, ensuring sufficient liquidity in the markets, considering operational risk and utilising existing market principles and regulations to provide a roadmap.
And the paper draws five key recommendations:
- Align 24/7 trading with 24/7 clearing: Industry and regulators must ensure the integration of trading and clearing to protect the financial health of the markets.
- Advance tokenisation initiatives with market infrastructure: The tokenisation of collateral could advance the timeline to 24/7 trading considerably by allowing the 24/7 movement of assets that stand behind trades.
- Extend the operating hours for wholesale payment systems: In today's markets, clearinghouses, clearinghouse members, and clients all rely on large value payment systems for transferring payments associated with calls for initial and variation margin.
- Identify the characteristics of markets ready for 24/7 trading: Some markets today may already have sufficient liquidity, modernised operations and fully collateralised trades necessary for 24/7 trading while other markets may take more time to reach that point, and some may not reach it at all.
- Engage regulators to resolve regulatory and operational impediments to 24/7 trading: Market regulators need to engage with industry to address these issues in a logical and thoughtful manner.
