The Japan Securities Clearing Corporation (JSCC), a member of the Tokyo Stock Exchange Group and attendee at its ‘home’ Sibos 2012 trade show, has gone live with a Calypso system handling its interest rate swaps (IRS) central counterparty (CCP) clearing service, gaining adherence to the new post-crash over the counter (OTC) transparency regulations.
The Calypso system from Calypso Technology is used for initial and variation margin calculations at JSCC, trade lifecycle processing and risk management procedures. The clearing service is the first yen-denominated IRS clearing service in Asia Pacific, say the partners. The contract was won primarily because the vendor already handles JSCC’s credit default swaps (CDSs).
Calypso is used by some other CCPs globally for clearing Libor interest rate swaps, credit derivatives and foreign exchange (FX) products, providing infrastructure for CCPs to offer clearing services for OTC derivatives, as mandated by the G20 after the 2008 financial crisis. Calypso Technology is also working with the banks in Japan and other major financial markets to facilitate the reforms in the OTC markets, claims the vendor.
JSCC has been working with the technology firm since 2010, when the Japanese clearer started working on its CDS Index clearing, which successfully launched in 2011. JSCC selected Calypso Technology as it was the only supplier capable of supporting the complete OTC derivatives clearing in a single system and because of its experience in the market.
According to the Celent consultancy, a financial services research and consulting firm, Japan’s (OTC) derivatives market in 2011 recorded 5.1 million transactions. “We needed a system that could scale to the volumes of the OTC business in Japan,” stated Yasushi Suzuki, managing director, JSCC.
Suzuki added: “Calypso Technology’s involvement in the project and experience working with global CCPs will be instrumental in enabling us to successfully meet the November 2012 Financial Instruments and Exchange Act (FIEA) deadline for OTC derivatives clearing. This milestone allows Japan to further improve the safety and transparency of the OTC market. The advent of OTC derivatives clearing is the first step in the structural reform of the OTC derivatives market.”