“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.
Source: FIA
