CloudMargin’s COO Steven Marconi attended the Risk South Africa conference last week. There was an overall sense that the South African derivatives market is in a great position to gain from lessons learned across the globe around key challenges such as regulation and automation.
Key topics discussed at the one-day event:
- Volatility in South African financial markets can be heavily influenced by events in major foreign markets. This means that together with the local concerns, such as the energy crisis, banks and money managers are experiencing the same concerns as those across Europe and US, including inflation, interest rate hikes and more recently, concerns about the health of the global banking system.
- Key areas of transformation including the adoption of new interest rate benchmarks and the very early stages of incorporating initial margin into their post-trade operations, are keeping operations and technology teams busy. Although South Africa lags US and European implementation timelines on these fronts, it does position local market participants well to implement measures quickly by leveraging best practices and lessons learned from other jurisdictions.
- The rollout of UMR in South Africa is on a different timetable than the rest of the globe. South African regulators are only expecting two banks to be captured by this September’s deadline. As we’ve all seen the huge effort this took by banks around the world, again, this is an opportunity take from lessons learned from other jurisdictions and implement quickly. CloudMargin has several resources on UMR here.
- Given the backdrop of regional bank instability in the US and Europe and the buy-out of Credit Suisse, there will be renewed focus by local regulators to examine the health of local markets and banks. The high concentration of trading risk across local banks will steer discussions toward Cleared OTC products, the potential to establish a local CCP and a more widespread adoption of Initial Margin.
- South Africa is expecting low growth and economic uncertainty due to the energy crisis, continued inflation and lower FDI resulting from geopolitical challenges, which will likely result in continuing volatility. As we’ve seen around the globe, this will demand more focus on capital efficiency.
These events are essential for market participants to come together and discuss best practices. As the focus on compliance and capital efficiency remains at the forefront of challenges in the South African derivatives market, it is important for firms to look to modern technology to help rapidly facilitate compliance measures, centralise risk data, and automate processes. South African firms are in a good position to learn from the rest of the world in many of the topics mentioned above. The key is execution and ensuring they can leverage best practices from established partners to get on board quickly to conduct business with other global players.
To learn more about how CloudMargin helps firms simplify their collateral and margin management process, check out our product.