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Thursday, 19 October 2017

UPDATE: Morgan Stanley's Ross to head LSE futures platform

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*Adds confirmation and comment from LSE

The London Stock Exchange Group has appointed Andrew Ross as chief executive officer of its CurveGlobal derivatives platform. Ross joins after 16 years at Morgan Stanley where he was most recently global head of agency listed derivative electronic execution and European head of clearing. 

The interest rate derivatives bourse, which went live last October, is a joint venture with Chicago’s CBOE and a group of the largest swaps dealers including Bank of America Merrill Lynch, Barclays, Citigroup, Goldman Sachs, JP Morgan and Societe Generale, while BNP Paribas joined the group in late January. 

CurveGlobal is in the process of launching its first wave of products, comprising short term interest rate futures in Euribor and sterling and long term interest rate futures in Bund, Bobl, Schatz and Gilts.

The decision to put a clearing specialist at the helm highlights the importance of portfolio margining opportunities to the platform’s business model as it goes head-to-head with Deutsche Boerse’s Eurex, the InterContintental Exchange and Nasdaq’s NLX.

Users of the listed derivatives instruments, which will be admitted to trading on the LSE Derivatives Market, will clear those transactions through LCH.Clearnet, opening up opportunities to net exchange traded derivatives positions against over-the-counter swaps that are cleared through LCH’s SwapClear platform and ultimately relieving balance sheet pressures for dealers.

Ross’s departure from MS is seen as another blow for dealers’ OTC client clearing efforts. The business was once seen as a potential cash cow associated with new legislation pushing OTC derivatives through central counterparty clearing firms.

But the reality has been very different. Margin collected from clients to back cleared swaps is counted towards the supplementary leverage ratio under Basel rules, making the business cumbersome from a capital and leverage perspective.

Morgan Stanley has been one of the few dealers to retain its top tier commitment to OTC client clearing in the face of crippling capital and leverage rules.

The bank reported US$9bn of segregated client margin backing cleared swaps trades in November 2015, making it the second most active player in that market after Credit Suisse.

Early rivals such as RBS, Nomura, State Street and BNY Mellon have thrown in the towel altogether, while some such as Barclays, have reduced their ambitions. Barclays reported US$5.4bn of segregated client swap margin last November, pushing the bank into sixth position, and has migrated much of its back office clearing function to a utility operated by SunGard.

Last summer, Credit Suisse joined a growing list of dealers raising fees that it charges to OTC clearing clients to offset rising regulator costs.

In a statement, CurveGlobal chairman Michael Davie noted that bringing together OTC and listed participants from both buy- and sellside was key to the platform’s success.

“It’s therefore vital that our Chief Executive has the depth of experience and relationship with each of these communities which is why I’m delighted that Andrew will be taking on the role. He brings unparalleled experience and an exceptional track record of successfully growing businesses within this very competitive industry,” he said.

Ross, who held a variety of roles at Morgan Stanley including head of CVA trading and completed a short stint at Deutsche Bank, has worked extensively with buyside and sellside traders in his role heading the US bank’s client clearing efforts. 

“I’m delighted to be joining CurveGlobal, and cannot imagine a better time to be bringing efficiency and innovation to Rates markets,” he said in a statement. “It will be a privilege to work with seven of the world’s major banks, CBOE, London Stock Exchange Group and LCH.Clearnet to realise the potential of a new venture designed by, and delivered for the market.” 

 

 

 

 

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