Senior MD, Group Chief Operating Officer & Global Head of Clearing, CME Group
Suzanne Sprague talks at FIA Expo '23 about changes & challenges for clearing & post-trade services
At FIA Expo 2023, JLN's Sarah Rudolph sat down with Suzanne Sprague, senior managing director, global head of clearing ...
About Suzanne Sprague
At the FIA Expo 2023, Suzanne Sprague discussed several industry developments and projects at CME. She noted that the exchange is paying close attention to the Basel proposal and its potential impact on clearing members' ability to provide central clearing, describing the G20 commitment to central clearing as a core tenet from the financial crisis. Sprague emphasized the importance of ensuring clients can access markets through clearing members, even for products not subject to a clearing mandate. She also commented on the role of regulation in market safety and the need to understand how proposed rules can affect different market participants. Sprague highlighted several ongoing CME projects, including the move to cloud-based clearing services, the migration to the SPAN 2 margin model, and enhancements to the cross-margin program with the Fixed Income Clearing Corporation. She described these initiatives as aimed at increasing scalability, capital efficiencies, and portfolio margining across asset classes such as futures and swaps. Sprague stated that technology has played a significant role in innovation and transformation in clearing over the past five to ten years and that she expects this trend to continue.
Transcript (10 segments)
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Interviewer0:07
How did the panel discussion on the evolving clearing landscape go?
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Suzanne Sprague0:07
It was a great dialogue about current industry issues. We talked a little bit about the evolution and the technology space, moving to the cloud, which CME is very excited about. Thinking about margin model evolution in the SPAN and SPAN 2 space, what that means for different clearing houses starting different margin models. Also touched a little bit on the CFTC RFI for conflicts and the FCM model generally, the evolution that we might be seeing in that space, as well as the proposed Basel Endgame regulations that could potentially impact the capacity for clearing members to continue to serve in that space from an exchange perspective.
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Interviewer0:54
What is the biggest challenge for clearing and post-trade services?
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Suzanne Sprague0:54
It's important to provide access to central clearing. The G20 commitment to central clearing was a core tenant coming out of the financial crisis. We are paying close attention to the Basel proposal and the potential impact that could have on clearing members' ability to continue providing central clearing. There was discussion on the panel about the ability to continue being a client clearing member or providing the same level of capacity for clearing, and that's something that we're always focused on: ensuring that there is the availability for capacity to be offered to different types of clients and ensure they're still able to hedge their risks. So even when you think about products that aren't subject to a clearing mandate, it's critical that clients are able to have clearing members serve as their intermediary to access markets to hedge and manage risk every day.
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Interviewer1:49
What are the biggest changes in clearing in the past 5 to 10 years?
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Suzanne Sprague1:49
Technology has played a big role in innovation and transformation, and I would anticipate it will continue to do so. There was discussion on the panel about cloud and different clearing houses starting to move to the cloud for purposes of offering those clearing services and the increased scalability and efficiencies that will bring. That continues to be a common theme: leveraging technologies to operate more efficiently in the future, as well as capital efficiencies. In the past 5 to 10 years, we've done a lot of work to increase the capital efficiencies that we provide for market participants. That continues to be a large focus of ours, so thinking about portfolio margining across asset classes, between futures and swaps for example. We're also excited to be moving forward enhancing our cross-margin program with the Fixed Income Clearing Corporation. We announced recently that we've received regulatory approval to do so, and we plan to move forward with those enhancements in January of next year.
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Interviewer2:54
How are exchanges responding to regulations?
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Suzanne Sprague2:54
Thinking about the role that regulation plays in our industry, it is a very critical component of the safety and soundness of our markets. We've always felt it important from a risk management standpoint to ensure that not only for our own purposes but for regulatory purposes as well, that as an industry we're offering best practices and ensuring the risk management model continues to evolve as needed and support the safety and soundness of markets. Proposals generally are usually an industry discussion, so not only do we comment on those in many cases individually, but there's also quite a bit of dialogue in the industry that happens through various associations and bilateral discussion with multiple market participants. It's critical to understand how proposed regulation can impact different players in the marketplace, not only ourselves but clearing members as intermediaries and clients in being able to access those markets. We've been very encouraged by the level of engagement that's evolved in the industry over the years, being able to digest and have a more broad discussion and reflect that in our assessment of potential proposals, that multiple stakeholders' views are taken into account in that proposed regulation and any potential unintended consequences that could come as a result.
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Interviewer4:20
What clearing projects are you working on?
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Suzanne Sprague4:20
We have a few key projects that we're currently working on. The move to cloud for clearing services is something we're very excited about, so we continue working on that this year as well as next year, being able to roll out clearing in the cloud and think about innovation that can come as a result of that. SPAN 2 is another exciting time for us, migrating from our current margin model SPAN to the SPAN 2 model and thinking about the capital efficiencies that will bring to market participants as a result of the portfolio effects of a more automated model like SPAN 2. And then FICC cross-margining is another example of something that we're very excited to be able to bring to market, thinking about the offsets that can be recognized between highly correlated markets such as the interest rate markets that CME clears as well as those offered by the Fixed Income Clearing Corporation. It's exciting that this year we've been able to reach some of those milestones and build the foundation to roll out even more of those efficiencies in the future.