A market  with no risks. CC&G guarantees  

The Central Counterparty of Borsa Italiana and its role as guarantor. «In this way we provide security to the whole market» explains Marco Polito, who became CEO after 28 years spent in Risk Management.  

A healthy market is also (if not primarily) a product  of the organizations  that manage its functions, risks and orderly conduct. Among these key players stand Central Counterparties: they are the ones to guarantee the successful outcome of all the deals taking place on guaranteed markets, ensuring, for instance, that a creditor receives the agreed amount. But how exactly does this work? We asked that to Marco Polito, Chief Executive Officer of CC&G – the acronym for Cassa di Compensazione e Garanzia, the Central Counterparty of Borsa Italiana and of the Group – who, in describing the role of his institution, uses a metaphor: «I like to think of us as the “firefighters” of the market.  Despite common perception, the main activity of firefighters is not putting out fires, but introducing measures  to prevent them. We do the same with financial transactions: having built  a system of guarantees  to prevent problems before they happen, we provide security to the whole market».

Marco, tell us about the role of CC&G.

«We are the guarantors of every trade between our member companies. That means we take on the risk of default of one of the two parties, the buyer and the seller: if that happens, we cover the amount due to the counterparty.  This is the function of Central Counterparties. This mechanism is made possible by the margin system: as members of CC&G in a regulated market, participants  are required to make  a margin deposit  that would be sufficient to cover the costs of a possible default.  This gives certainty to those who access the market that the contractual obligations will be respected, even if a counterparty should go bankrupt. In such a case, the margins of the insolvent party will be used to cover the expenses».

So we can say that your job is to reduce market uncertainties.

«Yes, and it’s a job that starts long before a trade takes place. First, our participants are exclusively banks or investment firms -  already supervised institutions – and that in turn, gives us a sound guarantee. Nevertheless, we carry out an in-depth due diligence to ensure that they respect the requirements to participate in the central counterparty system. These requirements refer not only to the creditworthiness or members’ capital adequacy, but also to their organizational structure in respect to the activity they will perform as CC&G member. So you can sense that, together with keeping up to speed with regulatory environment, Risk Management is our primary focus, and it also happens to be the area to which I dedicated a great part of my career».

Since you brought up the subject: CC&G doesn’t operate “in solitude”, but is part of an ecosystem that oversees  post-trade market.  What is the added value of this network?

«To begin with, we are in a position to provide our clients with an increasingly complete service, supporting them at every step.  

Largely speaking, being part of an ecosystem and being able to share expertise is beneficial to everyone, and I’m not just referring to the Group, but also to our clients, and markets in general. Think about an airport, and how it benefits the entire community: local companies, shops, people employed...

We do the same thing. A company listed on a market guaranteed by a solid and reliable Central Counterparty, which offers quality services and contains the risks, leads to the development of the entire financial market, as well as to a greater liquidity and access to capital. And one other aspect in the CC&G role is worth underlying: since it’s the insolvent company itself that repays for the insolvency it generated, there are no costs for the community».

Can you give some numbers to help us understand the size of your activity?

«We operate in 14 markets, including Borsa Italiana and MTS and we cover all the main asset classes: government bonds, shares, equity derivatives … We have about 150 Italian and European clients, and we are present in seven countries. As far as volumes are concerned, we are coming off a year in which we recorded 22 billion euros in collateral to face possible defaults. Our aim is to be a partner of reference to our clients, responding to their needs. Clearly, in our sector it is difficult to imagine a significant increase in a number of clients – there are that many banks, that number doesn’t change much, at most they merge – but we can certainly expand their business by broadening the range of products we cover. In this, we work side by side with the markets we guarantee, contributing to their innovation.

I’ll give you a recent example of this type of successful collaboration: in February, in the occasion of the extension of trading hours for derivatives on IDEM until 22:00, we also expanded our operating window, thus allowing customers to easily finalize post-trade activities on the same day of trading».

In these years, there has been a lot of talk about Regulation: how much of an impact does it have and what can CC&G do for clients?

«Adapting to regulatory changes  is a crucial area where we seek to support our clients: SFTR, CSDR, the consolidation of T2/T2S and the dossier on the establishment of a regulatory framework for the recovery and resolution of central counterparties are only some of the items on the agenda  that will involve the industry in the near future. All the players will be affected to varying degrees. Our approach is to include our clients in the process from the early stages by creating dedicated working groups where we discuss the issues, listen to their needs, so that they stay involved in the design of our solutions. The intent is on the one hand, to act as a spokesperson for our customers at  the relevant forums – such as ESMA or EACH – in coordination with the Italian Authorities; and on the other, to ensure that the solutions we adopt, simplify as much as possible the adaptation process, minimizing the impact».

Following current events, we can’t avoid talking about the ongoing health emergency. In what way has Covid-19 affected your activity?

«I am certain of one thing: you cannot improvise in an  emergency. What makes a difference is your ability to plan. To quote Eisenhower, “plans are useless, but planning is indispensable”. He was a general and he applied this principle to battles, but it is valid on every field. In our case, any pre-packaged plan would have proved inadequate to face a similar situation; it was more effective to adapt and carry on operations without sacrificing the quality of work. We were not unprepared. And  it was a remarkable “stress test”: we saw very strong market fluctuations, managing volumes three times the average, and we adopted new ways of working and interacting with each other, with our clients and stakeholders. March 12^th  was one of the most complex days in our history: and we pride ourselves on having handled it effectively».

Tell us a bit about yourself in conclusion.  How did you end up in the position of CEO of CC&G?

«I joined the company in 1992, with a one-month contract, within the General Affairs department. Year after year I specialized in Risk Management, collaborating in parallel with trade associations that represented Central Counterparties; these roles   really drove my understanding about what it takes to foster relationships in different market infrastructures. As my experience kept growing, so did  my international visibility. In 2013, I was asked to undertake a broader role within the Group Risk Management; there, for the first time, I understood what it means to arrive to a new place with a wealth of matured experience: you must  build on it, but not let it  become a burden and prevent you from looking at things with a new pair of eyes. A challenge within a challenge. I carried out this double assignment until 2018, when I took on the position of General Manager of CC&G, to then become its CEO 16 months later».

• CC&G is providing CCP Austria with a hosted service for Clearing and Risk Management
• The agreement demonstrates CC&G increased international reach and its ability to provide innovative services to other CCPs 

Cassa di Compensazione e Garanzia (CC&G), a leading provider of post trade services, and part of London Stock Exchange Group, today announces the go live of its hosted clearing service which has been deployed at CCP Austria (CCP.A).

CC&G is providing CCP.A with comprehensive EMIR and MIFID II compliant hosted clearing solutions including the delivery of a white-labelled CCP Clearing and Risk Management service, business continuity solutions and user interface solutions. 

The launch extends CC&G’s international reach, which involves providing innovative services to other CCPs, leveraging CC&G’s existing multi asset class clearing expertise and established IT resiliency.

The new hosted service from CC&G will allow CCP.A to build on its core commercial activities while using CC&G’s trusted and reliable clearing and risk management solutions.

Marco Polito, CEO and General Manager, CC&G: “We are delighted to announce this strategic milestone with CCP Austria. This initiative highlights the role of  CC&G as a risk management service provider as well as a trusted CCP. We look forward to continuing our close collaboration with CCP.A.”

Wolfgang Aubrunner, Managing Director of CCP Austria: “The extended cooperation with CC&G as a service provider enables CCP Austria to use synergies to efficiently cover future developments and the numerous regulatory requirements.”

• CC&G, part of LSEG, will provide CCP.RO BUCHAREST S.A. of the Bucharest Stock Exchange Group with CC&G’s Clearing and Risk Management solution
• CC&G provides technology and expertise to CCP.RO BUCHAREST S.A., enabling centralised clearing services for Romania’s capital and energy markets
• Agreement demonstrates CC&G increased international reach and its ability to provide innovative services to other CCPs

Cassa di Compensazione e Garanzia (CC&G), a leading provider of post trade services, and part of London Stock Exchange Group (LSEG), today announces it has entered into an agreement to provide CCP.RO BUCHAREST S.A., part of Bucharest Stock Exchange (BVB) Group, with consultancy and technological support to clearing and risk management services that will be managed by CCP.RO BUCHAREST S.A. for all asset classes traded in the Romanian market. CCP RO BUCHAREST S.A. is establishing a central counterparty clearinghouse (CCP) for Romanian markets.

Each legal entity will remain fully responsible for its own distinct CCP activity. The seven-year agreement adds a new dimension to CCP cooperation by allowing the Romanian central counterparty to focus on its market requirements while leveraging CC&G’s clearing and risk management expertise and robust IT architecture.

Marco Polito, CEO, CC&G said: “CC&G’s agreement with CCP.RO BUCHAREST S.A. represents a landmark project, beneficial to the entire Romanian financial community. This agreement is part of our commitment to simultaneously supporting multiple CCPs across geographies, fostering financial growth and ensuring full compliance with the current European CCP regulatory framework of EMIR and world-wide CCP principles. This agreement is a further step towards the growth of the CC&G clearing services internationally and will lead to further positive developments for both parties and stakeholder communities.”

Adrian Tanase, CEO Bucharest Stock Exchange said: “We are pleased to announce the initiation of this vital CCP project for Romanian capital and energy markets. The collaboration with CC&G, a well-recognized CCP in the EU, is a very important element for reaching our goal of making centralised clearing services available for all the capital markets operated by Bucharest Stock Exchange and the energy market operated by the Romanian Gas and Market Electricity Operator (OPCOM). CC&G has just deployed a similar solution in Austria, and I want to congratulate them for this achievement. Together with CC&G, we are looking forward to working closely with all the local stakeholders, including local authorities, the Financial Supervisory Authority, National Bank of Romania, and Romanian Energy Regulatory Authority, to have CCP.RO BUCHAREST S.A. functioning in the most efficient way, so to be able to launch financial derivative instruments and to increase risk management capabilities for our markets.”

Victor Ionescu, CEO OPCOM said: “From the very beginning, OPCOM was convinced of the necessity, opportunity and feasibility of the CCP.RO institutional construction and related functional and technology project. The partnership with Bucharest Stock Exchange is also one of the aspects that OPCOM considered for a long time, given the connections between the Stock Exchange and the Power Exchange, and that is proved through its participation and commitment as shareholder of CCP.RO. A CCP brings many benefits to the market from a risk management perspective: transparency, security and daily mark-to-market of cleared positions, all of these in a neutral approach to counterparty risk exposure. Clearing through a Central Counterparty is a step forward in the evolution of the energy markets that will bring energy trades to the next level of liquidity for the benefit of whole economic community, industry, investors and final clients. The contract between CC&G and CCP.RO is part of the committed and solid base that OPCOM is looking for CCP.RO to benefit in its way to commercial operation of related trades clearing operations.”

Rodica Popa, CEO CCP.RO BUCHAREST S.A. said: “Romanian capital and energy markets have proved during their evolution the strong commitment of their market operators, Bucharest Stock Exchange and Romanian Power Market Operator, to high technology standards as an important element in markets’ robustness that plays a vital role in the continuous development of a market place. Through the agreement signed with CC&G, CCP.RO is committed to provide stakeholders with the possibility to enhance post-trade capabilities based on high level technology and support for the launch of an independent CCP. This means also that we have to move to the next level of business infrastructure by implementing the specialised technology for margining and risk management operations on a real-time basis and for data reporting. The CCP.RO team believes that the agreement will also provide a valuable opportunity to learn from CC&G’s experience and knowledge, sharing within and between project teams.”

CCP.RO BUCHAREST S.A. will host the infrastructure that will relaunch the derivatives market in Romania and will provide new mechanisms for mitigating and transferring the risks for the markets operated by BVB and OPCOM, thus enhancing the confidence and activity in these markets. The CCP will interpose between the parties of the transaction becoming a counterparty for each buyer, respectively the seller, and will guarantee the completion of the settlement of the transaction by applying specific mechanisms for risk management. For the investors or the participants operating on the local capital market, the existence of the CCP will allow the introduction and development of transactions with derivative financial instruments (having as underlying assets equities, commodities, bonds, indices, exchange rates etc.).

Commercial Papers: un’analisi del potenziale mercato italiano

E’ con grande piacere che Monte Titoli condivide un’analisi condotta da un gruppo di studenti del PoliMi sul mercato dei Cambiali Finanziari in Italia.   Lo studio raffronta il mercato europeo e illustra come creare un mercato efficiente per finanziare il capitale circolante delle aziende.   Il tempismo dello studio è perfetto, visto che il Decreto Rilancio approvato settimana scorsa ha risolto il vincolo normativo che impediva alle banche di offrire questo strumento e quindi si potrà lavorare per lo sviluppo del mercato in Italia offrendo un ulteriore supporto all’economia reale.  

Grazie a Rosamaria Pillarella, Beatrice Sartori, Matteo Radice, Alessandro Savini, Luca Marconi, Matteo Alessandro De Piccoli per l’ottimo lavoro svolto.