What the leverage ratio means for clearing fees – Citi analysis

From their current levels of a few hundred US dollars, clearing ticket fees for some typical over-the-counter derivatives trades would need to jump to $1,000 or more if banks are to earn a healthy return on the capital required by the supplementary leverage ratio, according to Citi’s Mariam Rafi. Recalibration is needed to make the business work, she argues

Mandatory clearing in the US is in full swing, and with the rapid growth in client volumes, a primary focus for many clearing members has become managing the capital requirements and returns on capital associated with client clearing activity. Under Basel III, clearing members must hold capital against cleared futures and over-the-counter positions – this was not a requirement under Basel II and I – and the additional capital burdens are causing many to reevaluate their books of business to