Central counterparty clearing support product of the year: Nasdaq

Market disruption and extreme volatility impacted many asset classes in 2023, rendering the role of central counterparty clearing houses (CCPs) more vital – yet more challenging – than ever. Changing regulation, market standardisation initiatives and growing volumes added to the challenges, making it essential that CCPs use the best and most advanced technology available. 

Step forward Nasdaq, winner of the 2023 Central counterparty clearing support product of the year award. In addition to operating its own clearing house in Europe, Nasdaq provides clearing and risk products to more than 15 clearing houses worldwide. 

Judges said:

• “Nasdaq has a strong list of clients and obviously takes its role seriously.”
• “It’s great to see Nasdaq’s staunch focus on research and development as well as participation in industry think tanks.”

“As a clearing house operator, Nasdaq has extensive experience and understanding that uniquely positions us to deliver benefits to CCPs,” says Anna Theorin, head of product for clearing technology at Nasdaq’s Marketplace Technology. “Our clearing technology is built on a robust state-of-the-art technology platform with a modular, highly scalable architecture that supports a CCP’s need to always operate resiliently, while allowing for agile execution of growth initiatives and business development.”

Nasdaq’s clearing technology supports the complete workflow, from trade capture and position management to market data and pricing, risk and collateral management through to settlement. Its broad product coverage includes exchange-traded cash and derivatives instruments, over-the-counter support for interest rate swaps and foreign exchange, as well as stock lending and repo. The depth of coverage, in turn, enables cross-margining and efficient collateral management. The technology – which can run in the cloud, on-premise and in hybrid setups – also integrates with Nasdaq’s broader portfolio of marketplace technology, which includes products for exchanges and central securities depositories.

Its modular architecture means customers can implement selected modules on a standalone basis and scale according to business needs, providing support for the most demanding markets, as well as the ability to scale down for low-footprint setups. For example, the platform’s real-time risk module can be integrated alone, with one or with several third-party clearing systems, to give a consolidated view of risk across multiple asset classes and markets. 

The risk module includes multiple value-at-risk (VAR) flavours, standardised portfolio analysis of risk, as well as support for custom models. Multiple margin models can be used in parallel, enabling tailored risk estimation per asset class and member.

The product provides tools to simulate proposed changes to margin requirements via parameter, price and portfolio changes, and includes features for collateral concentration breakdown to aid in the understanding of potential risk exposures. It also offers configurable limit and alert management, stress-testing and backtesting capabilities, what-if calculations, default management, dashboarding and visualisation capabilities.

Notable developments over the past year include the addition of more VAR margin methodologies such as Monte Carlo, filtered historical VAR and stressed VAR; enhanced portfolio netting capabilities; the addition of a default management hedge analysis feature; a covered call feature; and enhanced default fund distribution tooling. 

Technology research and development (R&D) is a core focus for Nasdaq, which is an active member of several technology‑focused think tanks and collaborates with leading universities worldwide.

As part of its R&D investment, Nasdaq’s clearing technology team is currently exploring several machine learning concepts to enhance various risk management capabilities. One of these initiatives involves a pending patent related to a Wasserstein GAN with Gradient Penalty algorithm for generating artificial and extreme, but plausible, stress-test scenarios for a stock market.

Anna Theorin, head of product for clearing technology at Nasdaq’s Marketplace Technology, says:

“CCPs are core to financial market infrastructure and critical backbones to efficient and trusted capital markets. By developing technology to support CCPs, Nasdaq is fulfilling its wider mission of advancing economic progress, fairly, for all. We are committed to providing world-leading platforms that improve the integrity, transparency and liquidity of the global economy.”

Sponsored content