Derivatives client clearer of the year: Societe Generale

Risk Awards 2025: French dealer rides CTA wave with 9.6% jump in US clearing business

Flighty markets have dented managed futures funds’ returns in recent years. But investor allocations to this popular hedge fund strategy have held up amid the turbulence.

Assets under management at commodity trading advisers (CTAs) grew to $392.8 billion by the end of June 2024 – the latest available figure – compared with $375.4 billion a year earlier and $246.2 billion in June 2020, according to Preqin data.

As a flagbearer for the segment, with three decades of listed derivatives clearing experience and its own industry-leading CTA benchmarks, Societe Generale is making the most of this growth.

Managed funds’ appetite for futures helped boost SG’s US clearing business by 9.6% in the year to end-July – the most among the top eight clearers, official data shows.

Societe Generale’s edge comes from a post-trade platform and clearing capability expansion aimed particularly – but not exclusively – at the fast-moving world of global macro hedge funds.

We’re not using intermediary brokers as much as others, which means our pricing can be more competitive, particularly in emerging markets

Will Davies, Societe Generale

Globally, the firm boasts an 11.8% market share for exchange-traded derivatives clearing, based on its own analysis and external surveys.

Hedge fund clients praise the SG team, noting it has responded to their need for a clearing partner that offers access to multiple central counterparties (CCPs) and products.

“Societe Generale has been our longest-standing clearing partner and has supported our growth through a deep understanding of our product and its requirements for diversified market access,” says one hedge fund executive.

Ward Van Beek, product manager at Dutch systematic trading firm Transtrend, says Societe Generale’s strength is its wide array of products on offer. “Consistently over the years [it has offered] more products than other counterparties, not only the liquid products but also the niche products,” he says. 

Will Davies, head of prime services and clearing sales, UK, at Societe Generale, says the bank’s multi-asset framework has been key to business growth over the past year.

“The multi-asset class view we have is instrumental in the way we’ve covered reporting, reconciliation and margin, but also our ability to price and to look at risk,” says Davies. “The way to make that work is to have everything under one roof.”

Societe Generale’s derivatives clearing service spans not only 155 countries but also some 130 market memberships, including many emerging markets.

Davies says the range of exchange and CCP memberships is just as important as product breadth in driving business. “It means we’re not using intermediary brokers as much as others, which means our pricing can be more competitive, particularly in emerging markets.”

Across the spectrum

Demand for diversification and access reflects ongoing changes in the industry.

Alongside listed futures, which are a core instrument for CTAs, systematic traders now want to trade across the asset class spectrum, including commodity futures, cleared rates, cleared credit and foreign exchange. Many are opting for clearers with multi-strategy approaches.

Societe Generale was well placed to benefit from these trends following its acquisition of the remaining 50% stake in broker Newedge from Credit Agricole in 2014. The deal expanded SG’s range of services to include, among others, commodities clearing.

The bank has worked hard to build its client relationships in commodities, an asset class whose fortunes have fluctuated in recent years.

We’re a clearer at heart and we think more and more products will be cleared. Repo is one of those

Dirk Bellens, Societe Generale

“The threats to delivery in some of these markets, which are quite volatile, need to be monitored quite closely,” says Davies.

While the French bank is doubling down on clearing services for mature derivatives markets, it continues to add niche opportunities, for example bitcoin futures.

“We positioned ourselves to offer niche products because we believe they are the growth stories of the future…as clients are evolving and changing their strategies,” says Jamie Gavin, head of prime brokerage clearing at Societe Generale.

SG has identified repo clearing as another area of growth. The bank has invested heavily in this segment for the past five years, becoming a leading clearing broker for repo services at LCH and Eurex.

“We’re a clearer at heart and we think more and more products will be cleared. Repo is one of those,” says Dirk Bellens, head of coverage sales at the firm. “In the next 10 years I think it will be the norm for everything to be cleared in the repo space.”

Creative collateral

The firm’s focus over the last 12 months has also been on minimising margin costs for clients in the face of regulatory and CCP requirements.

The bank’s internal cross-margin engine, which encompasses interest rate, FX, commodity and equity derivatives, can be more efficient than arrangements offered through CCPs, the team says.

Still, the bank is a strong supporter of CCPs’ own cross-margin facilities, and often an early adopter of these services. For example, it is one of the few banks whose clients are able to cross-margin euro interest rate swaps versus listed futures at Eurex. 

We are offering free onboarding to existing clients onto Eurex if that is what they need

Jamie Gavin, Societe Generale

Societe Generale has also worked with a growing number of clients on tailored collateral management services, Bellens says. “If a transformation needs to happen, we can help with that.”

These bespoke services have become all the more pressing in a higher-rate environment. In some circumstances, the CCP will keep the coupon payments from government bonds that have been posted as collateral. With rates at elevated levels, clients needed to be mindful of the coupon payments they might forego when posting bonds.

For one client, Societe Generale arranged the purchase of US Treasury bills that could be posted at a Brazil CCP. This allowed the client to continue collecting yield on their US Treasury bond holdings.

Clients told Risk.net that Societe Generale is unusual among clearing brokers in the extent to which it is prepared to create bespoke solutions. The team is “pretty unique” in its responsiveness, a third client said, adding the clearing bank hosts monthly calls to identify issues that need fixing.

Reg notice

Societe Generale’s team is also on top of its game when it comes to its regulatory resources.

For example, SG was seen as a trusted partner by US firms looking to launch funds in Europe, as many required additional support on local regulations after pension funds were swept into the derivatives clearing obligation under the European Markets Infrastructure Regulation in June 2023. 

The dealer has also been keeping clients up to date on elements of Emir 3.0 and its compliance deadlines.

Most pressing is the so-called active accounts requirement, which requires firms to clear a proportion of trades belonging to European Union clients at an EU-based CCP. Some in-scope clients will need onboarding at an EU-based CCP – for example Eurex – for the first time.

“We do have a large number of clients that will need a [European] account. We have started the process of outreach,” Gavin says. “We are offering free onboarding to existing clients onto Eurex if that is what they need.”

After a strong year, Societe Generale is not resting on its laurels. As part of its strategic objectives, the bank is focusing on building out its equity prime brokerage: “a missing piece”, Davies says.

Supporting this expansion is the firm’s recent joint venture with Alliance Bernstein. Launched in April this year, the new unit – Bernstein SG – provides institutional investors, corporates and financial institutions with investment research, complementing the bank’s execution services.

Among Societe Generale’s priorities is also a further expansion into FX options clearing in the next few years.