The South African derivatives market is facing a game-changing industry shake-up that looks set to fundamentally change its operational structure
The unrelenting waves of regulatory reforms that have followed in the wake of the 2008-09 crises are creating tectonic shifts across the derivatives landscape. The South African derivatives market is far from immune.
Among the swath of regulations are Basel III and Solvency Assessment and Management Framework, while – as a member of the G20 – South Africa will also start to address OTC derivatives reform through the framework of the Financial Markets Act. At the intersection of these regulatory reforms are the desire for greater transparency and more secure derivatives trading, to buffer and safeguard financial markets against another meltdown.
These reforms have, however, introduced a significant degree of complexity. They will change the way that derivatives are priced, traded and reported. With so many of the operational details still in evolution, there is much uncertainty among market participants.
Business models, operations and infrastructure will have to adapt and evolve, balancing the imminent and urgent against the longer-term strategy and available resources.
The unintended consequences introduced by the “new paradigm” will be revealed in time. For now, KPMG sought to unlock the perspectives of South African derivatives market participants, gaining insight through a survey and discussions.