Laura Klimpel, Head of SIFMU Business Development and General Manager of Fixed Income Clearing Corporation (FICC), was recently recognized by the industry and her peers for a 2021 Markets Media “Women in Finance” Award. Klimpel received the honor for the Excellence in Clearing category. DTCC Connection sat down with Klimpel to discuss FICC’s business initiatives in a post-pandemic world.
Related: How to Advance Central Clearing Around U.S. Treasury Transactions
DC: How is the work that FICC is doing helping to protect the industry and the markets from future shocks?
LK: Significant market volatility can happen, but I think we were all surprised by the unexpected volatility early in the pandemic in March 2020. Clearing volumes in U.S. Treasury activity in FICC’s Government Securities Division soared to over $6 trillion daily, an almost 43% increase over the usual daily average of $4.2 trillion cleared.
The experiences and the lessons learned from the pandemic continue to provide insight into ways to make our financial services operations even more efficient, transparent, and resilient, and I believe we’ve reached a point where we have broad industry consensus around the benefits of increased central clearing of U.S. Treasury transactions – including a reduction of settlement and counterparty risk, and the risk of market disorder and fire sales.
The task ahead of us in the coming year is to work together to make greater adoption of central clearing in U.S. treasuries a reality.
DC: How has FICC contributed to these important industry conversations about central clearing of U.S. treasuries?
LK: It’s been an extremely busy year. We’ve been speaking at every opportunity we can, including various industry conferences and forums such as the Global Markets Advisory Committee of the Commodity Futures Trading Commission (CFTC) and the Futures Industry Association (FIA) Expo, sharing how central clearing can reduce the risks created by market fragmentation. Today, treasury market activity is split between bilaterally cleared transactions, and centrally-cleared transactions via FICC. Essentially, having disparate clearing processes is introducing greater risk into this growing market.
We’ve produced two white papers that have generated significant discussion among clients, regulators, and the industry. In our white papers, published in May and October 2021, we discuss how central clearing can limit default risk and enable smoother functioning and transparent markets, as well as how FICC’s long-standing “open-access” approach provides the flexibility necessary to allow a wide variety of market participants access to central clearing – all while also ensuring impartiality and fairness.
As we approach the end of the year, we’re pleased with the ongoing progress of this initiative. U.S. Securities and Exchange Commission Chair Gary Gensler echoed this position at a recent Fed conference, when he spoke about the risk-mitigating benefits of central clearing.
Related: More Clearing, Less Risk - The Benefits of a Central Clearing Model
DC: It’s been a year of service expansion and development for FICC. Can you share some of the highlights?
LK: Several years ago, we created the Sponsored Service, which offers eligible clients the ability to lend cash or eligible collateral via FICC-cleared delivery versus payment (DVP) repo throughout the day, a transformation of the repo marketplace. This year, we expanded on that effort, and launched the Sponsored General Collateral (GC) Service. The Sponsored GC Service, a significant undertaking, now allows sponsoring members and their clients to submit triparty repo transactions into FICC.
DC: Congratulations on your 2021 Markets Media “Women in Finance” Award. Why is this a significant recognition for you?
LK: I joined DTCC just over a decade ago, having worked as an attorney with experience in commodities and derivatives regulation and compliance. With a background in both business and law, it’s been very rewarding to navigate both the regulatory landscape and FICC’s drive for innovation, while considering the legal framework required to launch and support a service in this highly-regulated industry. I am truly honored by this recognition from Markets Media, and I am grateful for the amazing team of colleagues with whom I work each and every day to protect the markets.
My role as General Manager of FICC and Head of SIFMU Business Development is a responsibility I don’t take lightly. Without question, the U.S. Treasury market is the largest in the world, and its performance is vital to the strength and stability of the entire U.S. economy. I’m honored to continue working along with the rest of the FICC team to advance innovation, further reduce risk and help to promote capital and operational efficiencies to the industry.