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Indonesia to set up clearinghouse for derivative transactions in 2018

Bank Indonesia will set up a clearinghouse for derivative transactions in 2018, The Jakarta Post reported Dec. 29, citing Perry Warjiyo, deputy governor of the central bank.

Under international rules, derivative transactions that are not settled through a central counterparty clearinghouse are subject to a 10% margin due to higher counterparty risk. Warjiyo said the margin makes derivative products offered by Indonesian financial institutions relatively less competitive.

Financial institutions in Indonesia currently engage in over-the-counter derivative contracts and the counterparty risk is subject to both parties. With the establishment of a central clearinghouse, the risk would be centralized to it, Warjiyo said.

The proposed clearinghouse would be linked to the Indonesian stock market clearinghouse.