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Bank Indonesia to establish derivatives clearing, settlement house by 2018

BankIndonesia plans to set up a clearing and settlement house for thederivatives market, which is expected to begin operations in 2018, The Jakarta Post reported July 22, citingthe central bank's head of financial market development, Nanang Hendarsah.

The central bank is looking to establish a clearing andsettlement house, also known as a central counterparty, as derivativestransactions at banks have been limited and segmented, Nanang said. He expectsthe central counterparty to begin operations in 2018.

A central counterparty will reduce the credit risk of thecounterparty and the systemic risk of a transaction in the financial markets, Nanangadded.

Indonesia currently has central counterparties for theequities markets, as well as the commodity and futures markets, but lacks suchservices in the money market and the foreign exchange and derivatives markets.