Why full post-trade automation is the only answer to collateral demands in the new world of OTC clearing.
age of central counterparties (CCPs) is now well and truly
entrenched in the fabric of financial markets infrastructure.
The entities have already had ramifications for the
buy-sides’ collateral management strategies, but
change is in the offing as the final rules and details
impacting collateral management of OTC derivatives are being
ironed out in Dodd-Frank, MiFIR, Basel III and the
about by actual and potential losses in bilateral derivatives
contracts, regulators are mandating the use of central clearing
for all possible OTC derivatives, while requiring that a
firm’s liquidity and balance sheet exposures be
kept to a minimum.
As CCPs enhance their capabilities, we are likely to see
further growth in the products eligible for clearing, and as
these products become subject to the margin requirements of a
centrally cleared environment, collateral demands will increase
further. Namely, the margining and collateral optimisation
process will need to happen on a daily basis and, perhaps, more
frequently in stressed market conditions.
This article is available to subscribers and registered users
Please log in to continue reading.
Not yet registered? Take a free trial.
If you have already taken a free trial you
have ongoing access to the analysis section of FOW.com including this story.
Log in using your details below to read.
Already have an account? |