Post-trade | Collateral management
Differences between “haves” and “yet-to-haves” Leading firms
100% make daily margin calls,0% make weekly calls 61% are focused on improving efficiency margining processes 23% face onerous efforts in renegotiating ISDA agreements On average, firms anticipate 17% of portfolio to be cleared OTC derivatives (never 12 months)
first port of call ahead of transformation services. But none of these are clear cut solutions. “Collateral transformation services offered by
banks and brokers can be effective in helping some buyside firms fulfil their collateral obligations. However, the transformation process involves the bank or broker swapping clients’ riskier assets for cash, which impacts their own balance sheet. In an era of strict capital requirements, larger buyside clients may find it easier to take advantage of transformation services than smaller clients,” warns Ted Leveroni, executive director of derivatives strategy and external relations at Omgeo. Clearing brokers are prioritising who they will
clear for, Leveroni argues. “There is a bottleneck there and if you are a smaller or even mid-size player you will have to wait. And even if you are in the front of the line it will take 6 months to get the
“It comes down to having attentive and flexible services, the use of various instruments creates different collateral demands, and various legal jurisdictions will create different environments. Thereis no one size fits all solution.” Bob Almanas, SIX Securities Services
Lagging firms
71.4% make daily margin calls, 28.6% make weekly calls 57% are focused on improving efficiency margining processes 57% are faced with onerous efforts in renegotiating ISDA agreements On average, firms anticipate 13% of portfolio to be cleared OTC derivatives (never 12 months)
Source: Maximising Collateral Advantage:A Buyside Survey of Business and Operational Strategies – Celent
contracts signed. So being able to clear at all will be a challenge for a lot of asset managers.” Many market participants anticipate an increase
in the use of swap futures as a result, which offer a lower cost of capital and are transparent. Leveroni says that while there will always be a need for the OTC market, the regulatory changes will drive some volume into listed futures. “Investors have already reacted favourably to the availability of futurised swaps following the introduction of central clearing requirements in the US,” he says. But whatever market participants do, there is
no silver bullet, argues Bob Almanas, managing director for international services at SIX Securities Services. “It comes down to having attentive and flexible services, the use of various instruments creates different collateral demands, and various legal jurisdictions will create different environments. There is no one size fits all solution,” he says. n
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Best Execution | Summer 2013
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