CloudMargin Limited, a London-based specialist collateral management software developer, has launched a cloud-based OTC derivatives collateral management platform for the buy side which it says offers a real alternative to the spreadsheets that dominate within OTC derivatives end user firms.
“Until now, much of the buy-side had been priced out of having a dedicated collateral management platform and had no viable alternative to spreadsheets,” said Andy Davies, co-founder and CEO of CloudMargin. “CloudMargin’s innovative approach and use of the latest cloud-computing technology means we can offer a full featured, full-cycle collateral and margin management platform that’s well within the reach of even the smallest buy-side firm.”
CloudMargin supports the full process of collateral and margin management, from storing CSA parameters through calculating and issuing margin calls to handling disputes, selecting eligible collateral and instructing market movements. CloudMargin supports the drive towards CCP mandated by Dodd-Frank and Emir, giving a harmonized view of bilateral and cleared derivatives and a simple yet controlled process.
Separately, 4sight Financial Software has published a whitepaper on collateral optimization which provides a list of questions financial firms should ask when implementing an optimization project. “Collateral optimization has rapidly become essential for financial firms due to new regulations such as Emir, Dodd Frank and Basel III,” said Antonio Neri, 4sight's executive director. "The paper describes how optimization works and seeks to dispel some of the myths around optimization techniques."
4sight Financial Software has added new features to its collateral optimization system which allow users to automate collateral recalls and substitutions based on corporate actions, changes in collateral credit rating leading to it becoming ineligible, changes in counterparty and CCP eligibility criteria, and recall requests by underlying clients leading to a short position.
Collateral substitution is one of the biggest operational headaches of the collateral management process. 4Sight developed new automation around this process to reduce the level of manual effort involved, while also minimizing collateral costs through intelligent asset allocation.
The 4Sight collateral management system can base all collateral substitutions on automated cheapest to deliver collateral optimization algorithms. This allows users to identify and process multiple returns and recalls for multiple counterparties (bilateral, CCP or triparty) from a single screen. The system can also help users to see when pledged collateral is no longer cheapest to deliver and can propose suitable reallocations.
A broad spectrum of buy-side firms, from hedge-funds and asset managers, pension fund managers and insurance companies through to corporate treasury departments and energy firms, are seeing collateral volumes rocket and operational complexity soar while at the same time internal and external scrutiny over the collateral process has never been higher.
Even for firms below the threshold for central clearing, regulatory changes under Dodd-Frank and Emir are stretching manual processes and the use of spreadsheets to breaking point. “CloudMargin gives the buy-side an alternative to spreadsheets so they can finally have a secure, controlled, efficient and cost-effective collateral management operation,” said Davies.