has collateral management been
regulated until now.
With more derivatives set to
come under the regulatory mandate, the buy-side will have to be
prepared for a tough time dealing
with the amount of margin calls.
“Margin calls will further
increase in Europe from 3 Jan
when the requirement to exchange
VM on FX forwards and swaps
becomes mandated. Operationally market participants need to
process these margin calls, but
collateral management has been an
area in the industry where there
has been a good deal of inefficiency,” adds White.
“The market is not in a position
to hire a large number of people to
throw at this problem. Collateral
management is a hugely effective
risk mitigation technique, but it is
only effective if it is accurate.”
quarter of 2017. Outside of interest
rate swaps, non-mandated products
also saw new highs in March.
Around 126,000 FX derivatives with
a notional of $1 trillion were cleared
in March. LCH also saw the highest
volumes on record for inflation
swaps clearing, with $397 billion
notionally cleared in March.
“The recent introduction of the
uncleared margin rules has acted
as a significant incentive for firms
to direct more trades to clearing,
while the upcoming clearing man-
date for rates has encouraged buy-
side clients to clear more of their
portfolios,” says Cameron Goh,
global head product management,
rates and FX derivatives, LCH.
“In addition the execution, risk
management and operational effi-
ciencies of clearing have resulted
in significant take-up of clearing
among participants that are not
subjected to a clearing mandate.”
Going forward, collateral management will continue to be a significant issue for the buy-side. The
days that collateral management
was a dusty, back-office function
that would be dealt by its sell-side
partners are gone. Never before
“Our legal team has made
a huge effort over the past
few weeks to meet the
deadline, more than 100
new CSAs have been setup.”
FABIEN OREVE, GLOBAL HEAD
OF TRADING, CANDRIAM.