White Papers from The Field Effect on Margining and The New Operating Model

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Our two latest white papers are now available for download from our site: http://thefieldeffect.co.uk/white-papers/ (or use the links below)

Margining Paper 1- Understanding Regulatory Hurdles & Industry Solutions

A great deal of change is coming to the collateral management world over the next few years. With mandatory clearing and non cleared margining already well on their way to implementation, many firms whose collateral management needs have until now been basic will need to take action. Specifically banks, corporates, pension funds and other buy-side firms will either need to enhance or create collateral management capability in order to satisfy regulation. Implementation of regulation arrives on a sliding scale all the way to 2020, so understanding when your firm will be impacted is key.

Margining Paper 2 – The New Operating Model

This is the second white paper in our series addressing the margining and collateral challenges facing the banking industry. The first paper examined the regulatory timelines and emerging vendor utility ecosystem.  In this paper we look at potential disruption to the business operating model facing sell-side and buy-side firms caused by BCBS/IOSCO regulations relating to the margining of non-cleared OTC derivatives. We provide a framework for understanding which areas will be impacted and suggest an approach for planning your response. In summary, sell-side and buy-side firms must be ready to exchange variation margin (VM) by March 2017, and initial margin (IM) at some point from September 2016 onwards depending on the scale of notional OTC outstanding.  The penalties for margin disputes are potentially severe, but capabilities for IM/VM calculation and dispute management may be inadequate or even non-existent in some firms. Third party vendor and utility solutions are rapidly emerging, but it is by no means clear how these might fit together to form an effective solution.

We believe each firm must rapidly understand the impacts of these changes on their business operating models, addressing key dimensions such as business process and workflow, functional requirements, controls and technology.  In this paper we set out some of the key process changes impacting pre-trade processing, margin calculation, dispute resolution and collateral operations. Whilst some firms may not be impacted by the IM margining regulations for a while yet, we suggest that firms should design a strategic target state that addresses IM as well as VM. This is likely to guide the firm towards the most efficient and lowest cost target state in the long-run. If the end state is not yet well defined firms should start work immediately on their target operating model, explore the emerging utility / vendor solutions, and should set out a clear roadmap and business case to define and justify the journey. If you haven’t commenced already, the time to start is now.


These two papers are part of the Rocket Special Edition PDF produced for the Breakfast Briefing on April 7th:

One recipient called this 'the bible of margin activity', which may be an over statement, but it's a useful snapshot of the latest services available.  The contents includes:

  • Collateral Hurdles: Understanding Regulatory Challenges and Industry Solutions (Bill Hodgson and Nick Stafford from The Field Effect)
  • Margining and Collateral: The New Operating Model (David Field and Nick Stafford from The Field Effect)
  • The Game Change for Collateral Management (David White, TriOptima)
  • Beyond Standard Two-Way Margining (David Maloy, COO NetOTC)
  • Are You Ready For Uncleared Derivatives Margining? (Banu Apers, Clearstream)
  • The Future of Collateral Management (Karl Wyborn, CloudMargin)

This publication is the most up to date picture of what the latest Collateral platforms are offering. This item is an electronic PDF version of the magazine, which will be delivered to you by email and is formatted in landscape to fit your computer or tablet screen comfortably. Visit our shop to purchase this highly useful publication.

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