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October 10, 2016

Post Trade Forum | First Meeting Agenda | Bilateral Margin

The first meeting has now been scheduled and members of the email list informed, find out how to participate here.

The first meeting of the Post Trade Forum on Bilateral Margin has been scheduled and people who joined the mailing list informed. If you would like to be part of this new approach to airing and resolving challenges in the post trade processing space for OTC products, join the mailing list and we'll let you know how to join this on-line event. We have been running a survey on priorities in the post-trade space, you can see a summary of the poll here, and submit your own responses and see the latest results once you click the Submit button.

Agenda

  1. Introduction by Bill, and to our expert John Lund for this meeting
  2. Short presentation by John on the current state of bilateral margin regulations and implementation
  3. Discussion on the questions below
  4. Call for questions and agenda points for the 2nd meeting on Regulatory Reporting

Questions for Meeting 1 (so far)

  1. Bilateral Margin: CSA under ISDA or BSA under DRV Deutscher Rahmenvertrag: negotiate new CSA, amend the existing or have two at the same time for “old/new” collateral?
  2. In which currency does variation margin (VM) for FX swaps/forwards have to be paid? (As there are always two currencies in an FX contract.)
    • Are we free to choose one of the deal currencies or is there a rule?
    • Or is FX exempt from the VM rules?
    • Would it be possible to stay in a single currency (CHF) VM regime for FX collateralization?
  3. Would it be possible for us to always deliver CHF VM (with or without haircut ?)?
  4. Will the new regime allow our counterparties to deliver other currencies?
    • Our idea is to avoid multi-currency collateral management as much as possible. Thus we would like to clear anything that’s clearable and as a result have only FX and possibly some TRS non-cleared.
  5. Have you seen this approach with other clients?
    • Today we use our home-built collateral management tool that offers a high degree of automation (Automatically parsing pdf attachments of incoming e-mails and booking the corresponding figures in our collateral management system & saving all mails in electronic audit-proof storage). However, scaling this to multi-currency might be quite a lot of work.
  6. Do you suggest any operational platforms for collateral management?
  7. Is there an industry standard emerging? Is Arcadiasoft going to be the industry standard?
  8. Is there a role for a utility to take on the processing of margin and collateral management in the bilateral trades market? This utility could calculate all initial and variation margin requirements and potentially "pool" margin requirements to optimise collateral management. Could this be done by LCH, LSE, Euroclear, ICE etc or a private company? This approach could push towards standardisations of the margin agreements, haircuts, reconcile disputes, simplify processes etc.
  9. Is there a role for a utility to take on trade processing for all counterparties? This could overcome reconciliation issues in trades where there are more than two counterparties and draw asset management trades in with bank trades thereby reducing the number of processes?

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