SmartStream, a provider of financial Transaction Lifecycle Management (TLM) services, has launched its TLM Collateral Management adaptor to cater to an augmented lifecycle of trading messages for the non-clearing over-the-counter (OTC) derivatives market, according to a SmartStream statement.
The TLM Collateral Management Adaptor will be assimilating SmartStream’s TLM Collateral Management using Acadiasoft’s Margin Sphere clearing services. The launch comes on the heels of revised legislation and standards by the International Organization of Securities Commissions (IOSCO) and the Basel Committee. In particular, these organizations have worked to develop tougher risk mitigation standards for non-clearing OTC derivatives market.
The IOSCO’s standards were designed to foster risk mitigation techniques to achieve better management of counterparty credit risk and the hasty resolution of disputes. However, the solution also allows for the unilateral identification of disputes and ultimately enhances resolutions in real-time.
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The resulting changes have also placed an emphasis on trading desks and collateral managers to better understand which assets are reserved for trading or collateral, which historically has been convoluted in its implementation. As such, all firms dealing in non-standardized OTC derivatives will find themselves in a similar position to clear derivatives and will be required to post both initial margin and variation margins when trading.
According to Darryl Twiggs, Head of Product Management, SmartStream, in a recent statement on the launch, “Volumes in non-clearing OTC are predicted to rise by a factor of ten in 2016 following the implementation of new IOSCO regulations for intra-day margin call calculations. The heads of collateral operations have been requesting a solution; and currently we are the only vendor to provide the full lifecycle from initial trade activity through to settlement.”
“I am delighted that we have been able to use our TLM technologies to deliver the adaptor quickly. This brings collateral management closer to our other solutions in portfolio and margin settlement reconciliations and intra-day funding liquidity management. The challenges further increase when firms are engaged in derivatives activity through a variety of legal entities in different national jurisdictions; we are speaking to clients who are seeking to mitigate risk in derivatives for cross border transactions,” he added.
Just last week, a trio of leading banks led by Goldman Sachs, JPMorgan Chase, and Morgan Stanley joined forces with SmartStream to create a new Reference Data Utility. SmartStream’s Reference Data Utility will aim to provide services for instrument reference data normalization and validation across all asset classes.