Insights, tips and industry commentary from the team behind the world’s first production-grade open source risk management platform.

Marc Henrard

Your questions answered: new Q&A available on our MVA research

We’ve received a number of follow-up questions on the back of the research paper on MVA we published last month in collaboration with University College London.

We’ve provided answers to the questions below, and will continue to update with answers to your questions as they come in.  Please send your questions to Marc Henrard.

Results of our margining survey

In our last newsletter we asked readers to participate in a survey on margining. This produced some interesting results in regard to trends we see gaining momentum in the market in the near future: the rise of lifetime initial margin calculations, and an increasing need for independent CCP model implementation.

Marc Henrard

New OpenGamma research with UCL supports practical solutions for MVA

As the market is well aware, initial margin will be charged on both cleared and non-cleared OTC (for large dealers by Sep 2016). This ties up large amounts of high quality collateral which in turn creates a significant funding and capital costs for holding OTC positions. Initial margins will be charged by the CCP daily for the full holding period of the trade (potentially to maturity) and it is this long-term nature of initial margin that makes these costs difficult to estimate.

Let’s be clear: Margining is no longer just a sell-side headache

When the deadline for regulatory compliance was extended to Q4 2016, many buy-side firms may have gratefully shelved any nascent worries about OTC derivatives clearing.

OpenGamma Margining: or, How to optimize your OTC CCP margin buffer

A leading bank has created a central margin calculation utility for OTC Clearing powered by OpenGamma to address a number of requirements. This case study shows how they did it.

Overview: The bank currently runs a margin buffer at the CCPs where most of their client swaps are cleared. The buffer is in place to facilitate client intraday trading where a client will post margin post execution of the trade.

Kirk Wylie

The Full Story of the OpenGamma/Eurex Clearing Partnership

How smarter IM calculation can minimize capital allocation

A common challenge for our customers is the substantial amount of capital consumed by the clearing process. A particular frustration is the funding costs associated with posting Initial Margin to the clearing houses for the entire life of the trades.

Technology for our Time

One of the benefits of being a relatively new vendor in the fintech space is that customers and prospects can be refreshingly open with their views about the status quo. They frequently tell us that traditional vendors are still not meeting the industry’s needs, which is perplexing as it has always seemed pretty clear to us how our sector needs to adapt – in fact, we’ve built our whole business around it.  

Reflecting on IDX

IDX was buzzing this year with some particularly good sessions looking at industry paradigm changes in post trade derivatives, such as The Future of the Intermediary. Participants on this panel discussed the shift of focus for FCMs away from operational cost and towards capital cost, and the difference between non-differentiating clearing costs such as connectivity to CCPs, and client-facing activities where FCMs provide their core value.

IDX Outlook: Focus on Capital Inefficiencies

Inaccurate OTC derivatives margining is diverting cash away from revenue-generating areas of banks in the form of excess collateral, at the very time when capital is at its most scarce. Derivatives margining is one of the more pressing challenges that the industry should seriously consider at the FIA/FIA Europe International Derivatives Expo (IDX) on June 9-10.

We hope you’ll come and visit us at IDX to discuss some of the solutions we’ve built to address this ongoing industry requirement.