The International Organization of Securities Commissions (IOSCO) and the Basel Committee have developed risk mitigation standards for the non-clearing OTC derivatives market. Firms dealing in non-standardised OTC derivatives will be in a similar position to cleared derivatives and will be obliged to post both initial margin and variation margins when trading. Therefore trading desks, along with collateral managers, are keen to understand which assets should be preserved for use as collateral and which, potentially, are available for trading. 

Darryl Twiggs, Head of Product Management, SmartStream states: “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.” 

TLM Collateral Management Adaptor integrates SmartStream’s TLM Collateral Management with AcadiaSoft’s MarginSphere clearing services. Uniquely, SmartStream are providing full coverage of the supported lifecycle messages and events supported under STP, negating the need for ad hoc manual activities at other terminals. The adaptor is delivered as part of SmartStream’s latest release of TLM Collateral Management v5.2.10. 

The IOSCO standards promote risk mitigation techniques to engage in effective management of counterparty credit risk and timely resolution of disputes. The solution enables inflight identification of disputes and aids their resolution in real-time. This saves time, money, and plays a big part in managing non-clearing OTC cross boarder risk.