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Efficient Collateral Management Leading to Higher Liquidity and Lower Risk

Collateral Management

Increased regulation has caused financial institutions to have substantial capital tied up as collateral. With new rules on frequency of portfolio reconciliation, CFTC has widened the ambit of regulation to include smaller financial institutions. Hence, for all organizations, efficient collateral management is important to ensure adequate risk coverage without sacrificing liquidity.

eClerx manages the margin lifecycle for multiple clients. Our services include CSA setup, interest payments, portfolio reconciliation, and dispute resolution. We use leading industry tools including TriOptima® to help clients manage their collateral requirements. For smaller institutions, we have developed an in-house portfolio reconciliation engine. For centrally cleared portfolios, we manage collateral movement between clients and the Central Counter Party (CCP).

Challenges

  • ​Disputes in Margin Settlements
  • Lack of clarity on break categories and root cause
  • High aged breaks in the portfolio
  • High MTM breaks in the portfolio
  • Compliance with new regulatory requirements
  • Incorrect Setups and Data Records leading to bad Margin calls
  • Inaccurate data feeds/data standard issues leading to false breaks
  • Pressure to ensure excellent client service, FED Ranks, Z/Yen ratings

Solutions

  • Streamlined process for CSA setup, interest payments, portfolio reconciliation, and dispute resolution
    • Maker-checker process for creating and validating CSA setups and interest payments
    • Break prioritization by MTM, aging, and counterparty
    • Cheat-sheets for frequently occurring breaks
    • Standardization of regional variances
    • Automated control reports and STP to custodian portals
  • Fixing data integrity and systemic issues
    • Suggestions to fix TriOptima’s® pairing logic
    • Pareto analysis and resolution of frequently occurring breaks
    • Fixing upstream data feed and quality issues
  •  In-house developed matching engine and dashboard
    • Reconcile breaks with counterparties not on TriOptima®
    • Mitigates risk against smaller counterparties
    • Real-time dashboard helps tracking and consistent follow up

Benefits

  • Timely settlement of margin calls
  • Faster break resolution through structured follow-ups and rigorous investigation
  • Quicker setup of CSAs
  • Negligible Own Unmatched percentage after taking on the process
  • Improved a Bank’s FED Rank to #1 within a short timeframe
  • Reduction in turnaround time for Clearing processes
  • Reduction in recurring breaks due to system improvements suggested on Bank systems and TriOptima®