Twenty-eight of the world’s largest banks are participating in industrywide testing of the first ever Central Margining service for non-cleared OTC derivatives, which was released by AcadiaSoft and delivered in collaboration with TriOptima last month.
Industry testing of the AcadiaSoft Collateral Hub marks the successful completion of the first phase of a high profile industry initiative around electronic margin management announced last July. With the successful release and testing of two-way Central Margining for Initial Margin (IM), AcadiaSoft, in partnership with TriOptima, has confirmed usability for its platform for straight-through-processing of derivatives margins. The new service will facilitate industry compliance with impending margin regulations coming into effect in September.
“I am amazed by the industry’s ability to define a shared solution to a regulatory development and then get behind it so quickly and effectively,” says Chris Walsh (pictured), Chief Executive Office of AcadiaSoft. “Thanks to such widespread industry support, we have been able to deliver on an ambitious product plan in only six months- and we are on target to deliver end-to-end straight-through-margining for non-cleared OTC derivatives via the Hub by Summer.”
The release is the first phase in linking AcadiaSoft’s platform with TriOptima’s triResolve service. This linking enables market participants to calculate and reach agreement for exchanging initial and variation margin amounts; identify and reconcile differences; and prevent disputes.
“Testing the AcadiaSoft Collateral Hub provides banks with the opportunity to refine and calibrate their margin processes six full months ahead of the implementation of the new margin regulations this coming September,” says Mark Demo, Regulatory Product Director at AcadiaSoft. “We make it possible for industry participants to automate and scale their margin processes to meet the challenges of complying with the new regulations.”
A new margin framework established by the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO) and legislated by local prudential regulators around the globe is expected to take effect on 1 September. The largest banks that trade non-cleared OTC derivatives will be required to post and collect additional margin and standardise their collateral terms and processes. When fully implemented over the next five years to bring mid-sized banks and many asset management firms under the regulatory umbrella, the regulations will result in a substantial increase in margin calls and associated collateral movements that will require a fully automated margin process.