The need to reduce costs

Since the banking crisis, collateral optimisation has been a major focus for buy and sellside firms as they endeavour to manage capital and liquidity - driven by Basel III, Dodd Frank and EMIR regulations, plus a changing appetite to correctly account for market, credit and liquidity risk in pricing the derivative transaction.

Liquidity will become more expensive. According to estimates, the additional required collateral will range from 2 to 11 trillion US dollars in times of stress or uncertainty.

Demands to support liquidity ratios, as below, will influence the cost of liquidity and liquid assets over time:

  • Liquidity coverage ratio (LCR) by retaining high-quality liquid assets (HQLA)
  • Gross initial margining against bilateral OTC transactions
  • Mitigation against intraday liquidity risks and increased activity through listed derivatives and CCPs

The GFT Collateral Optimiser can make dramatic improvements in the calculation and management of your collateral. It is designed to enable banks to accelerate the implementation and renovation of their internal collateral management process.

Why transform your business

Liquidity will become more expensive

Estimates of the additional required collateral range from 2 to 11 trillion US dollars in times of stress or uncertainty.

Initial margins for OTC

Levels of margin on OTC transactions will push up collateral and operational costs and force mobilisation of non-cash collateral. This will have an impact on investment performance and operations complexity.

Pre- and post-trade challenges

Costs of collateral will need to be accounted for when pricing a derivative transaction.

Given the growing importance of collateral from a trading, risk and capital management perspective, it’s rapidly becoming a necessity to manage collateral holistically. One of the key priorities when managing the sharp rise in calls and substitutions will be to optimise sources’ use of collateral inventory.

ContactTeaser Nick Nicholls Principal Consultant

Why choose GFT

Proven track record

GFT is one of the world’s leading solutions providers in the finance sector, offering business, design and technology consulting, combined with implementation and maintenance of a broad range of IT applications.

A calculation solution

Our extensive teams of specialists work with senior clients in both onshore and in local nearshore development centres. Overall, our aim is to achieve the best fit and solution for ourclients collateral problems.

Profit by our approaches

a. The openness of our source code and type of license required

b. The availability of ‘ready-to-use’ assets, faster project delivery and reduced project risk

c. The best cost/quality ratio through our unique onshore/nearshore approach.