Collateral optimisation more important to sell side, says SunGard
28 November 2012 New York
Image: Shutterstock
Collateral optimisation appears relatively more important to the sell side, perhaps reflecting the broader range of collateral-absorbing activities that are undertaken compared to the initial margining process that is so important to the buy side, found a recent survey.
The research, which examined global collateral management in buy- and sell-side firms, also found that central clearing and reconciliation were rated highly across both, with 69 percent of sell-side respondents saying that a centralised front-office funding function across products and locations is fundamental to effectively optimising funding costs.
“This is an interesting parallel with the rise of CVA trading functions to optimize the cost of credit risk in many sell-side institutions,” said SunGard.
The research also found that 69 percent of firms have built their cleared OTC collateral management capabilities out of their existing bilateral collateral management function, “probably due to the inherent flexibility required by an OTC derivatives platform to be able to handle a wide variety of products and agreements.”
“Very few respondents (10 percent) feel that their systems and processes are fully complete in their ability to support the combined cleared/non-cleared model for processing collateral. The major gaps identified relate to achieving full automation, both on cleared and non-cleared processes.”
The research, which examined global collateral management in buy- and sell-side firms, also found that central clearing and reconciliation were rated highly across both, with 69 percent of sell-side respondents saying that a centralised front-office funding function across products and locations is fundamental to effectively optimising funding costs.
“This is an interesting parallel with the rise of CVA trading functions to optimize the cost of credit risk in many sell-side institutions,” said SunGard.
The research also found that 69 percent of firms have built their cleared OTC collateral management capabilities out of their existing bilateral collateral management function, “probably due to the inherent flexibility required by an OTC derivatives platform to be able to handle a wide variety of products and agreements.”
“Very few respondents (10 percent) feel that their systems and processes are fully complete in their ability to support the combined cleared/non-cleared model for processing collateral. The major gaps identified relate to achieving full automation, both on cleared and non-cleared processes.”
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