Minium, IBM and Promontory release joint white paper
19 February 2018 London
Image: Shutterstock
The patchwork of outdated systems most firms use today is not fit for purpose, according to a white paper jointly released by Minium, IBM and Promontory.
The white paper, titled ‘The Way Ahead for Derivatives Clearing and Prime Services’, said that “firms simply will not be able to deliver the right level of return on equity for their clearing and prime brokerage businesses without a radical reassessment of their technology stacks”.
It stated that what is needed is “a system capable of producing a current view of collateral positions, including what has been pledged or recalled”.
Minium, IBM and Promontory also discussed some of the key challenges faced by the sector, such the cost of operational processes, the ongoing wave of new regulations and their impact on existing systems.
On a positive note, the white paper explained that in terms of regulatory trends, regulatory bodies and market participants, including central counterparties (CCPs) continues to “improve the quality of trade-repository data”.
It added that “it will be important for CCPs to demonstrate to supervisors that they are properly managing operational risk [incorporating] industry best practices and supervisory expectations” but that clearinghouses and investment banks still need to “pay close attention to the operational risks associated with trading, clearing and settlement”.
The white paper also explained the importance of the General Data Protection Regulation (GDPR) and the European Market Infrastructure Regulation (EMIR) in establishing “prudential and risk-mitigation techniques and operational requirements for derivatives transactions.”
It added that EMIR will require CCPs and trade repositories to “fulfill prudential minimum requirements”.
The white paper, titled ‘The Way Ahead for Derivatives Clearing and Prime Services’, said that “firms simply will not be able to deliver the right level of return on equity for their clearing and prime brokerage businesses without a radical reassessment of their technology stacks”.
It stated that what is needed is “a system capable of producing a current view of collateral positions, including what has been pledged or recalled”.
Minium, IBM and Promontory also discussed some of the key challenges faced by the sector, such the cost of operational processes, the ongoing wave of new regulations and their impact on existing systems.
On a positive note, the white paper explained that in terms of regulatory trends, regulatory bodies and market participants, including central counterparties (CCPs) continues to “improve the quality of trade-repository data”.
It added that “it will be important for CCPs to demonstrate to supervisors that they are properly managing operational risk [incorporating] industry best practices and supervisory expectations” but that clearinghouses and investment banks still need to “pay close attention to the operational risks associated with trading, clearing and settlement”.
The white paper also explained the importance of the General Data Protection Regulation (GDPR) and the European Market Infrastructure Regulation (EMIR) in establishing “prudential and risk-mitigation techniques and operational requirements for derivatives transactions.”
It added that EMIR will require CCPs and trade repositories to “fulfill prudential minimum requirements”.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
