ISDA publishes new collateral management toolkit
17 August 2020 London
Image: Isarapic / Shutterstock.com
The International Swaps and Derivatives Association (ISDA) has developed the new Collateral Management Transformation Toolkit (CMT Toolkit) to build on the recommendations of its Blueprint for the Optimal Future State of Collateral Processing, which was published in 2017.
The document was originally designed to provide a set of principles that the industry could work toward to meet the changing demands and challenges of the collateral management process.
The CMT Toolkit is intended to help ISDA firms strategically implement portfolio reconciliation and dispute resolution efficiencies. This will increase operational efficiency, reduce operational and counterparty risk, and improve liquidity and capital measures for all market participants.
This initiative may help those firms that are included in phases five and six of the initial margin
(IM) requirements of the Uncleared Margin Rules. However, ISDA notes, this document is intended to be used more broadly for over-the-counter derivatives post-trade processes.
The toolkit identifies opportunities for improvement depending on the type of firm and maturity of its dispute management procedures.
For example, it recommends establishing a governance framework for the dispute management process, the use of distributed ledgers and performing regular trade and collateral reconciliations outside of margin call disputes.
ISDA concludes that dispute management and portfolio reconciliation “will always play a key role within the collateral management lifecycle”.
The initiative explains that firms, including those on the buy and sell side, should holistically review their current dispute management process and use a CBA in order to make strategic improvements to collateral management operations functionality over the longer term.
The toolkit can be accessed via the ISDA website.
The document was originally designed to provide a set of principles that the industry could work toward to meet the changing demands and challenges of the collateral management process.
The CMT Toolkit is intended to help ISDA firms strategically implement portfolio reconciliation and dispute resolution efficiencies. This will increase operational efficiency, reduce operational and counterparty risk, and improve liquidity and capital measures for all market participants.
This initiative may help those firms that are included in phases five and six of the initial margin
(IM) requirements of the Uncleared Margin Rules. However, ISDA notes, this document is intended to be used more broadly for over-the-counter derivatives post-trade processes.
The toolkit identifies opportunities for improvement depending on the type of firm and maturity of its dispute management procedures.
For example, it recommends establishing a governance framework for the dispute management process, the use of distributed ledgers and performing regular trade and collateral reconciliations outside of margin call disputes.
ISDA concludes that dispute management and portfolio reconciliation “will always play a key role within the collateral management lifecycle”.
The initiative explains that firms, including those on the buy and sell side, should holistically review their current dispute management process and use a CBA in order to make strategic improvements to collateral management operations functionality over the longer term.
The toolkit can be accessed via the ISDA website.
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