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      SWIFT automation for Collateral Managers

      Client type: Large Regional Bank
      Regulatory impact: UMR Phase 5 

       

      Client summary

      A long-time user of OSTTRA services, including OSTTRA triResolve for portfolio reconciliation since 2010, the bank had previously expanded its use to include collateral management support via OSTTRA triResolve Margin to help prepare for UMR compliance. The transition from their previous Front Office collateral system to OSTTRA triResolve Margin provided new support for IM margining, enhanced functionality and improved workflow automation, something that was critical as they anticipated increasing volumes under UMR.

      Problem

      Under UMR they were subject to new regulatory requirements mandating that they segregate Initial Margin via triparty or 3rd party custodian.  Despite having in-house SWIFT capability for cash & securities collateral settlement, they could not support connectivity to triparty or 3rd party custodians in the same way.  A key challenge was the requirement to connect to multiple custodians, including: Bank of New York Mellon, Clearstream, Euroclear & JP Morgan. Settlement processing was further complicated by a requirement to notify each triparty of movements both when receiving and posting IM collateral.

      Standard triparty connectivity options – instructing individual settlements via separate custodian portals, or fax – did not appeal to them.  Similarly, build out of their own connectivity to each custodian was considered costly and inefficient, given no experience with the new collateral segregation models, and magnified by a need to connect to not just their own triparty, but those of their counterparties too.

      Our Solution

      The Bank took the initial decision to leverage an industry utility for instruction of collateral movements via SWIFT.  However, it soon became clear that it did not provide connectivity to all the required custodians.  As the UMR deadline approached, the Bank decided to supplement the use of the settlement utility and expand their use of OSTTRA triResolve Margin to provide the additional connectivity.

      This approach saw the Bank instruct all SWIFT settlements via OSTTRA triResolve Margin, with some being routed via the industry utility, and others being instructed directly via the OSTTRA SWIFT gateway. However, this still required a separate login to the utility to view collateral settlement status updates for those settlements they instructed.

      Within weeks of UMR go-live the Bank quickly decided that the ‘dual’ settlement approach was not efficient and opted to extend use of OSTTRA triResolve Margin for the instruction of all collateral transfers and to end their use of the utility. This decision was due to the system’s ability to connect to all triparty agents, support for an extensive set of SWIFT message types and provision of real-time settlement transparency. Further, by combining their margin & settlement workflows in OSTTRA triResolve Margin the Bank was able to increase operational efficiency, as well as reduce the risk of incorrect bookings & failed settlements.

      For users, upon completion of the margin call workflow a collateral instruction is automatically generated for approval. The system then automatically creates an IM collateral instruction message (MT527/540/542) which is sent in real-time directly to the required triparty or custodian. Collateral settlement status updates are received (MT558/544/546/548) providing insight and certainty. Additional transparency is provided via collateral reporting which offers a single consolidated view of all collateral assets, regardless of the triparty (MT569/535).

      By leveraging OSTTRA triResolve Margin’s robust SWIFT connectivity, the Bank was able to support all requirements without the need for custom development and complex testing. Use of a single solution for both IM margin management & IM collateral settlement allows the Bank to benefit from a fully automated workflow, ensuring maximum levels of STP. From call issuance to collateral instruction, all steps can be automated and managed via a single dashboard, saving time, reducing risk and lowering the chance of failed settlements.

       

      To learn more about Collateral Management, click here or Contact us

      Click here here for more information about SWIFT Settlement.

      OSTTRA triResolve Margin: UMR compliance & SWIFT connectivity

      Client type: Major Japanese Bank
      Regulatory impact: UMR Phase 1

       

      Client summary

      A long-time user of OSTTRA triResolve for portfolio reconciliation, alongside legacy vendor system for VM collateral management, with manual email-based workflow for exchange of margin calls. Impacted by the first wave of UMR regulations in September 2016, they required new tools to support the IM margin process, including storage of IM agreements; IM call calculation; IM call workflow; support for electronic exchange of IM margin calls; connectivity to industry infrastructure for IM reconciliation and connectivity to triparty agents for collateral settlement.

      Problem

      The Bank had an existing VM margin process supported by an installed vendor system. While this provided support for the traditional VM call process, it was assessed as not being suitable to support new additional IM margin requirements. Key gaps included no connectivity to industry infrastructure; zero drilldown capability; no automation and onerous requirements for annual system upgrades.

      While the Bank’s initial focus was to establish an automated IM margin call workflow, during the UMR project they identified a new problem, previously not in-scope. As they onboarded to new custodians & tri-party agents to support collateral segregation requirements, it quickly became clear they would need to establish a new process to ‘connect’ to each one. Their existing in-house payment system did not support tri-party and traditional options to instruct collateral payments via custodian portals, or fax, were deemed too manual, overly slow and subject to error.

      The build out of their own connectivity to each custodian was considered costly and inefficient, given no experience with the new collateral segregation models, and magnified by a need to connect to not just their own tri-party, but those of their counterparties too.

      Our Solution

       

      The Bank took the decision to implement OSTTRA triResolve Margin for IM margin management.

      The provision of a fully automated workflow, combined with integration to both Acadia’s IMEM service, and OSTTRA triResolve, ensured they could manage all IM requirements from a single dashboard.

       

      As part of this decision, the Bank also chose to leverage the system’s SWIFT connectivity for settlement automation capability. This was chosen due to the high-level of flexibility and automation it offered. As a global bank they required connectivity not just to their own preferred tri-party, but a wider industry network. This included: BNY Mellon, Clearstream, Euroclear and JP Morgan.

      In addition to allowing connectivity to a wide range of custodians, the system also offers support for the specific technical & booking requirements of each one, thus removing the need for complex bespoke configuration. Off the shelf support for a wide range of SWIFT message standards allows instruction of collateral via tri-party or 3rd party methods.

      For users, upon completion of the margin call workflow a collateral instruction is automatically generated for approval. The system then automatically creates an IM collateral instruction message (MT527/540/542) which is sent in real-time directly to the required tri-party or custodian. Collateral settlement status updates are received (MT558/544/546/548) providing insight and certainty. Additional transparency is provided via collateral reporting which offers a single consolidated view of all collateral assets, regardless of the tri-party (MT569/535).

      By leveraging triResolve Margin’s standard & robust SWIFT connectivity, the Bank was able to go-live quickly, without the need for custom development and complex testing. Use of a single solution for both IM margin management, and IM collateral settlement, allows the Bank to benefit from a fully automated workflow, ensuring an end-to-end STP process. From call issuance to collateral instruction, all steps can be automated and managed via a single dashboard, saving time, reducing risk and lowering the chance of failed payments.

       

      To learn more about Collateral Management, click here or contact us at info@osttra.com.

      UMR Compliance: IM Monitoring Case Study

      Client type: European Regional Bank
      Regulatory impact: UMR Phase 5 – AANA $/€50bn

      Client summary

      Existing user of both OSTTRA triResolve and OSTTRA triResolve Margin to support portfolio reconciliation and collateral requirements. Firm required to comply with uncleared margin rules (UMR) in phase 5. Primary focus was new support for calculation and monitoring of initial margin and support for potential exchange of IM calls in the future.

      Problem

      UMR compliance required new daily calculation of initial margin, and the firm needed support for both SIMM and schedule methods. To better understand the impact of UMR – and the potential need for new legal documentation and opening of custodian accounts – the firm wanted to estimate IM exposure per portfolio as early as possible. Based on initial portfolio estimates and a review of trading strategies, it was projected that IM exposure would not exceed the 50M threshold with any counterparty for a while following the September deadline. With IM expected to increase over time, the goal was to actively monitor all portfolios and only begin legal negotiation when tolerances were exceeded.

      The UMR project goal was to deliver a solution that could support both calculation and monitoring of initial margin. At the same time, it needed to provide support for potential future exchange of collateral and connectivity to custodians and triparty, should future IM increase above threshold levels.

      Solution

       

      The firm decided to extend its existing use of OSTTRA services for an integrated UMR solution. The addition of OSTTRA triCalculate provided SIMM sensitivity and initial margin calculation capability and, combined with their existing use of OSTTRA triResolve Margin, allowed them to easily monitor IM exposure.

       

      As a licensed ISDA SIMM™ vendor OSTTRA was able to support all IM calculation requirements off the shelf. The firm was able to onboard easily, with  OSTTRA triCalculate requiring only a single Excel trade file to begin calculations. Our team of valuation experts were able to quickly perform data normalization and provide IM results for validation by the Bank. This exercise provided both high-level IM results as well as a SIMM breakdown, allowing the firm to easily compare numbers with counterparties.

      OSTTRA triCalculate results feed automatically into OSTTRA triResolve Margin, allowing the client to see IM exposure in their existing dashboard, eliminating any integration effort on the part of the firm. OSTTRA triResolve Margin IM tolerances are defined for each relationship, allowing the firm to set their own custom monitoring limits. Should IM tolerances be exceeded, automated alerts are issued to notify the Bank to take action, for example to begin legal document negotiation.

      For additional transparency, OSTTRA triResolve Margin’s threshold monitoring service also provides the Bank with a view of any initial margin calculations shared by their counterparties via Acadias Initial Margin Threshold Monitor (IMTM) service. Active monitoring of IM via the Bank’s existing use of OSTTRA triResolve Margin is designed to simplify processing for users, removing the need for use of multiple platforms or additional data setup.

      In the future, should the Bank exceed IM threshold amounts, they are able to easily switch from IM monitoring to active margin call management, using the same dashboard they use today for VM, with integration to both Acadia’s IM Exposure Manager (IMEM) for sensitivity reconciliation and SWIFT for collateral settlement via custodian or triparty.

       

      To learn more about Threshold Monitoring, click here or contact us at info@osttra.com.

      EMIR Post Trade Risk Reduction Service Exemptions from ESMA and the FCA Come into Effect for OSTTRA

      LONDON, 8 July 2025 – OSTTRA services have been granted exemptions from mandatory clearing obligations under EMIR by the European Securities and Markets Authority (ESMA) and from the public reporting requirements under MiFIR by the UK’s Financial Conduct Authority (FCA).

      OSTTRA triBalance is currently the only provider in the EU approved to carry out post-trade risk reduction services under a clearing exemption, confirmed by ESMA on 16 June 2025. Additionally, the FCA’s exemption from the Derivatives Trading Obligation (DTO), post trade transparency reporting and best execution requirement took effect on 30 June 2025, removing a further obligation from UK based users of OSTTRA’s Post Trade Risk Reduction (PTRR) services. EU based users already benefitted from the equivalent exemptions that came into force with EU MiFIR 3 in 2024.

      The clearing obligation was designed to reduce systemic risk by mandating central clearing for certain derivatives, however, the EMIR clearing obligation prevented the use of vanilla swaps for portfolio rebalancing. With the exemption now in place, the OSTTRA service can better optimise risk reduction through a more liquid and widely traded contract, marking a significant milestone in OSTTRA’s efforts to expand the use of post trade risk reduction services.

      Previously, swaptions were used as a proxy, but these more complex and costly instruments limited the wider adoption of portfolio rebalancing. This reduced the broader benefits of multilateral participation, preventing widespread reduction of counterparty risk in the financial system. The exemptions from ESMA will better enable OSTTRA to support a wider set of market participants.

      A similar decision from the Bank of England’s Prudential Regulation Authority (PRA) is under consideration; another key step towards enabling broader market participation. Work is also underway to facilitate similar exemptions from the CFTC and SEC for equivalent rules in the US under the Dodd-Frank Act, which will complete the regulatory alignment needed to fully support multilateral risk reduction and enhanced liquidity.

      “This is an important development for our clients, who rely on our services to reduce risk in their portfolios,” commented Kirston Winters, Head of Legal, Risk, Compliance and Government and Regulatory Affairs at OSTTRA. “These exemptions allow us to deliver more efficient and accessible optimisation services, reducing operational complexity and enabling broader participation in multilateral risk reduction – ultimately strengthening the resilience of the financial system. We’re working closely with other regulators to provide additional exemptions, which will further enable firms to use post trade risk reduction services.”

      To find out more, talk to a member of our team at at info@osttra.com.

      Navigating the Complexities of CVA Risk Capital Calculations: A Global Perspective

      Basel III capital rules now require banks globally to choose between the Basic Approach (BA-CVA) and the more risk-sensitive Standardised Approach (SA-CVA) for calculating Credit Valuation Adjustment (CVA) risk. Many institutions, particularly in the EU, have initially favoured BA-CVA due to lower implementation costs.

      In the EU, a significant factor influencing CVA risk capital strategy is the current exemption for corporate and sovereign trades, which reduces the capital cost considerably. However, the long-term stability of this exemption is uncertain. Its potential removal would significantly increase the required CVA capital, possibly shifting the balance in favour of SA-CVA for many institutions. This kind of regulatory uncertainty requires banks worldwide to carefully consider their CVA risk capital strategy and prepare for regulatory shifts.

      The choice between BA-CVA and SA-CVA also has important implications for hedging strategies. While SA-CVA allows banks to incorporate market risk hedges into their CVA calculations, BA-CVA does not. Consequently, hedging to reduce P&L volatility might inadvertently increase capital requirements under BA-CVA. Banks, therefore, need to carefully weigh the trade-offs between simplicity, capital efficiency, and hedging effectiveness, a consideration relevant across all jurisdictions.

      OSTTRA triCalculate XVA helps banks apply the most appropriate approach to different counterparties. This granular control is crucial for optimising capital and adapting to evolving regulations, both within specific jurisdictions and globally. Furthermore, OSTTRA triCalculate XVA leverages GPU technology to overcome the computational complexity of CVA sensitivity calculations. This enables efficient and timely generation of necessary risk sensitivities, even for large and complex portfolios.

      With the Basel III capital rules already implemented in some jurisdictions, the UK set to adopt them in January 2027, and US regulations expected to follow, banks must take a proactive approach to CVA risk capital management. This involves not only considering the current regulatory landscape but also anticipating potential changes and understanding the interplay between CVA risk capital calculations and hedging practices.

      A flexible and robust calculation solution, capable of handling the computational demands of CVA, is vital for navigating this complex and globally diverse environment, ensuring long-term compliance and capital efficiency.

      OSTTRA triCalculate provides XVA risk calculations across credit, debt, funding, margin, capital and collateral for bilateral OTC derivatives. Our web-based service provides efficient XVA calculations using transparent and consistent models. To learn more, contact us or visit osttra.com/xva

      Cash Flow Management: Moving Away from Manual Workflows

      Efficient cash flow management is critical for market participants navigating ever-evolving post trade requirements. But existing workflows rely on manual processes, leading to errors and excessive operational demands. Watch the video below to hear from Tom Woolfenden, Product Design Director at OSTTRA, to hear how OSTTRA Cash Flow Management is automating and streamlining operations for firms facing tight deadlines and complex processes.

      Our configurable, centralised platform already processes thousands of cash flows, across multiple asset classes and currencies. To find out more, visit osttra.com/cashflow or contact us.

      From Rusty Bikes to Formula One: Upgrading Cash Flow Management in Derivatives Trading

      Traditionally, the back office has lagged behind the front office in technological advancements, hindering efficiency and accuracy in cash flow management. It’s time to shift gears and unleash the full potential of automation, regardless of asset class or payment type.

      In December 2024, Philippe Lintern, the head of the Bank of England’s FX division, compared front office staff using the most advanced technology to Formula One teams, while noting that peers in the back office were left struggling to match the pace on their “rusty old bicycles.” An area where this rings particularly true is the $667 trillion global derivatives space, where cash flow management remains heavily manual, relying on humans, emails and even fax machines, despite the fast-paced world of trading pushing ever increasing volumes through this strained back office infrastructure.

      It doesn’t have to be like this. As the dust settles from the all-consuming rush to T+1 settlement, resources can be re-focused on tackling some of the stubborn pockets of manual process that persist in the back office – and with the twin goals of improving both operational and capital efficiency, cash flow management is emerging as a priority.

      “Last year we started to see a lot more focus on transparency and automation in post-trade interactions between counterparties, including those processes where custodians are involved, such as cash flow payments,” said Tom Woolfenden, Director, Product Design, OSTTRA. “However, so much manual coordination remains to agree and settle these cash flows.” This has been highlighted recently by the Financial Markets Standards Board in their final standard for sharing of Settlement Instructions, and updated guidance also issued in the Global Foreign Exchange Committee’s revised FX Global Code, such as Principle 44, which states that “Market Participants are encouraged to implement straight-through automatic transmission of trade data from their front office systems to their operations systems”, by means of secure interfaces where the transmitted trade data cannot be changed or deleted during transmission.

      Cash flow management itself isn’t a complicated concept: At its core, it’s about making regular payments to the other parties involved in your trades, based on the underlying contract terms and up-to-date valuations.

      However, things get incredibly complex when you consider the scale of the market. A large financial institution might handle hundreds of thousands of these trades and their associated cash flows every month. This volume alone makes it difficult to track who owes what to whom. The problem is compounded by the fact that different participants use different data standards, calculation methods, market data sources, and messaging formats. This lack of standardisation can make it extremely challenging to even figure out which specific trade back-office staff are discussing in their emails, or which trade is causing a discrepancy.

      “An absolute worst-case scenario is that you’re expecting to receive a cash flow from an open trade, and you have your designs on how to use that money, but your counterparty doesn’t even have an idea that there is an obligation to you”, Woolfenden adds.

      Interest rate swaps, equity swaps and portfolio swaps are prime examples of the products where manual cash flow management leads to errors and operational inefficiencies. Take equity swaps for example: Cash flow management for these contracts involves the ongoing payments of the swap for the duration of the trade, as well as the underlying dividends and accruals, all of which need to be calculated, agreed on and then settled, which is where the uncertainty and misalignment comes in.

      “We often see market participants taking agreed cash flow information offline, emailing, or even faxing it to their custodian, creating an inefficient communications chain to complete the payment and settlement process,” Woolfenden said.

      As settlement times are expected to continue to shorten globally, untangling the confusion will quickly become even more important. Cash flow inefficiencies also prevent liquidity optimisation, or the ability of the front office to deploy cash to generate profits – because the money is stuck in a back-office limbo until the disagreement is resolved.

      The most efficient way to resolve this conundrum is bringing transparency into the process for all sides and linking agreed trades with subsequent cash flows so that calculations can be made using consistent economics. OSTTRA Cash Flow Management is an established platform that helps streamline the cash-flow-processing challenge with a standard workflow and matching engine. With legal confirmations for many bilateral OTC trades readily available on OSTTRA MarkitWire and connected to the OSTTRA triResolve reconciliation engine, participants can have complete confidence that they share a common view of a transaction with their counterparties. An automated system that matches cash flows, as well as linking the underlying trades associated with them, removes the need to spend time figuring out who owes what and why: OSTTRA Cash Flow Management also notifies participants if they’re misaligned. It can also bilaterally net matched cash flows into an agreed, reduced number of payments whilst respecting settlement instructions.

      “At OSTTRA, we are uniquely positioned to eliminate friction and inaccuracies in derivatives cash flows, thanks to our position at the centre of post-trade, from trade confirmation and processing through to portfolio reconciliation and collateral management, and all the opportunities for improving data standardisation that this brings. The end result is that we can seamlessly automate the entire process, including sending SWIFT settlement messages on behalf of our clients. The settling bank, typically the custodian, can receive an instruction to do the settlement just one minute after the cash flow is matched, removing the all too common merry-go-round of email, phone and fax communication and bringing greater transparency on a real-time basis,” Woolfenden said.

      Once the whole lifecycle is automated, conducted in real-time and in a way that’s transparent to parties, calculations can be done on the same basis, payments can be netted and settlement becomes a matter of a simple instruction to the custodian – as easy as riding a bike! To learn more about OSTTRA for Cash Flow Management, please visit osttra.com/cashflow

      From T+1 Settlement to the FX Global Code: Unlock Operational Excellence in Post-Trade

      Are you ready to elevate your post-trade operations in the face of evolving regulatory demands? T+1 settlement, CSDR, and the FX Global Code are setting new standards for operational excellence, demanding proactive solutions.

      Listen as Steve French, Commercial Head for FX & Securities at OSTTRA, discusses how new regulations, industry initiatives and volatile markets are increasing demands for operational resilience and agility.

      OSTTRA triResolve Analytics

      OSTTRA triResolve analytics provides trend analysis of your trade portfolio from a reconciliation, risk and collateral perspective.

       

       

      OSTTRA triResolve Dispute Analytics

      OSTTRA triResolve dispute analytics leverages underlying reconciliation data to automate attribution of dispute root cause. The feature enables systematic analysis of what is driving margin call disputes over time.

       

      *Accessible to all OSTTRA triResolve clients 

      OSTTRA triResolve Dispute Manager

      OSTTRA triResolve Dispute Manager combines margin call data with portfolio reconciliation results to automate attribution of dispute drivers and enable a systemic dispute identification, tracking  & resolution process.

       

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