Cross-Asset Archives - Page 3 of 6

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.

Define and identify all margin call disputes across agreement types to give an overview of all ongoing disputes
Ability to prioritise investigation based on internal thresholds and automatically document disputes below thresholds
Automatic attribution of dispute drivers, based on the margin call information and reconciliation results of the underlying trade portfolio, to pinpoint where to start the investigation
Workflow to visualise work in progress and outstanding tasks
Possibility to document resolution work on dispute level with daily investigation statuses and free text comments
Easy access to audit log of the dispute and dispute history for the agreement to support current investigation and audits
Possibility to extract data for internal reporting and audits

OSTTRA launches new solution to digitise paper confirmations

NEW YORK, LONDON, 14th July 2022 – OSTTRA, the global post-trade solutions company, today announced the launch of a paper digitisation solution that enables market participants to reduce the amount of time it takes to process paper confirmations for complex over-the-counter (OTC) derivative transactions from hours to minutes.

The new solution is a significant enhancement to the existing paper trade workflows for Investment Managers on OSTTRA Trade Manager, automating trade review and matching processes to achieve faster confirmations. With tens of thousands of OTC trades still captured on long form paper, reviewing trade details, terms and conditions is an arduous task for all firms, resulting in significant operational cost and risk.

The enhanced solution uses Artificial Intelligence (AI) to extract and digitise critical details from pdf transaction records, such as the notional value of a swap or strike price of an options contract. Creating this digitised representation of the trade is critical to automating onward processing and reducing the risk of human error in reviewing or transcribing these complex transactions.

Umniya Ahmed, Executive Director, Investment Management strategy, at OSTTRA, said: “Historically, the time it takes to process and confirm a paper OTC trade can take days and in some cases weeks. No two documents have the same legal structure – which presents a major headache to a typical investment manager dealing with multiple counterparties and numerous instrument types. Our solution uses AI to adapt to any type of paper transaction, irrespective of length or format.

By adding a paper digitisation element to Trade Manager, Investment Managers will be able to process the more intricate derivatives transactions alongside their existing electronic trade flow – allowing them to monitor all their OTC trades in one place.”

The launch of this new solution reflects OSTTRA’s ongoing commitment to expanding its services for the Investment Management community, leveraging its global network to streamline and standardise post-trade workflows.

The paper digitisation solution is available for FX options and equity swaps from this month, and then fixed income options, commodity swaps and non-deliverable forwards (NDFs) from September.

To find out more, click here.

Managing XVA in a Changing World: Challenges and Opportunities

XVA (X-Valuation Adjustments) have become an essential part of risk management in modern finance, reflecting the all-in cost of trading derivatives. Used by a range of institutions, from global and regional banks to asset managers and energy companies, XVA calculations are becoming increasingly important. However, challenges in their use remain, including inconsistent approaches, outdated technology, regulatory changes and the need for greater transparency.

What are the most pressing challenges facing the industry in managing XVA?

The industry faces two key challenges. Firstly, a lack of consistency in the approach to calculating XVA, including which XVA components to consider and when. This is particularly evident with the introduction of newer adjustments such as Margin Valuation Adjustment (MVA) and Capital Valuation adjustment (KVA), where treatment varies relative to the more widely agreed approach for Credit Valuation Adjustment (CVA), Debit Valuation Adjustment (DVA), and Funding Valuation Adjustment (FVA). However, with the regulatory-driven shift to greater levels of central clearing and the introduction of uncleared margin rules, the focus has moved on to MVA. Against this backdrop, we have been working with a wide range of clients to help them quantify margin cost from today until their portfolio maturity.

Secondly, many institutions are challenged by inadequate XVA infrastructure. Large banks often rely on in-house systems that struggle to handle the data volume and computational needs of an evolving XVA desk. Others struggle with expensive hardware and installed software that is costly and difficult to upgrade.

To what extent does the evolving regulatory landscape pose challenges for making definitive XVA decisions?

If you take margin and capital valuation adjustments, for example, projecting future margin and capital requirements is inherently challenging when regulatory changes and model revisions cannot be fully anticipated. However, it is important to recognise that a robust XVA system will have a wide range of calculation configurations which can be changed and clearly explained. For example, we often work with clients to understand the impact of changes such as the recalibration of the SIMM™ model on MVA calculations, or a model change from CEM to SA-CCR on KVA calculations.

How have recent regulatory changes impacted your clients’ XVA calculation needs?

The increasing focus on expected Initial Margin (IM) profiles and MVA has led to a number of our clients who manage Variation and Initial Margin via OSTTRA triResolve Margin, to use more sophisticated margin analytics. Forecasting IM accurately will involve computing SIMM™ sensitivities at future simulation dates. OSTTRA triCalculate effectively leverages our IM engine to perform precise and up-to-date SIMM™ computations within MVA/CVA calculations, ensuring a comprehensive and robust assessment of the implications of future IM in XVA.

What is the potential impact of cloud computing and web-based technologies on XVA calculation and data management?

Cloud computing and web-based technologies are poised to fundamentally transform XVA calculation and data management. By eliminating the need for expensive hardware and installed software, these technologies offer a more efficient and cost-effective approach. Cloud platforms centralise XVA data and calculations, fostering collaboration and transparency across an organisation – a critical advantage in today’s dynamic financial landscape.

Furthermore, cloud solutions provide the scalability and flexibility needed to adapt to evolving market conditions and regulations. With faster and easier implementation than traditional on-premises solutions, web-based systems offer a compelling path to optimisation for institutions seeking to enhance their XVA processes.

OSTTRA’s XVA service operates in our on-premise private cloud and we have invested in high performance GPU-focused servers. We are constantly evaluating the benefits of remaining in our private cloud versus moving to the public cloud.

How can OSTTRA help?

Our priority is high-speed, accurate calculations, enabling financial institutions to process previously unachievable daily risk calculations. Our web-based approach provides accessibility, transparency and consistent calculations to multiple departments and teams. By running 100,000 Monte Carlo paths as standard, we ensure increased accuracy in XVA, which is particularly valuable for analyses such as P&L attribution using sensitivities – exceeding the capabilities of many legacy systems.

Our solution is designed with user-friendliness and transparency in mind, providing consistent, interactive calculations accessible to all stakeholders. Clients transitioning from legacy systems have reported a smooth experience and increased adoption, contributing to a more informed and collaborative approach.

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 info@osttra.com or visit osttra.com/xva

OSTTRA and LCH SwapAgent collaborate to reconcile bilateral OTC trade data

LONDON, 2nd August, 2022 – OSTTRA, the global post-trade solutions company, today announced that its market-leading portfolio reconciliation service, OSTTRA triResolve, is actively reconciling data received from LCH SwapAgent, part of London Stock Exchange Group (LSEG).

Building on an existing relationship between OSTTRA and LCH SwapAgent, where trades legally confirmed on OSTTRA MarkitWire are registered into the LCH SwapAgent non-cleared service, this collaboration provides enhanced benefits to customers.

LCH SwapAgent is a service designed to standardise and simplify the valuation and settlement of non-cleared OTC derivatives and is now connected to OSTTRA triResolve to enable the reconciliation of member trade data.

Market participants can authorise SwapAgent to send their data directly to OSTTRA triResolve so that they can reconcile all their holdings versus counterparties in one place – at the required regulatory frequency for total portfolio size. This enables participants to use one coherent reconciliation process that takes advantage of OSTTRA triResolve’s workflow tools to help investigate and resolve differences.

“We are pleased to assist the market with this direct link. Having all portfolios on OSTTRA triResolve, enabling a straight through process, reduces operational complexity for our customers” said Sheila Schofield, triResolve Business Management. “Firms impacted by uncleared margin rules will also benefit from a streamlined process when managing regulatory initial margin” Sheila added.

“We continue to work with OSTTRA triResolve to help our members achieve greater operational efficiencies. Facilitating direct delivery of data for market participants, to enable an easy regulatory reconciliations process, helps to enhance automation and is a major benefit for the non-cleared derivatives marketplace” said Nathan Ondyak, Global Head of LCH SwapAgent.

OSTTRA was formed in 2021 through the combination of MarkitServ, Traiana, TriOptima and Reset, four businesses that have been at the heart of post-trade evolution and innovation for more than 20 years. This integration with SwapAgent reflects OSTTRA’s ongoing commitment to build upon its global network, creating partnerships across the industry to streamline post-trade workflows for financial markets.

ISDA SIMM™ Version 2.7: How will the SIMM™ recalibration affect initial margin requirements?

The recalibration of the ISDA Standard Initial Margin Model (SIMM™) reflects the latest market risk assessments and is set to go live on 7 December 2024. SIMM™ 2.7 is expected to reduce initial margin requirements for most market participants, as the delta risk weights for asset classes such as equity, commodities and qualifying credit have been significantly decreased. This adjustment is mainly due to the exclusion of the volatile early pandemic period in the calibration of the model. The largest increases in risk weights will apply to high yield and non-rated credit non-qualifying assets and trades involving high-volatility FX currencies.

Although the recalibration generally will reduce margin requirements, there are many aspects to the model, making it difficult to anticipate how the numbers will move for everyone. For example, delta concentration thresholds that determine what positions are given higher weight in the risk calculations, are generally lowered across all assets. Hence, more positions will breach these thresholds and therefore be subject to increased margin, potentially impacting less diversified portfolios with large, concentrated positions. In contrast, higher vega concentration thresholds and lower vega risk weights will likely reduce exposure amounts for options, especially options that are more sensitive to implied volatility changes, hence lowering margin requirements.

Preliminary data from client portfolios shows up to 26% reductions in initial margin requirements, though the degree of benefit will vary based on portfolio composition. Overall, the reduced margin burden allows clients to allocate their capital more freely.

An interesting aspect of the recalibration is that some clients close to the €50 million initial margin threshold, the bilateral threshold at which firms are obliged to exchange initial margin with a certain counterparty, might remain out of scope for longer. Some clients that are currently above the threshold for posting IM could even be pushed back under and continue to monitor their IM.

On a final note, ISDA will start to update the parameters semi-annually after SIMM™ 2.7 to more effectively adapt the model to prevailing market conditions.

Ensuring a smooth transition with OSTTRA

OSTTRA triCalculate streamlines the move from the current SIMM™ version to version 2.7 by allowing clients to test the impact of the recalibration before it takes effect. Our comprehensive SIMM™ solution helps clients in navigating the evolving margin landscape effectively whether they are focused on margin exchange or on margin monitoring.

Our platform delivers accurate IM calculations with day-to-day variation tracking and offers a detailed breakdown per product, risk classes, sensitivities and buckets, giving users a better understanding of what is driving their IM amount. Clients can also run “what-if” analyses, including Pre-Deal Checks to assess potential impact of new or unwound trades, along with Market Data Stress Testing and Model Backtesting. Our continuous collaboration with clients enhances the user experience, focusing on clear and actionable risk insights to support better decision-making in collateral management.

Trade Lifecycle Services Update – Winter 2025

2025 has been a year of significant progress in collateral and portfolio reconciliation, and we’re thrilled to share some highlights. Looking ahead to 2026, we’re committed to further empowering market participants by simplifying workflows, reducing risk, optimising margin processing, and facilitating a seamless adoption of new regulations.

Portfolio Reconciliation & Collateral Update – 2024 Round Up

2024 was a year of significant progress in collateral and portfolio reconciliation, and we’re thrilled to share some highlights. Looking ahead to 2025, we’re committed to further empowering market participants by simplifying workflows, reducing risk, optimising margin processing, and facilitating a seamless adoption of new regulations. Thank you for your continued partnership

Compression & Optimisation Update – October 2024

“So far 2024 has been a year of significant global events – from general elections and easing interest rates to geopolitical shifts that have impacted the global economy. We have remained committed to supporting the integrity of the markets and empowering our extensive network to mitigate risks effectively, resulting in record performance, innovation in new asset classes and products as well as notable award wins.

Thank you to our network of participants for your continued support and we look forward to delivering even greater efficiencies in the future.”

Erik Petri, Head of Optimisation

Post-Trade Dictionary: Decode Industry Terms from A to Z with this Post-Trade Glossary

New FINRA 4210 Margin Requirements – What Do Firms Need to Know?

Following eight years of delay and postponement, the ‘4210’ rules finally come into effect 22 May 2024. In-scope firms with covered agency transactions, including To Be Announced (TBAs), pool transactions & Collateral Mortgage Obligations (CMOs) will become subject to daily margin requirements (or equivalent capital deductions).

What should firms focus on?

While immediate priority should be given to establishing and updating legal Master Securities Forward Transaction Agreement (MSFTA) documentation, the broader challenge is to establish the BAU processes to correctly identify in-scope trades, perform daily MTM valuations and manage margin exchange (or capital deductions).

How can OSTTRA help?

Ahead of the regulatory go-live, firms are already using our services to manage both reconciliation and margining of their MSFTA portfolios.

OSTTRA triResolve provides an automated way to align portfolios & resolve differences. We reconcile over 90% of all bilateral OTC derivatives across 2,000+ groups. You benefit from a centralised service model with a global network where you and your counterparties share the same view and work together to resolve any differences.

OSTTRA triResolve Margin leverages the portfolio reconciliation data and automates the margin call exchange & collateral settlement process.

Benefits

Standardisation & Optimisation

Simplifies data capture & normalisation, supports data quality checks and provides best-practice workflows across products.

Cost Effective

Our transparent pricing model is pay as you go with no hidden fees.

Rapid onboarding

No installation required. Be up and testing in days.

Operational efficiencies

Retire manual processes – reducing operating costs and allowing you to focus resources on risk & compliance.

Robust dispute resolution

Reconciliation analytics pinpoint where you have disputes and identifies what is driving them.

Multiproduct coverage

Multi asset class and product support including Bilateral, Cleared, ETD, Repo and TBA.

To find out more about our Margin solutions, contact us below.