Cross-Asset Archives - Page 3 of 7

Proactive IM Management in the Face of SIMM 2.8+2506

The semi-annual recalibration of the ISDA SIMM model, version 2.8+2506 (reflecting data up to 30 June 2025), has been released and becomes effective on 6 December 2025¹.

This update introduces relatively modest changes overall. We see some of the biggest delta risk weight decreases in energy-sector commodities. Conversely, the most notable increases are in the credit qualifying space, specifically for high-yield and non-rated subsections within the financial and technology sectors. Most other risk weights and correlations across interest rate, commodity, and equity risk classes see only minor adjustments, and all concentration thresholds remain unchanged.

While these specific parameter changes may be small and likely have a minor impact on SIMM calculations, in the contemporary regulation-driven environment, we see a trend where the costs and complexities of managing initial margin are becoming a critical focus for liquidity and funding.

In this landscape, simply calculating the IM number is not optimal for managing margin costs, maintaining control over liquidity buffers and making funding projections. There is significant value in understanding its drivers and anticipating how it changes with time, alterations of the portfolio and under stressed market scenarios. The OSTTRA triCalculate service has a sophisticated suite of tools designed to address these exact challenges.

Stay ahead of SIMM version updates

Clients can anticipate IM impact from a SIMM recalibration. Well before SIMM 2.8+2506 becomes effective, OSTTRA triCalculate enables users to compare their current portfolio’s IM against the new model version.

Understanding daily IM movements

A common challenge we see is understanding why IM moves from one day to another, especially for portfolios dependent on many market factors. We have developed a dedicated attribution view to make this transparent. It allows for a drill down analysis from the top-level product class (e.g., Equity, Rates) to the individual risk factors and trades, as well as quantifying how much of the IM change can be attributed to market data moves versus new and expired trades.

Make informed strategic decisions

Effective IM management is forward-looking. To that end, we provide powerful tools for strategic planning:

Pre-Deal Checks: How will a new set of trades affect your margin? Our pre-deal check tool quantifies the marginal IM impact before execution. This insight can be crucial in deciding not just whether to trade, but how to trade, potentially aiding in the selection of a counterparty or the structuring of the transaction to be more margin-efficient.
IM Stress Testing: You can also project your margin exposure into the future. The service supports sophisticated IM stress testing, allowing you to bump market data or apply a theta shift (time decay) to predict future IM requirements under various scenarios.

Calculate the cost of funding

Funding initial margin over time can be a big financial burden and source of uncertainty. As part of our extensive XVA suite, we support MVA (Margin Valuation Adjustment) calculations. MVA quantifies the expected cost of funding initial margin over the lifetime of a portfolio. Clients are interested in MVA because it provides a measure of a major cost component associated with uncollateralised or partially collateralised trades, ensuring that pricing fully reflects the true economic cost of the trade’s full lifecycle.

Don’t wait for 6 December

The ISDA SIMM 2.8+2506 update is just the latest challenge in a complex and evolving margin landscape. With OSTTRA triCalculate, you can move from a reactive to a proactive IM strategy.

Contact us at info@osttra.com to schedule a demo or, if you are an existing client, to run a free impact analysis on your portfolio against the new SIMM 2.8+2506 model.

¹ https://www.isda.org/2025/10/31/isda-publishes-isda-simm-methodology-version-2-8-2506/

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

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.

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

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.

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.

Analyse trends, themes & difference drivers in MtM exposure*
Insight into reconciliation quality*
Analysis of trade matches, identifies systematic issues and includes peer group benchmarking
Overview of Reconciliation* & Margin activity
Helps monitor operational efficiency and regulatory requirements
Delivers Management Information for Risk, Dispute, Collateral & Reconciliation teams
Trend Analysis of margin call disputes
Tracks dispute ages & average unsecured exposure
Identifies main drivers & root cause of disputes
Highlights size and frequency of disputed counterparties

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.

Understand dispute volumes and average dispute size for the whole portfolio across agreement types
Monitor average unsecured exposure – complete view of the risk related to the variation margin call process across your portfolio
Track agreements by days in dispute as well as review and investigate long running disputes
Analyse the main drivers of the disputes and understand key issues
Identify the counterparties you have most and largest disputes with

*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.

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

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