Omgeo Upgrades Collateral Management System
Omgeo has added centrally cleared swaps to its collateral management system allowing fund managers, broker dealers and banks a single view of all their collateral exposures.
An upgrade to its ProtoColl automated collateral management platform, announced on Monday, gives buy and sell side firms a better view of the collateral received, required and delivered for centrally cleared swaps in addition to bilateral transactions, repurchase and securities lending deals.
Omgeo ProtoColl's workflow will calculate daily initial and variation margins; issue call and recall notices for margin; flag any disputes on the amount of margin that must be posted; and record any adjustments. The platform will also keep tabs on how much collateral has been sent or received and from which counterparty for all collateralized transactions. Fund managers and their clearing brokers can communicate with each other using proprietary formats established by the brokers. Omgeo, a post-trade communications service firm, inherited ProtoColl when it bought collateral management firm Allustra in 2008.
Adding swap transactions that are cleared through clearinghouses -- a process often coined central clearing -- required Omgeo to incorporate new workflow between fund managers and their clearing brokers to incorporate both initial, variation margin and more frequent margin calls. Under the current practice of bilateral processing, fund managers communicate only with broker-dealer counterparties and usually rely on a combined movement for both types of margin.
"We are seeing increased focus on automated collateral solutions as firms recognize the need to act now to prepare their initial processes ahead of the implementation of new regulatory mandates including Dodd-Frank and EMIR," say Ted Leveroni, executive director of derivatives strategy and external relations for Omgeo. "While the regulations are still to be finalized there will always be the need for both bilateral and centrally cleared capabilities and ProtoColl gives clients the ability to manage both from a single platform today."
Errors related to manual calculations and communications between counterparties can easily result in disagreements and either too much or too little collateral used. Spending on automating and aggregating collateral management -- a historically paper-based and siloed process -- has become a priority for financial firms which have to comply with the Dodd-Frank Wall Street Reform Act and its European counterpart EMIR. Collateral requirements are expected to increase and knowing just how much and when it should be delivered or received from which counterparty on an intraday companywide basis will help firms maximize the use of their collateral across multiple product lines. Disputes can also be reduced -- if not eliminated -- and resolved quickly rather than in a few days.
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com)