Asset Managers Automate Post-Trade

Terry Flanagan

OTC regulations mandate counterparty exposure reporting.

The asset management industry is automating middle- and back-office operations, motivated by regulatory mandates to identify and reduce counterparty risk.

OTC reforms, in the form of legislation such as the Dodd-Frank Act, will require pinpoint precision in identifying counterparty exposure.

“From a regulatory perspective, we are seeing a number of different proposals and actual rulemakings, stemming from the G20 mandates for OTC derivatives reporting, that will require the use of counterparty information,” Robin Doyle, senior vice president and chief financial officer for corporate risk at JPMorgan Chase, said during a webinar on Thursday.

Regulators across the globe are driving firms to move from manual processes like Excel spreadsheets to automated solutions.

“Automation in the post-trade space not only increases efficiency and reduces costs, but it also helps firms maintain both the transparency and data necessary to be compliant with new regulatory requirements,” Martin Loxley, director of collateral management at Omgeo, told Markets Media.

Kempen Capital Management, a Dutch asset management company, has implemented Omgeo’s ProtoColl collateral management solution to automate its collateral management process for OTC derivatives, and to strengthen its counterparty risk controls.

In anticipation of growth in the volume of OTC derivatives trades and increased regulatory requirements affecting the derivatives markets, Kempen Capital Management replaced its legacy Excel spreadsheets with an automated solution that supports more proactive collateral management processes, including the functionality to make its own collateral calls, validate received calls and monitor collateral movements.

“Kempen previously managed collateral using Excel spreadsheets,” said Loxley. “They now have an automated workflow solution that can generate margin and collateral calls, validate received calls and monitor portfolio exposures and collateral movements.”

ProtoColl faces off with clearing brokers and client FCMs and enables users to manage and monitor collateral for bilaterally and centrally cleared trades in the same system, effectively automating counterparty credit risk management and mitigation processes, Loxley said.

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