Communication solution to help set and maintain collateral for OTC derivatives transactions unveiled

Jan 28, 2011 by Charles Gubert

The Depository Trust & Clearing Corporation (DTCC), MarkitSERV and AcadiaSoft are working together to deliver a joint solution for improving communication regarding the setting and maintaining of the collateral required between counterparties to over-the-counter (OTC) derivative transactions.

The three companies are seeking to develop a multi-functional collateral processing platform for the OTC derivatives market. It is hoped this will bring greater transparency and reduce the operational risk associated with processing bilateral collateral agreements.

The MarkitSERV portal will provide clients with integrated access to the AcadiaSoft Messaging Platform, an online service that facilitates and manages communications required for collateral calls. This should be up and running later in the first quarter.

The new service will enable buy- and sell-side counterparties to manage information electronically on exposures, commitments and adjustments to collateral. It will also enable them to create an audit trail of all communication regarding margining.

As long as the messages about collateral are used to satisfy collateral and other related reporting requirements as stipulated under the Dodd-Frank Act, they can be processed through the DTCC’s Trade Information Warehouse facilities and regulatory reporting interface.

“Clients are searching for ways to streamline the multiple post-trade requirements relating to derivatives transactions and by linking AcadiaSoft’s technology and DTCC’s capabilities to MarkitSERV, we provide clients with a single comprehensive platform to manage collateral alongside trade processing workflow, portfolio reconciliation and valuations,” said Jeff Gooch, chief executive officer at MarkitSERV.

The total value of collateral circulated in the OTC derivatives space was estimated to be $3.2 trillion at the end of 2009 – compared with $200 billion a decade earlier, according to the International Swaps and Derivatives Association. Despite its significant growth, the processing of OTC derivatives collateral has remained predominantly manual and fragmented – raising industry and regulatory concerns about the operational risks involved in these transactions.

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