OTC Derivatives Reform: the Complexity & Cost of Infrastructure Changes for Operations

While even this is scary enough for all industry participants, I do understand there's way too much change ahead for anyone to cover in detail in a single article!

I agree with (almost) everything here, and honestly believe anyone in "wait and see" mode is going to be badly burnt.  The impact of near time reporting is one thing, but, as you mention, the impact on collateral management is wide ranging.  (Those of you who attended last week's session at UCL will agree two hours discussion only really scratched the surface on this subject.)  There are also significant challenges merely in connecting to new CCPs, SDRs and SEFs.  

Where I disagree with your conclusion is that building out either an existing equities infrastructure or an existing ETD platform is the way to go.  One pro is that these are often better at handling volume than the commonly used OTC primary trading systems (you know who you are!)  However on the downside we are still not sure of the size of the "rump" of bi-lateral OTC trades and this could be considerable.  These trades will definitely be your "square peg" in the round hole of existing non-OTC solutions. In addition, even the data complexity of the shiny new cleared OTC trades outweighs that of, say, a cash equity trade.  (Dare I mention FpML?)

The exact future state lifecycle remains unclear - for example are allocations pre or post clearing?  As you point out, the details of regulatory and SDR reporting are fuzzy to say the least.  The number and flavour of SEFs is a known unknown.  There are new opportunities such as collateral optimization - across asset classes and arbitrage between CCPs. And we have hardly started on regulation from Brussels!  Plenty of sleep will be lost in the coming months.

Anyway, fully flexible, rules-based, non-siloed, horizontal solutions are the only way forward, but I would say that, wouldn't I?