Q&A Article

ISDA's Julian Day, Head of Market Infrastructure, discusses the top operational priorities for 2012 and explains how ISDA aims to help market participants address concerns regarding central clearing of OTC derivatives, implement the new standardised CSAs and the 2011 equity derivatives definitions.

Q. What will be the main focus for ISDA in 2012 from an operational point of view?

Buy-side institutions are feeling the strain of new regulatory compliance requirements and increased demands from investors for transparency. In a Q&A, Misys' Jean-Baptiste Gaudemet explains how hedge funds and asset managers are improving risk mitigation, collateral management and reporting processes to satisfy the expectations of both regulators and clients.

Q. How are buy-side firms improving trading processes to meet new compliance requirements including AIFM, UCITS and Dodd-Frank?

Post-crisis firms are focusing on the correlation of different risk types as they now recognize the need for a true total view of risk. In a Q&A, SunGard’s Marcus Cree explains the new drivers behind investment in risk technology and how the culture for risk management is changing to meet demands in the new regulatory environment.

Q. Are financial institutions still investing heavily on risk management even after three years have passed since the financial crisis began? Are there new drivers for the focus on risk management? 

In a Q&A, Deloitte’s Ricardo Martinez explains the methodology and prioritization program used to assist sell-side clients in preparing for the changes proposed under the Dodd-Frank Act's Title VII including the pushout rule, central clearing, use of SEFs and reporting to SDRs.

In a Q&A, Murex's Dania Fakredin-Viatte explores how client clearing service models can utilise technology to support pricing, risk management and collateral functions that make up the building blocks of a robust and efficient client clearing service for OTC derivatives.

Q. What does a client clearing service model generally look like and what functions are included?

A good client clearing service must provide at least the following features: 

With the introduction of central clearing for OTC derivatives, financial institutions will have to manage new agreements, with different business rules, in addition to the existing documentation for bilateral trading relationships. In a Q&A, Exari Systems’ Paul Nelmes explains how documentation will change within a CCP environment and why financial institutions must implement efficient documentation processing methods to avoid increased legal and operational costs caused by the new market requirements. 

Financial institutions are increasingly centralizing collateral management on a firm-wide basis to improve optimization capabilities and support more stringent credit counterparty risk mitigation practices. In a Q&A, SunGard’s Ted Allen explains the opportunities and challenges in moving to an enterprise-wide approach for collateral management.

Q. How have market changes post-financial crisis altered how financial institutions manage collateral and credit counterparty risk? 

In a Q&A, SunGard’s Tony Scianna explains how financial institutions can build data management infrastructure to support new regulatory requirements and enterprise-wide risk management practices.

The communication of bilateral margin calls is currently manual and therefore inefficient, error-prone and costly. In a Q&A, SWIFT’s Banu Apers explains how use of a standardised electronic messaging capability can reduce counterparty risk and brings a firm’s collateral management operation up to speed with market best practices.

Banks are optimising collateral to keep competitive in a new market environment. In a Q&A, InteDelta's Nick Newport explains the opportunities and challenges in re-using collateral to fund other trading activities.