Bloomberg’s MARS collateral management services suite has been integrated by HSBC Private Bank and a consortium of financial institutions, ahead of a shifting regulatory atmosphere for over-the-counter (OTC) derivatives margin requirements, according to a company statement.
New Regulatory Playing Field
Q1 2017 is slated to see a shakeup in this space, with a new round of regulations slated to affect OTC derivatives. In particular, beginning in March 2017, market participants in the market for non-centrally cleared OTC derivatives will be held to tougher requirements imposed by multiple global regulators.
The impetus behind this push will be a widespread bid to help mitigate systemic risk – however, this could yield costly operational challenges to investors who will still need to calculate and post initial and variation margins for all non-cleared trade. As a result, Bloomberg’s collateral management and reconciliation solution will look to support and facilitate the new margin requirements in a cost-effective manner.
Presently, Bloomberg MARS Collateral Management is part of a wide-ranging solution that supports banks, investment firms, and corporations facilitate the collateral management and reconciliation process to effectively meet regulatory obligations, including the new tranche of requirements.
Effort to Reduce Operational Burdens
Bloomberg has made efforts to help value complex derivatives, as well as manage collateral agreements, calculate margin requirements, and reconcile trades. Overall, its MARS service was chosen to be utilized by HSBC and others as it will aim to limit the operational and compliance burden imposed on firms.
The MARS service provides cross-product, cross-asset support for Dodd-Frank and EMIR compliance. Additional provisions will also allow for the handling of documentation, automated messaging, risk analytics, and portfolio reconciliations, among other functions. HSBC’s assimilation of the MARS service will help capture these gains.
According to Kpate Adjaoute, Managing Director at HSBC Private Bank, in a recent statement on the integration: “It’s a business imperative to trade these types of instruments, so compliance too becomes a business imperative. We anticipated that these reforms were coming. It helps to centralize the process and have access to the data we need, as well as the counterparties with whom we trade.ˮ
“The challenges investors face in the OTC derivatives market cannot be addressed with software alone. Bloomberg provides the data and analytics to calculate and reconcile margin requirements. We go further by connecting a global network of corporations and investment firms, both large and small, to unify what can be a very laborious, risky and disjointed process,” added Phil McCabe, Global Product Manager for Collateral Management at Bloomberg.
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