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Collateral optimisation strategies come to the fore 

April 24, 2014
Mike Kentz, IFR

Almost a year on from the start of mandatory central clearing in the US, buyside funds are shifting their attentions towards optimising their collateral functions to alleviate the burden of posting billions of dollars worth of margin against cleared derivatives trades.

Banks have long predicted collateral management would become a vital service for swap end-users, many of whom are now having to handle daily margin calls for the first time. Margin efficiency fell by the wayside last year as buyside firms concentrated all their efforts on the compliance and operational nightmare of mandatory clearing, but this looks set to change.

“Now that we’ve got most of our books going through clearing, it’s apparent we’ve got to optimise the way we post collateral,” said the head of operations at one major US fund. “We’ve known for awhile this would come up but we are just now starting to have serious discussions with our clearing banks about what they can provide.”

Read more: IFR

 
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