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Alternative Market Briefing

TABB Group estimates buy-side firms need to deposit $2tln to comply with the new clearing requirement for swaps

Wednesday, March 26, 2014

Komfie Manalo, Opalesque Asia:

Research and consulting firm TABB Group estimated buy-side firms need to deposit approximately $2tln in cash and other eligible assets at central counterparty clearinghouses (CCPs) to comply with the new clearing requirement for swaps.

In one-to-one conversations with U.S.-based asset managers, hedge funds, banks and insurance companies dealing in interest rate swaps (IRS) and/or credit default swaps (CDS), and other industry leaders, TABB found they all gained a competitive advantage by using new, improved back-office technology, specifically risk analytics, collateral optimization and faster trading processes.

Will Rhode, director of fixed income research at TABB, who co-wrote "Margin Call: New Risk Tools for the Buy Side," with contributing analyst Sol Steinberg said in a statement, "Capital is a scarce resource that cannot be squandered by overestimating a margin call. Efficient collateral usage will become an integral, growing factor in a firm's investment and hedging strategy as improved risk analytics come of age."

An estimated 33% of the firms said they selected their FCM (Futures Commission Merchant) based on the strength of their technology platform. By integrating with the buy-side's clearing workflow, the FCM hopes to increase their stickiness and become the pr......................

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