4sight Financial Software has upgraded its collateral optimisation system to allow users to automate collateral recalls and substitutions.
The recalls and substitutions could be based on a number of factors, including corporate actions, variations in collateral credit rating or changes in central counterparty (CCP) eligibility criteria.
“Collateral substitution is one of the biggest operational headaches of the collateral management process,” Martin Seagroatt, head of marketing at 4sight, a financial software provider, said.
“We developed new automation around this process to reduce the level of manual effort involved, while also minimising collateral costs through intelligent asset allocation.”
Collateral has become a key issue in the industry ahead of regulatory changes for OTC derivatives. Under the US’ Dodd-Frank Act and the European market infrastructure regulation, swap trades will need to be reported and centrally cleared, increasing collateral requirements.
The 4sight collateral management system uses automated collateral algorithms, allowing users to identify and process multiple returns and recalls for multiple counterparties, whether it be bilateral, CCP or triparty, from a single screen.
The system is also aimed at helping users to see when pledged collateral is no longer the cheapest to deliver and propose suitable reallocations.