The world’s largest swap dealers have begun industry-wide testing of a collateral utility for non-cleared OTC derivatives, as banks look to cooperate in the face of tough regulations.
Industry testing of the utility, a central margining service developed by AcadiaSoft and delivered in collaboration with TriOptima, marks the first phase of rolling out the initiative.
“Testing the AcadiaSoft Collateral Hub provides banks with the opportunity to refine and calibrate their margin processes six full months ahead of the implementation of the new margin regulations this coming September,” said Mark Demo, Regulatory Product Director at AcadiaSoft.
Tougher rules due to take effect in September 2016 will force dealers to post more collateral to back their trades and reduce the amount of credit exposure a counterparty faces. However this had led to concerns that this will lead to disputes over how much margin is required between banks and buy-side firms.
The service will allow firms to automate their collateral management and comply with the impending margin regulations.
The banks that have invested in the service include Bank of America Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and State Street.