A platform released by analytics and risk management tool provider OpenGamma will provide clearing members the ability to calculate initial margin calculations of central counterparties (CCPs) for swaps transactions.
The OpenGamma Platform for Margining lets clearing members, such as futures commission merchants (FCMs) run complex margin calculations and stress tests on client accounts at low-latency to manage the regulatory-driven need to centrally clear swaps trades.
The solution will combine the risk engine of the firm’s flagship platform with in-memory data management to support client requests and replication of initial margin and variation margin methodologies for CCPs.
Mas Nakachi, CEO of OpenGamma, told theTRADEnews.com the clearing members had traditionally relied upon approximations or proxy measures to calculate margin, but required greater precision to place margin with clearing houses.
“FCMs and clearing members need more exact margin calculations as swaps move towards central clearing and swap execution facility (SEFs) trading,” he said, adding that the platform will also facilitate pre-trade credit checks when infrastructure around credit limit hubs are finalised.
Nakachi said that as SEF trading increases with the Commodity Futures Trading Commission’s ‘made available to trade’ (MAT) rule, which is expected to come into force in February, clearing members will be required to calculate margin with greater precision.
He predicted that SEFs running central limit order books (CLOBs) will eventually gain enough liquidity to actively compete with the request-for-quote models that have attracted initial volumes – a development which precise margin calculations will facilitate.
“When CLOBs come on line the need for these systems will increase exponentially as participants need to calculate the correct, accurate number of margin needed by CCPs,” Nakachi said.
In a statement, OpenGamma said the platform lets FCMs run full margin re-calculation of client accounts as large as 10,000 swaps in less than a minute and respond to SEF ping requests using full initial margin replication.