NetOTC shelves planned margin platform

The NetOTC Bilateral platform was intended to go live this year to coincide with incoming margin requirements.

NetOTC has decided to put on hold the launch of its bilateral margin platform for non-cleared OTC derivatives due to conflicts with regulation.

The NetOTC Bilateral platform, designed by its co-founders Neeraj Sharma and Matthew Durkin, is based around a pooling structure whereby individual banks can post initial margin into one central account.  However, the regulations for posting collateral for non-cleared derivatives do not allow this as it currently stands.

Speaking to The Trade Derivatives on the decision Roger Liddell, CEO of NetOTC said: “The regulation does not allow a pooling structure. [However] this is at the core of our offering, and without that it does not make much sense. We have decided to put it on hold until the regulations change, which might occur in a year or two’s time.

“We will still work on building out the technology and getting the ISO certification to make sure everything is in the best shape possible. We are not planning to make any significant changes [to the offering], it is just in the short-term the regulations as it is do not provide for it.”

Liddell also said the business will have to significantly scale back in order to minimise costs in the medium term.

The initial margin requirements are set to come into force for banks in September 2016.

Earlier this year, NetOTC namedDavid Maloy to oversee the launch of the platform alongside Liddell, who was appointed CEO in November.

The decision from NetOTC follows a similar decision from GlobalCollateral, a joint venture between Euroclear and DTCC, which decided to delay the launch of its flagship margin transit utility (MTU) until 2017. It was initially set to go live in 2015.