Post-trade solutions provider Omgeo has launched a new tool that lets firms maximise their existing asset inventory for collateral when trading, ahead of new OTC derivatives rules.
Omgeo's ProtoColl is an automated collateral and margin management tool and has been upgraded to allow users to create "sophisticated rules-based algorithms".
Asset managers would be able to define preferences and rules to assess the quality and importance of various assets to be used for collateral.
ProtoColl will then recommend which assets to use, and prioritise them based on the preset rules.
"Increasing collateral and margin requirements, coupled with a shorter list of eligible collateral instruments, will likely result in a collateral shortage," Ted Leveroni, executive director of derivatives strategy and external relations at Omgeo, said.
"As a result, many buy-side firms face an overriding need to be able to optimise their use of existing collateral, before even considering the transformation process."
The new tool would allow firms to optimise what they have and make sure they are making the best use of their resources, he said.
An Ernst and Young survey released last month found 58% of 42 buy-side firms were worried about the scarcity and quality of collateral, as a result of regulatory changes.
Both the US Dodd-Frank Act and the European market infrastructure regulation (EMIR) have introduced central clearing rules for swaps, including increased collateral requirements.
The new rules means the buy-side is forced to pay initial margin against swaps exposures for the first time and have processes in place to post variation margin on an intraday basis.
The mandatory clearing deadline under EMIR is expected to fall in mid-2014, although reporting requirements would begin from September.
In the US, central clearing of swaps started on March 11 for 'major swaps participants'. Swaps traded between 'swaps dealers', and 'major participants' will be subject to mandatory clearing from June 10, which will include a large portion of buy-side firms. One 9 September, all market participants engaged in swaps trading will be forced to centrally clear the instruments.
Omgeo's upgraded ProtoColl also includes a browser-based dashboard, giving users a real-time view of collateral management activities, such as collateral dispute status and counterparty risk positions.
Other changes include support for the Legal Entity Identifier, the CFTC Interim Complaint Identifier (CICI), and functionality for maintaining existing agreements with counterparties.
By Paloma Migone