French broker Société Générale is implementing the Colline collateral management solution from Lombard Risk Management, which will allow it to offer buy-side clients comparative figures on clearing costs for over-the-counter (OTC) derivative trades.
Société Générale's clients will be able to check the margins they have been charged on a trade-by-trade or a position basis and compare the charges leveled between clearing houses.
“If it's cheaper to clear your swaps on LCH.Clearnet than on another clearing house it gives you the option to move your business,” said Helen Nicol, product director, at Lombard Risk. “The tier one clearing brokers are examining the charges from clearing houses at the moment although their flexibility of the brokers, and ultimately their buy-side clients, is dependent on the products offered by the clearing houses.”
Colline is a web-based platform designed for cross-product collateral management. Société Générale Corporate & Investment Banking will use it to handle its global collateral management operations in six countries across Europe, the Americas and Asia. The bank has licensed the full suite of collateral management modules to create a solution that covers OTC derivatives, repo and securities lending with clearing and reporting functionality.
The migration of OTC derivatives onto a central clearing model is expected to increase costs for buy-side firms. In derivatives trading, CCPs operate by becoming one side of every trade, eliminating the buy-side firm's counterparty risk to its broker and providing an audit trail for market activity. However to operate this model, CCPs require trading firms to put assets forward as margin in case of default, which is not required for bilateral trades.