Collateral Management - An Introduction |


Introduction 3
Bi-Party Collateral Agreement: 6
Collateral Trading and Re-hypothecation: 7
Tri-Party Collateral Agreement 7
Repo Agreement 8
Collateral agreement and documentation (Collation) 10
Collateral allocation 10
Collateral Calculation10
Collateral optimization and Evaluation: 10
Counterparty communications 11
Reconciliation 11
Integration with External systems 13
Scalability 13
Information efficiency 13
Messaging standard 13
Technology 13
Enterprise integration 14
Lender 14
Borrower 14

Singapore Exchange partners with Clearstream for Asian collateral service

collateral-moneyThe Singapore Exchange and Luxembourg-based Clearstream are planning to launch a collateral management service that should help customers use assets as collateral at SGX’s securities depository CDP.

Under the deal, SGX uses Clearstream’s collateral management infrastructure, the global liquidity hub, and offers its own liquidity hub GO service to enable collateral to be allocated, optimised and substituted automatically in real time. The point of the deal is essentially to market a source of high-quality collateral in Asia.

“We are delighted to expand the Liquidity Hub GO partnership model to Singapore Exchange and to bring our unique collateral management outsourcing solution to Asia,” said Jeffrey Tessler, chief executive of Clearstream. “Together with SGX, we will be able to develop a tailor-made collateral management solution for Singapore in a very short time-to-market. High quality collateral is scarce and increasingly expensive – making it available is also a top industry priority in Asia. SGX and Clearstream will soon be able to jointly address this major industry challenge for the Singapore and Asian markets.”

Global financial reforms such as Basel III, Dodd-Frank and EMIR require banks to set aside more collateral, and to transfer the bulk of OTC derivatives contracts onto central clearing – meaning that more collateral must be placed as margin.

Clearstream’s liquidity hub GO service went live with the Brazilian CSD Cetip in July 2011 and is due to be launched with ASX in Australia, the South African CSD Strate and Spain’s Iberclear before the end of this year.

Margin Requirements for Non-centrally Cleared Derivatives

fundsThe standardised derivatives contract will be mandatory for central clearing, while the remaining exempt from central clearing non-standard contracts will be subject to higher capital requirements.

The initial margin requirement baseline 99 percent confidence interval over a 10-day horizon.


Margin Requirement Non-centrally Clearing

Part A: Executive summary 1
Part B: Key principles and requirements 6
Element 1: Scope of coverage – instruments subject to the requirements 6
Element 2: Scope of coverage – scope of applicability 7
Element 3: Baseline minimum amounts and methodologies for initial and variation margin 10
Element 4: Eligible collateral for margin 16
Element 5: Treatment of provided initial margin 18
Element 6: Treatment of transactions with affiliates 21
Element 7: Interaction of national regimes in cross-border transactions 22
Element 8: Phase-in of requirements 23
Appendix A 25
Standardised initial margin schedule 25
Appendix B 26
Standardised haircut schedule 26

CloudMargin | Alternative Collateral Management Solution

CloudMargin today launches a new cloud-based OTC derivatives collateral management platform for the buy-side. 

The features of CloudMargin includes collateral and margin management, storing CSA parameters through calculating and issuing margin calls and handling disputes, selecting eligible collateral and instructing market movements. Real-time reporting and a unique dashboard bring a new level of oversight.

Most importantly, CloudMargin supports the drive towards CCP mandated by Dodd-Frank and EMIR, providing an overall view of bilateral and cleared derivatives.

Here is an explaination: How CloudMargin works.

ISDA Margin Survey - 2013



1. Collateral in circulation in the non-cleared OTC derivatives market rose 1 percent during 2012, from US$ 3.65 trillion at end-2011 to US $ 3.70 trillion as at December 31, 2012.

2. The number of active collateral agreements (those with exposure and / or collateral balances) supporting non-cleared OTC derivatives transactions was 118,853 at end-2012, of which 87 percent are ISDA agreements. About 88 percent of all collateral agreements are bilateral, an increase of 4 percentage points over last year.

3. 87.4 percent of all collateral agreements are with counterparties whose portfolios of collateralized transactions include less than 100 OTC derivatives. 0.4 percent of all collateral agreements are with counterparties whose portfolios of collateralized transactions include more than 5000 trades.

4. Among all firms responding to the survey, 73.7 percent of all OTC derivatives trades (cleared and non-cleared) are subject to collateral agreements. For large firms, the figure is 80.7 percent.

5. Responding firms also reported that 69.1 percent of all non-cleared trades are subject to collateral agreements. For large firms, the figure is 75.3 percent.

6. On an asset class basis, 83.0 percent of all CDS transactions (79.4 percent of non-cleared) and 79.2 percent of all fixed income transactions (72.5 percent of non-cleared) are subject to collateral agreements. For large firms, the figures are 96.3 and 89.4 percent, respectively (and are 94.5 percent and 74.9 percent, respectively, for non-cleared).

7. Portfolio reconciliation, which refers to the matching of the population, trade economics and mark-to-market of outstanding trades in a collateralized portfolio, is widely used and considered best market practice. For all firms in 2013, the survey evidences a clear effort to increase the frequency of portfolio reconciliation.

8. With respect to collateral types, cash used as collateral represents 79.5 percent of collateral received and 78.7 percent of collateral delivered, which is an increase from 78.8 and 75.6 percent respectively last year. Government securities constitute 11.6 percent of collateral received and 18.4 percent of collateral delivered this year, consistent with last year’s results.


J.P. Morgan Introduces Enhanced Collateral Management Services

skyJ.P. Morgan today introduced significant enhancements to its industry-leading collateral management business to help clients navigate new industry regulations. Core to these enhancements is Collateral Central℠, a dynamic, real time service that provides clients with advanced asset tracking, margin management, proprietary optimization algorithms and analytics to support collateral activities across a wide range of derivatives, securities and cash transactions in real time. The roll out of these capabilities allows the management of collateral to move from an operational consideration to the front line of trading and portfolio management decision making.

Collateral Central includes the introduction of an innovative virtual global longbox for J.P. Morgan clients – a single, comprehensive view of their collateral assets and obligations – as well as access to dedicated experts with whom they can discuss their collateral situation in real time. Clients ultimately make their own strategic collateral decisions and execute their transactions through Collateral Central.


To find more how the Central Collectral works? see more
Collateral Optimisation