Manage your OTC Derivatives Positions Post-Regulation Devika Darbari

Manage your OTC
Derivatives Positions
Post-Regulation
Devika Darbari
Director, PortRec Product
Management
October 2011
CONFIDENTIAL
Agenda
 Introduction
 Regulatory landscape: reconciliations and collateral
management
 Regulatory impact to the buy side
 MarkitSERV services and solutions
– Reconciliation via PortRec
– Collateral management in conjunction with AcadiaSoft
 Next Steps
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Regulatory Landscape: Reconciliation and Collateral
Dispute Management
3
US regulation: reconciliations and collateral management
 Proposed Dodd/Frank
 Material term discrepancies to be resolved immediately
 Reconciliation of positions on collateralised and uncollateralised
 Valuations discrepancies to be resolved in 1 business day
– Threshold: (higher valuation – lower valuation) >10% of higher valuation
 Recordkeeping – 502(d)
– Record of each discrepancy
– Length of discrepancy if over one business day
– Made available upon request
4
Dodd/Frank: reporting
 Reporting and SDR Rules — detailed grid
5
―Counterparty Exposure Repository‖
ISDA’s consultative report on OTC derivatives data
reporting and aggregation requirements (Sept 23, 2011)
suggests the need for a single ―Counterparty Exposure
Repository.‖
 Proposed scope
– Single repository for aggregate risk view for regulators
– Current trade repositories are designed for transactional level
reporting, not portfolio level
– Contain the net mark-to-market exposure for each counterparty
portfolio and the corresponding collateral, as well as the firm’s
calculation of net exposure after the application of collateral
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Impact to the buy side
 Focus on frequent proactive reconciliations
 Establish a robust positions dispute management process
 Connect collateral and reconciliation workflows
 Consider cross asset class and regional considerations
 Review reconciliation processes with respect to cleared trades
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MarkitSERV Services and Solutions
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MarkitSERV solutions
 MarkitSERV offers a single platform solution for OTC trade
processing. Our solution supports both affirmation, matching
processes, reconciliation, as well as the widest range of
transaction types and products.
 MarkitSERV users include
– 2,200+ buy-side clients
– 80+ dealers
– 70+ Interdealer brokers and service providers
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MarkitSERV PortRec solution
 Exception focused workflow
– Automated reconciliation
– Alerts on critical valuation thresholds
– Quick identification on economic breaks and DKs
 Dispute management features
– Interactive dispute communication tools and tracking
– Drill down into confirmation and clearing activity
– Integration with Markit Portfolio Valuations
 Tri-party reconciliation
– Third party administrators
– Trade Information Warehouse
– Extensible to SDRs
 Custom reporting
 Collaboration with AcadiaSoft
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MarkitSERV PortRec – Valuations Threshold Report
• Set and monitor valuation
thresholds by counterparty and/or
asset class
• Calculate valuation risk on MTM,
notional, PV01 or NAV
• Quickly identify the positions with
the largest risk and aging
• Overall risk exposure as a
percent of total valuation
difference
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MarkitSERV PortRec – Dispute Management
• Single dashboard to monitor economics and valuation
disputes
• View into root cause and aging details
• Auditable communication with your counterparty
• Aligned with recommended ISDA Dispute Resolution
Procedures
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MarkitSERV – Reconciliation & collateral messaging workflow
Buy Side
MarkitSERV
AcadiaSoft
Auto Reconciliation
Auto Call Messaging
Valuations
Substitutions
Dispute Management
Dispute Management
Broker
Dealer
Fund Admin
Reporting
MarkitSERV Confirmations
Trade
Manager
Markit
Wire
Audit
Audit
DSMatch
SDR
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Reporting
DTCC TIW
Markit Portfolio Valuations
FCM
MarkitSERV Services and Partnership
Collateral Messaging: AcadiaSoft
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AMP product summary
 AMP acts as a central service to provide workflow, message
delivery and cross referencing between counterparties, offering:
–
–
–
–
–
–
–
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Automated margin call messaging
Standards in communication
Near real-time visibility of counterparty actions
Partial and full dispute notification
Full audit trail against each record
Detailed management reporting
Greater STP into collateral applications
AMP overview
 AMP has messaging and
workflow for bi-lateral
derivative margin
processes





Margin call
Recalls
Substitutions
Interest statements
Replacing the current
process
 Performed by email
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AMP overview: workflow
AcadiaSoft Platform
Hosted BT/Radianz
Collateral
Management
Application
•Portal
•FTP
•API
• Outbound
• Inbound
• No Call
 Margin Agreement portal allows you to:
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–
–
–
–
–
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Create margin agreements
Manage legal entities
Manage users & roles
Set up monitoring
Manage users
Enable interest statements
Allow for multiple calls per day
 Message Portal allows you to:
– Initiate/ respond to margin call
– Initiate/ respond to interest statements
– Initiate/ respond to substitutions
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MarkitSERV Services and Partnership
Reconciliation: MarkitSERV PortRec
Collateral Messaging: AcadiaSoft
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Collateral management: AcadiaSoft
 In 2011 the MarkitSERV portal will provide clients with integrated
access to the AcadiaSoft Messaging Platform (AMP), an online
service that facilitates and manages communications required
for collateral calls.
 The joint solution will provide improved communication related to
setting and maintaining the collateral required between
counterparties to over-the-counter (OTC) derivative
transactions.
 The new service will enable buy- and sell-side counterparties to
manage information electronically on exposures, commitments
and adjustments to collateral, and create an audit trail of all
communication about margining.
 The solution is the first step taken by the two companies to
develop a multi-functional collateral processing platform for the
OTC derivative market.
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Future strategy
 Further integration of AMP with MarkitSERV PortRec
 AMP integration with DTCC Collateral Warehouse
 AMP and PortRec integration with other collateral management
system vendors
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Next steps
 If your firm is not yet an existing MarkitSERV client then consider
Contact sales to schedule a demonstration and discussion of the
available MarkitSERV solutions. ([email protected])
 Current MarkitSERV clients in need of more information may
contact the MarkitSERV Client Account Group.
([email protected])
 Visit the MarkitSERV.com website for more information including
upcoming events, fact sheets, related links and to access the
new MarkitSERV video overview of our buy-side clearing
solutions. (www.markitserv.com)
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