Euroclear Bank is to launch an exposure management service for over-the-counter (OTC) derivatives trades before the end of the year.
The Bank’s “DerivManager” service will apparently reduce valuation and collateral disputes, operational costs and errors in exposure calculations.
DerivManager will provide trade matching and daily portfolio reconciliations between counterparties, helping clients to determine, match and manage exposures resulting from OTC derivatives transactions. Based on client-provided valuation data of their bilateral derivatives contracts.
Euroclear Bank will automatically standardise and compare the two sets of data, detect and report any discrepancies in the mark-to-market values for these trades.
In so doing, both counterparties will avoid potential valuation disputes. In addition, DerivManager will net total exposures to reduce collateral requirements to cover exposures.
“DerivManager clients will further maximise value by managing their exposure obligations through the outsourcing of collateral management to Euroclear Bank, Europe’s leading triparty agent. No other provider offers such proactive OTC derivatives trade matching, reconciliation and exposure-management services,” says Frank Reiss, head of Equities and Derivatives Product Management at Euroclear.
“Euroclear Bank’s DerivManager is an important move towards providing greater transparency, flexibility and automation in managing bilateral exposures. After months of close collaboration between the Collateral Framework Group and Euroclear Bank, we are delighted that the OTC derivatives market’s calls for exposure transparency have been heeded with the arrival of this service,” adds Mark Rowlands, co-chair of the Collateral Framework Group.