HSBC and other financial institutions have implemented Bloomberg’s MARS collateral management and reconciliation service, ahead of impending non-cleared derivatives rules.
Bloomberg’s MARS collateral management helps banks and investment firms carry out the collateral management and reconciliation process whilst complying with the new requirements.
It allows users to value derivatives, manage collateral agreements, calculate margin requirements, send margin calls to counterparties, reconcile trades and book collateral to their portfolio.
Kpate Adjaoute, managing director at HSBC, explained compliance is now imperative to business.
“We anticipated that these reforms were coming. It helps to centralise the process and have access to the data we need, as well as the counterparties with whom we trade,” he said.
As of March, market participants are required to post initial and variation margins for all non-cleared trades, classify eligible collateral to post and deal with an increase in margin calls and daily calculations.
The rules are intended to reduce systemic risk, but present costly operational challenges for investors and firms.
Phil McCabe, global product manager for collateral management at Bloomberg, explained the challenges for investors in the OTC derivatives market, “cannot be addressed with software alone.”
“We go further by connecting a global network of corporations and investment firms, both large and small, to unify what can be a very laborious, risky and disjointed process,” he added.