Sell-side clearing and collateral strategy

The larger sell side firms have been subject to mandatory clearing since 2016 and will now be exchanging bi-lateral VM & IM. Smaller firms will be exchanging VM already and need to ensure they are ready to exchange IM as they reach the phase-in requirements threshold.

In addition firms with large customer franchises must decide whether and how to offer client clearing services. Each firm needs a clearing and collateral strategy that addresses critical issues such as:

• What regulation will impact which geographies / legal entities by when
• Choice of clearing venues
• Cross-silo integration of margin and liquidity requirements (treasury, repo, SBL, OTC cleared, non-cleared, LCR etc)
• Cross-silo integration of useable assets (multiple business lines and custody venues), with appropriate funds transfer pricing
• Collateral type and eligibility management (cash vs non-cash, considering leverage ratio, balance sheet and NSFR impacts)
• Collateral segregation model balancing security with liquidity impacts
• Client clearing and/or collateral services (custody, transformation, optimisation, tri-party etc)
• Margin model(s) and calculation, forecasting, agreement and reconciliation
• Collateral selection, instruction, mobilisation, substitution, reconciliation
• Legal documentation (clearing, tri-party, quad-party etc)
• Market infrastructure connectivity and messaging
• Infrastructure provisioning: build v buy; vendor v utility

TFE can help you develop your strategy quickly and efficiently based on our our deep expertise in clearing and collateral, underpinned by our structured methods and tools.