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.

If you think TFE could help your business please get in touch