New margin requirements drive demand for automation and electronic messaging
Buy-side firms now have a new option for managing the collateral for their derivatives trades thanks to AcadiaSoft.
The web-based platform, CollateralManager, covers all types of derivatives, including cleared and uncleared OTC derivatives and exchange-traded futures and options, as well as repos and securities borrowing. AcadiaSoft is aiming to help buy-side firms cope with the increased margin workload stemming from the introduction of margin requirements for uncleared derivatives. The traditional approach, based on manual processing, is expensive and prone to errors in the new environment. That creates the need for more automated solutions, the company says.
AcadiaSoft is not the only company tackling this problem. CloudMargin, a startup based in London, also offers a collateral management solution that runs through the cloud. CloudMargin recently raised $10 million in capital and has more than doubled its client base over the past 12 months.
AcadiaSoft's strength is in its MarginSphere messaging system, which is considered the de facto standard in OTC derivatives markets. CollateralManager offers integration with MarginSphere as a key feature, which should make it easier for counterparties engaged in collateral management to communicate. The company also highlights the strength of its margin processing platform, called AcadiaSoft Hub. Every global bank and nearly all regional dealers are engaged on that hub, and the new CollateralManager system will allow the buy-side to tap into that infrastructure and achieve "straight through margining" of their transactions, the company said.
Scott Fitzpatrick, a director of the Massachusetts-based company, says that AcadiaSoft took a lot of the functionality for CollateralManager from ProtoColl, its original margin management product, and ported it to a web-based system. “What we’ve done is we’ve taken some of the operational processes that exist in ProtoColl and we’ve built them into a light-weight framework that is available via web browser and easily deployable,” he explained.
The chief advantage of the new cloud-based system is that it integrates collateral management technology right into its electronic messaging software. The tight coupling of messaging with the collateral management functionality can reduce a lot of the manual work that now goes into collateral management. One bank with a large trading desk estimated that reducing e-mails between the asset manager and the lender before a margin request is approved will save the trading team approximately 4-6 hours of work every day, according to Fitzpatrick.
"It frees up the people within the collateral departments to worry about things that are basically exception-based,” he explained.
