AcadiaSoft has launched MarginSphere 2, the latest version of its industry-leading electronic margining platform for OTC derivatives.
MarginSphere 2 is specifically designed to address new regulations for non-centrally-cleared derivatives that will take effect next year. MarginSphere 2 will enable more than 200 buy-side and sell-side firms that comprise the AcadiaSoft community to efficiently comply with 2016 regulatory requirements, including mandatory exchange of bi-lateral initial margin, automated processing of segregated collateral assets, verified management of collateral disputes, and unbundling of collateral movements into currency specific silos.
The new regulations, promulgated by the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions (IOSCO), will take effect on 1 September, 2016. Once implemented, it is expected that margin volumes will surge three to 10 times above current levels. MarginSphere 2 will allow this increased margin activity to be managed without a directly proportional increase in operational costs.
“A lot of firms are just now waking up to the fact that margin volumes are about to explode, making traditional manual processing impractical and expensive,” says Chris Walsh, Chief Operating Officer of AcadiaSoft. “MarginSphere 2 provides the industry with a standardised electronic solution well in advance of the September 2016 regulatory compliance deadline.”
AcadiaSoft’s MarginSphere platform fully automates the margin process, including matching of margin, comparison of necessary inputs and agreement of calls and movements. MarginSphere enables participants to match margin calls immediately so disputes can be resolved or minimised before agreeing margin movements. MarginSphere interacts with in-house and partner collateral systems to automate the margin process while assuring changes are accurately reflected in both upstream and downstream processes. MarginSphere 2 is the result of collaboration between AcadiaSoft, its Industry Working Groups and the major market participants and infrastructures that participate in the AcadiaSoft community.
By driving standardisation and automation, MarginSphere 2 will enable industry-wide realisation of economies of scale in margin processing, producing efficiencies and cost savings for all market participants. Further benefits of MarginSphere 2 for sell side and buy side firms include:
• Support for compliance with non-centrally cleared derivatives margin regulations in advance of September 2016 deadline
• Delivery of considerable operational efficiencies and improved risk mitigation processes
• Avoidance of extensive in-house proprietary platform adaptation and development costs, as well as costly market fragmentation
• A clear audit trail and increased transparency for margin transactions
With electronic margining standards in place, AcadiaSoft’s efforts are now focused on the collaborative development of additional services to facilitate additional regulatory compliance while also providing for cost reduction and improved Straight Through Processing across the industry. Specific services under development include Initial Margin Calculation, Reconciliation and Disputes Management. These services will be introduced throughout 2015, well before the 1 September, 2016 regulatory deadline.
“In coming months, we will continue to engage with our Working Groups and other major stakeholders to further enhance the solution we have developed with their input,” saysAcadiaSoft’s Walsh. “We believe that MarginSphere 2 can ultimately form the basis for an industry utility that can create an even more efficient and risk-managed OTC derivatives market.”