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NetOTC launches bilateral platform for non-cleared OTC derivatives ahead of schedule

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Risk solutions provider NetOTC has launched NetOTC Bilateral, an end-to-end bilateral market infrastructure for the margining of non-cleared OTC derivatives.

NetOTC Bilateral is connecting to Euroclear’s Collateral Highway in an effort to answer the market demand for greater transparency, resilience and addressing the market need for funding, capital and operational cost efficiencies.

From September 2016, the mandatory exchange of Initial Margin (IM) comes into effect. NetOTC Bilateral is a sophisticated IM solution that goes beyond the calculation and calling of standard two-way margining.

NetOTC Bilateral is offered as a dedicated service that works with existing service providers. Robust collateral segregation, optimised calculation and simplified implementation features are enabled by an innovative NetOTC Bilateral legal structure that results in unique funding, capital and operational cost benefits.

NetOTC Bilateral uniquely strengthens IM exchange as it eliminates IM disputes, enables a single daily IM delivery to cover all counterparties, and on default, when collateral is needed most, NetOTC Bilateral provides enhanced claims coverage and ensures that all IM is delivered on the next settlement cycle.

Commenting on the launch of NetOTC Bilateral, Neeraj Sharma, Group CEO and Co-Founder, NetOTC says:, “We are delighted to launch NetOTC Bilateral. NetOTC Bilateral is not just responding to the principles and policies required by the regulators and the G20, it delivers a complete, integrated and independent market infrastructure that tackles the real implementation challenges presented to us by the market.”

NetOTC Bilateral is available for clients ahead of schedule, with user on-boarding commencing in 2015. It is regulatory compliant, adaptable for future amendments, and aligned to industry principles and initiatives. Specifically suited to existing portfolios and counterparties, NetOTC Bilateral is available for early adoption and coverage in advance of the IM timeline.

Roger Liddell, the former CEO of LCH Clearnet, who has recently been appointed as the same position at NetOTC, says: “From an operational perspective, banks must find ways to process the multiple margin calculations and transactions that the new rules entail, without rendering the whole process uneconomical. The complexity cannot be underestimated and not tackling the IM and post-default processing is likely to have considerable impact on banks’ already constrained capital requirements.”

Incorporating the exchange and clearing expertise of the TMX Group and the UnaVista matching and monitoring platform of London Stock Exchange Group, the service is further strengthened with key industry partners and leaders.

Olivier Grimonpont, Global Head of Collateral Management and Securities Lending, Euroclear said, “We continue to develop our core business activities, looking for new ways to deliver client value in the areas in which we traditionally operate. Through the Collateral Highway, Euroclear welcomes all collateral givers, takers, intermediaries and infrastructure providers – thanks to a truly open architecture. NetOTC Billateral’s connection into our global collateral management platform is a testimony to the Euroclear innovation agenda.”

This connection will help create a robust, single point of market access for the unclearable OTC derivative market, designed to enable full compliance in a transparent, predictable and cost effective way.

Bob Wigley (pictured), Chairman, NetOTC, says: “Throughout the process, we have been impressed by the banks’ appetite to engage with our working groups and the priority that senior banking executives are placing on regulatory readiness for the new margin rules. The addition of the Collateral Highway to our infrastructure partners further illustrates the market appetite for a comprehensive approach.”

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