NEW UTILITY TO REPLACE PROJECT COLIN.

Thirteen major global banks, ICAP and market infrastructure groups, the Depository Trust & Clearing Corp (DTCC) and Euroclear have joined forces with AcadiaSoft to create a new utility aimed at reducing the number of disputes over margin flows for over-the-counter (OTC) derivatives.

BNP Paribas, Citi, Société Générale and UBS are the newest members, joining existing investors Bank of America Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and State Street.

The venture replaces ‘Project Colin’, which was set up by Goldman Sachs earlier this year but failed following the departure of its architect, Paul Christensen, in March. The utility will leverage AcadiaSoft’s MarginSphere, its electronic messaging service for OTC derivatives, ICAP TriOptima’s triResolve, its trade reconciliation service, and the Margin Transit Utility operated by the DTCC-Euroclear GlobalCollateral Joint Venture.

The new hub will provide workflow support for participants to issue and respond to margin calls, compare necessary inputs that include risk factor sensitivities, and enable participants to identify and minimise disputes at the input level before issuing margin calls. It will deliver operational efficiencies and improved risk mitigation processes and avoid considerable in-house proprietary platform adaptation and development costs. Moreover, it will reduce costly market fragmentation and drive standardisation, transparency and automation where it is currently lacking.

Regulatory changes that come into effect in September 2016 are driving the push to a fully automated margin process, including calculation and matching of margin, comparison of necessary inputs and agreement of calls and collateral movements. Market participants will be required to improve the quality of their collateral processes and reduce collateral disputes or be subject to substantial new capital requirements.

“The joint solution between GlobalCollateral, AcadiaSoft and TriOptima brings together many critical collateral management services, each designed to address industry needs around evolving regulatory requirements and increased collateral management operational burdens,” said Michael C. Bodson, President & CEO, DTCC. “The offering will be a significant step forward in the efficiency of the non-cleared OTC derivative markets.”

Tim Howell, CEO of Euroclear, noted, “As an open, industry-led market infrastructure committed to ensuring that operational platforms and services keep pace with regulatory intent, we are delighted to be part of this key initiative for the industry.”

He added: “The creation of this new open platform reinforces the importance of collaboration across the capital markets to reduce risk, increase transparency and improve operating efficiency for our clients.”

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