CloudMargin’s Lee McCormack reckons 2017 will
be the year collateral management goes mass-market.
The derivatives clearing and market infrastructure veteran,
who has worked at Nomura, Morgan Stanley UBS, outlined his
predictions for the industry this week.
After years of discussions around collateral shortage fears,
collateral optimisation and automation of collateral calls,
real changes are near.
"From March 2017 almost everyone trading uncleared OTC
derivatives will have to calculate variation margin, determine
if a collateral movement is required and send or receive a
collateral payment – this process will be required
every day," said McCormack, who joined CloudMargin last year as
the company's London-based head of product strategy.
The fintech firm runs a cloud based collateral management
system which gives users a view of counterparty, clearing
broker and CCP activity and offers real-time reporting on all
"If you also consider that OTC derivatives are now mandated
for central clearing this means that number of margin calls
being you will have to calculate and make will increase by
approximately 500%," he added.
In addition, McCormack expects collateral management will
become more connected.
"Adoption of electronic messaging between trading
counterparties, custodians, tri-party agents and CCPs will
allow users to click a button and watch as their collateral
calls are sent, accepted and paid.
"Demand for Tri-party custody services will increase as a
more efficient way actually paying or receiving margin
He also expects the rise of the CCPs to continue, with all
major CCPs will look to bring their trade processing capability
to the non-centrally cleared market.
Finally, McCormack predicts a rapid increased adoption of
cloud technology in financial services.
"We saw a tipping point mid-way through 2016 in our
conversations with new clients. We no longer had to
persuade them of the benefits of our platform being
"There is now a presumption that using the cloud is safer,
more secure and significantly more cost efficient than using
your own locally hosted servers."