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Business Remodeling: Rethinking Risk and Collateral Management

Satayam Kancharia, Numerix, Tabb Forum, Business Remodeling: Rethinking Risk and Collateral Management, here. It makes sense that in response to greater trade automation, risk, regulation, and compliance oversight there will be an aggregation of Front, Middle, and Back Office analytics. In some ways the swaps and credit desks’ technology stack will move closer to the futures technology stack in the larger dealers. The Front Office analytics demand will extend from just trade booking, blotter monitoring, P&L valuation, and risk to include CVA, Collateral, and Treasury functions. So for example, the Emerging Market Credit traders finally get to manage their counterparty, collateral, and FX risk in a more direct and fully automated way all the way back to the Firm’s Books and Records.  The Straight Through Processing ideas of the last  5 years will grow to automate more of the entire Front-to-Back flow and design the monitoring and control technology for the folks bearing the risk in the Front Office. That is not going to be something every dealer can just figure out and implement.

There has been an avalanche of regulation over the past several years. While firms are digging out from under it in an effort to comply, others are looking for new opportunities this environment presents. Satyam Kancharla, chief strategy officer of Numerix, told John Lothian News’ Jim Kharouf that firms must find ways to create more efficiencies in terms of collateral management and looking at their operations in a more holistic way. The combining of OTC and futures into cleared structured environments are forcing firms to break down those trading desk silos that have been part of firms over the years.

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