From September, new rules for bilateral clearing of OTC derivatives will increase the number of collateral movements between market participants. If current 3% settlement fail rates for collateral movements prevail, their cost will quickly become unsustainably burdensome, especially for buy-side firms and for the industry as a whole.
As the new regulations approach, there is a risk that problems that cause settlement fails will be overlooked or exacerbated by the complex changes required to market participants’ existing OTC derivatives workflows and documentation.
DTCC-Euroclear GlobalCollateral Ltd commissioned PwC to speak to market practitioners - asset managers, banks and broker-dealers, outsource service providers and custodians - to explore the causes of margin call failure, quantify its impact on firms and the industry, and propose potential solutions to head off this nuisance before it becomes a real headache for the industry.
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