Navigate the crisis By Wassel Dammak, Head of Product Strategy, Collateral Management

To face Covid-19 crisis, many financial firms triggered disaster recovery plans. Due to the lockdown in different countries, they had to cope with an unprecedented way of working, entirely decentralized, with most of the staff working from home. At the same time, both buy side and sell side firms had to manage higher trading volumes due to last months’ markets volatility peaks. Collateral departments have been under huge pressures to process and meet Margin Calls with a substantial increase of margin requirements reaching up to 250% of the average volumes.

Most of collateral teams at Banks, Brokers, buy side and propriety trading firms dealt with these difficulties without any major issues. However, this situation unveiled, in certain cases, hidden complexity and inefficiency that could have been avoided if end-to-end processes from trade inception to margin settlement had been streamlined. Therefore, one of the major problems faced during the crisis was about communication across internal teams involved in the margining process.

The margining function typically relies on good data quality from upstream systems (Market data, valuation, exposures, credit risk data, corporate events, etc.) and generates multiple outputs to downstream systems (Settlement, Credit Risk, cash & non cash inventories, regulatory, etc.). All the sub-processes involved in such function need to be timely orchestrated across different departments to generate & process margin calls on time and avoid positions left uncollateralized or surprise margin calls at time of liquidity stress.

The medium- and long-term impacts of the virus on the global economy will probably reduce the volatility and liquidity observed in the last weeks and thus reduce the revenues over the next months. This New Normal state offers new opportunities to transform legacy IT landscape and shift into a flexible IT cost structure by leveraging new Technologies like AI, Cloud deployment and Devops adoption. With a modular approach to improve the complex and inefficient pieces of the architecture, firms don’t need to go through a complete review of the entire IT systems.

Choose the partner
The right partner is the one who can help transform the IT legacy stack while adapting to each financial firm specificity to upgrade the parts of the stack it needs to.

At VERMEG, we offer a comprehensive set of technical components to enable and accelerate such transformation. Adopting a modular approach with a technology that can interoperate and seamlessly integrate with other systems is a key driver of our product strategy.

Our offering covers as well a store of business components, that can be plugged on the top of existing systems to add value in a specific function (like collateral optimization) or to monitor in real time the end-to-end margining process avoiding in real time any potential bottleneck in the overall collateral chain.

Finally, we have streamlined clients’ onboarding through a cost-effective Cloud hosting offer that complies with complex due diligence processes and a mature SaaS deployment that adopts agile and DevOps principles to drastically reduce the total cost of ownership.

 

For further information on how we can help manage this transformation journey please reach out to info@vermeg.com.