06 November 2017
London
Reporter: Jenna Lomax

Margin calls explosion on the horizon, claims CloudMargin


Recent regulatory changes will result in a 500 percent increase in the number of margin calls that have to be calculated by collateral management teams, according to a recent report by CloudMargin.

The report also argued that the public cloud model will become the dominant infrastructure model by 2020.

CloudMargin estimates the adoption of cloud models is expected to more than quadruple from 10 percent in 2016 to 45 percent in 2020.

Cloud technology could also slash the overall cost of system ownership by up to 75 percent, compared with other solutions, the report said.

“A much higher level of automation and efficiency will be essential if compliance is to be carried out effectively, and this is especially true when it comes to collateral management,” the report stated.

According to Accenture, a technology service provider, global investment in fintech companies has grown from around $1 billion in 2010 to more than $15 billion in 2015, and CloudMargin explained that this “is only set to grow.”

Accenture found that almost 90 percent of executives in the financial service industry believe compliance costs will show double-digit growth in the next two years.

CloudMargin indicated that this change in attitude towards collateral management comes from the 2007-08 financial crisis and that the financial industry is now more aware that collateral management offers security against the possibility of payment default than it was prior to 2007.

The report added: “Collateral was only required for smaller, riskier counterparties, such as hedge funds, as it was considered impossible that a large institution would default. Such assumptions were subsequently proven to be woefully inaccurate with the collapse of Lehman Brothers sending shockwaves around the world.”

CloudMargin stated: “Upgrades are automatic, and there is no versioning of the system. Consequently, it is easy to benefit seamlessly from the latest tools and functionality as they are rolled out. This removes professional services upgrade fees to install updates. Essentially, the cost of development is shared.”

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Hedge funds continue 2017 run
23 November 2017 | Madrid | Reporter: Drew Nicol
Global AUM of hedge funds rose 24 percent to $3.2 trillion in the past two years, according to data captured by IOSCO’s latest market survey.
Goldman Sachs appointed by Thrivent for agent lending
23 November 2018 | Minneapolis | Reporter: Jenna Lomax
Thrivent Financial has appointed Goldman Sachs as it new lending agent
ICMA maps repo and cash bond operations
22 November 2017 | Zurich | Reporter: Zsuzsa Szabo
ICMA has launched a free-to-read mapping directory for more than 80 technology solutions for repo and cash bond operations
FCA publishes MiFID II guide
22 November 2017 | London | Reporter: Jenna Lomax
The guide focuses on the regulatory regime in MiFID II for trading venues and data reporting services providers
Hedge fund industry reaches new highs in Q3
22 November 2017 | London | Reporter: Zsuzsa Szabo
The hedge fund industry has recorded strong performance in Q3 2017, after stumbling in 2016, according to Preqin
India reviews SBL position limits
21 November 2017 | New Delhi | Reporter: Zsuzsanna Szabo
The Securities and Exchange Board of India has altered its securities lending rulebook, following market calls for change
EU Commission opens consultation of SFTR TR fees
21 November 2017 | Paris | Reporter: Drew Nicol
UK-based trade repositories may be forced to shoulder additional third-party recognition fees to operate under EU regulatory frameworks post-Brexit, according to proposed EU Commission rules