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BIS Report on Developments in Collateral Services

The Bank of International Settlements (“BIS”, who are also responsible for the “Basle” rules), have just issued this paper entitled “Developments in collateral management services”.

Of particular interest to those in the energy and commodities industry will be the parts that look at the increased use of services by the buy side. While at present only a few companies in the sector will be affected by mandatory clearing (since they are mostly “NFC-“), the chances are that more and more will get into clearing or increased margin requirements over the next few years, due to rule changes in EMIR and MiFID II, the liquidity moving to cleared products and the upcoming rules on uncleared margin.

The section on page 19 about segregation and the “quad model” will be of interest. It will also be interesting to see whether “collateral transformation” will become useful to the energy and commodities market as the requirements for capital increase. At present, the use of non cash collateral is quite rare in the sector, and the use of securities even rarer.

The paper generally points to the fact that collateral requirements will increase. This will lead to an increase in services in that area. As a result, it is important for all to become familiar  with the options and offerings, including on the buy side, in order to prepare for the inevitable pull into the world of greater clearing and margining.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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