OpenGamma is developing an open-source method for the calculation of margins on bilateral derivatives transactions, the company has announced. OpenGamma is working with OTC derivatives market participants on the project.

This represents the first time that open access for margining source code will be available across industry participants, enabling full transparency of independent, verifiable margin calculations for OTC derivatives trades that will not be controlled by any entity. The OpenGamma source code will be made available for incorporation across utilities and trading systems in what the company hopes will usher in a new era of consistency and openness.

“With capital scarce, financial firms are more focused than ever on developing high-value, proprietary innovations rather than re-creating industry-standard methodologies,” said Mas Nakachi, OpenGamma CEO. “That’s why we’re working with the industry to streamline and democratize the development of market structure solutions, which also fundamentally reduces operational and systemic risk through the inherent transparency of open source code. (read more…)

SunGard has announced the introduction of a new utility to help global market participants meet regulatory pressures related to cleared OTC derivatives and post-trade futures. The utility will leverage technology to gain efficiencies, reduce risks and lower costs for global capital markets firms’ middle and back-office functions.

SunGard’s utility will provide customers with technology services and derivatives clearing operations for trade clearing, lifecycle management, margin processing, brokerage, reconciliation, data management and reporting to meet regulatory compliance needs. SunGard’s global back-office processing system for listed and cleared OTC derivatives that covers 160-plus cleared derivatives markets worldwide will supply the underlying technology to power this utility.

“Post-trade cleared derivatives processing is highly commoditized, providing little differentiated value to each firm at increasingly higher costs due to today’s regulatory environment. SunGard’s post-trade derivatives utility will help transform the cleared derivatives middle and back office across the entire industry, resulting in a more sustainable operating model and cost structure for the future,” Brian Traquair, the head of SunGard’s capital markets business, explained on the sidelines of the 40th Annual FIA International Futures Conference. (read more…)

Singapore Exchange plans to expand its suite of foreign exchange futures offerings in the third quarter with the addition of contracts for Renminbi crosses and the Taiwanese dollar. The additions, which were announced on the sidelines of the 40th Annual FIA International Futures Conference, are subject to regulatory approval and fall in line with the latest G20 changes affecting over-the-counter derivatives that call for a movement toward electronic exchanges.

The SGX Asian FX futures suite has hit $37 billion in aggregate notional value over its lifetime as contracts for the Indian rupee and Singapore dollar routinely break volume records. The exponential growth rate for Asian FX futures has mirrored strong, growing demand by investors worldwide for FX derivatives trades on a regulated platform that offers transparency and real-time pricing to coincide with Asian time zones.

“Global market participants can continue to draw on SGX’s unique platform to fulfill their investment needs and effectively manage their Asia-wide exposures across multiple asset classes in the Asian time zone,” said SGX CEO Magnus Böcker, who has announced he is leaving the exchange in June of this year. (read more…)

We all have heard that one of the big culprits in the credit crisis was the collateralized debt obligation (CDO). CDOs are notes backed by baskets or cohorts of different types of receivables. The notes can be backed by residential mortgages, or commercial mortgages, or student loans, or credit card receivables or auto loans, etc (or a mixture of all the above). It is the cash flows from those receivables, not some end borrower, that services the CDO notes, i.e. pays interest and amortizes the principal on the notes.

I don’t want to go into the details about CDOs here or their role in the credit crisis because many other writers have gone into this exhaustively elsewhere. Suffice to say CDOs (or asset backed financing/securitizations) are actually very important and effective ways of financing certain receivables pools (of effecting what is known as ‘non-recourse’ finance). And yet there were fairly obvious issues with many CDO structures before the crisis: their excessive structural complexity (the notes were broken into too many tranches); the questionable credit quality of the underlying assets; the use of too many different types of underlying receivables; the fact that those rating the notes (the rating agencies) were effectively in bed with the originators of the notes; the overly aggressive selling methods of CDO tranches by swarms of brokers; etc. (read more…)

President Barack Obama traveled to the heart of Silicon Valley on Friday to lay out his vision for improved cybersecurity in a digital age that has seen high-profile cyberattacks make headlines in recent weeks. Joining leaders from various industries at the White House Summit on Cybersecurity and Consumer Protection at Stanford University, Obama stressed the importance of enhancing the public-private partnership already in its infant stages.

“We are just getting started,” Obama explained. “We are only 26 years into this internet age. We’ve only scratched the surface.”

Obama marked the event (scroll down for full video) by signing an executive order that calls for the establishment of industry hubs and a common set of information standards to facilitate greater collaboration in combating cyberthreats. Obama also outlined the four basic principles he sees as paramount to success in the fight against cyberthreats:

  1. Shared Mission – Government cannot perfect cybersecurity on its own, nor can the private sector.
  2. (read more…)