A leading bank has created a central margin calculation utility for OTC Clearing powered by OpenGamma to address a number of requirements. This case study shows how they did it.
Overview:
The bank currently runs a margin buffer at the CCPs where most of their client swaps are cleared. The buffer is in place to facilitate client intraday trading where a client will post margin post execution of the trade.
The challenge:
The bank wants to be able to calculate intraday margin to demonstrate full visibility and control of the amount of margin required to cover client positions, with the ultimate goal to reduce and optimise the size of the buffer.
The solution:
The bank has launched a what-if margin calculation application to calculate predictive margin of the OTC Cleared (rates & credit) positions held by clients.
Benefits for the bank:
CCP-provided tools do not meet this requirement. Using OpenGamma Margining (OTC Rates and Credit) enables the bank to proactively manage intraday margin buffers. Furthermore they will improve client service with a ‘what-if’ margin capability tool available through their client portal. This tool will enable a clearing client to view on-demand calculation of margin across all of their positions, and also to load in position from other FCMs to give a client a single view of margin.