Insights from our experts. 

Impact of trading new markets on margin management

There are many reasons why firms may look to trade new markets. Some are looking to diversify their risk or to increase their returns, others may just want to take advantage of alternative venues for current products, or are driven to do so because of regulation. 

Whatever the reason, firms need to be able to optimise margin and manage their liquidity requirements, as well as be able to predict and validate their margin for any new market. 

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Margin Algorithms

When considering the impact of trading new markets, the most obvious area to consider is the number of different margin algorithms, and each of these is complex in its own right.

The more markets you trade, the more methodologies that need to be supported.  This is important because it greatly increases the effort required to achieve effective margin management. 

Operational Issues

The differences in margin calculations may be the most obvious impact on margin management that comes from trading new markets. However, there are operational differences that can make it much harder than expected to support new markets. These generally fall into two categories: 

  • The way that trades and positions are represented 
  • The tools that are provided to assist in margin management 

Impact on key functionality

We look at the impact that new markets will potentially have on systems and processes, looking at each of these key areas:

  1. Validate

  2. Track

  3. Optimise

  4. Forecast

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