"Throughout the life of a trade, you need to take collateral to ensure that one side of a trade does not lose out completely in the event of default by the other side," says Phil Buck, CEO of North America at Anvil. "If an organisation is doing a basket of trades of different types â such as swap, commodities, repo and securities lending -- with a counterparty, it would be better to net the collateral exposure to minimise risk."
This has been difficult in the past for two reasons. Primarily, organisations and technology have tended to be organised according to product verticals. Secondly, the international legal framework has discouraged collateral netting through single product focused cross-border agreements
"The political and technological barriers are crumbling, and ISDA and ISMA are working separately to create an acceptable global agreement which will facilitate cross-asset margining internationally," says Buck. "As a result, financial institutions are turning to the Anvil Margin system to support cross-product margining and are enjoying significant economies as a result."
The system calculates exposures, monitors collateral already pledged and finds appropriate additional collateral from available long positions, significantly increasing the efficiency of trades. It lets users make the most efficient use of the collateral they have, and recognises that margining is integral to back and middle office activities as well as front office.
Anvil Margin is designed to handle both cash and non-cash collateral, and shows both current and projected exposures. It gives precise margin tracking with an informative display of exposures and rapid margin call capabilities. This helps spot the effects of market movements as they happen, ensuring the most efficient use of collateral. Anvil Margin focuses more on the front office than other collateral management systems. This appeals to trading houses who recognize the importance of traders being able to make more efficient use of collateral.
"More and more instruments are being used as collateral, so keeping tabs on what a company has and seeing it integrated into a single system is a growing advantage," observes Buck. "Using the Marginâs intuitive tools to offer collateral out on a worst first basis makes users more effective in their day-to-day activities."