Citi has delivered collateral management and middle office services to one of Europe’s leading asset managers, enabling it to centrally clear OTC derivatives for the first time.
A significant regulatory shift for the industry, Dodd-Frank requires all US-based entities to clear certain types of OTC derivatives via a central counterparty (CCP). As of today, ‘Category 2’ market participants, including some funds, are required to use CCPs. Similar requirements for OTC derivatives, introduced under European Market Infrastructure Regulation (EMIR), are expected to apply to all European-based financial institutions in 2014.
By using its OpenCollateral and its derivatives middle office solution, Citi ensured that a major long-only asset manager could begin clearing OTC derivative trades via its clearing brokers well before the regulation came into force, paving the way for other European investors to address their collateral requirements ahead of the EMIR regulations.
Citi’s OpenCollateral open architecture collateral management solutions help clients to optimize the use of collateral and streamline the administrative and operational challenges of managing all types of collateral assets across multiple counterparties. The services Citi delivered to this client fully support the complex new margining processes required for OTC clearing.
“We are pleased to help clients who are proactively addressing various global regulatory requirements well in advance of geographical deadlines,” said Sanjiv Sawhney, EMEA Head of Securities and Fund Services at Citi. “Our ability to ensure a key European client could begin clearing their OTC trades centrally at this stage in the Dodd-Frank regulatory timeline shows how committed we are to manage their obligations efficiently and presciently.”
“In the context of major regulatory changes like Dodd Frank, Citi has shown a unique ability to develop open architecture solutions which allow clients to improve efficiencies, reduce costs, and meet regulatory obligations swiftly and efficiently so that they can focus on their core businesses,” said Raj Shah, Global Head of Collateral Management, Securities & Fund Services at Citi. “We look forward to meeting our clients’ future needs in the run-up to EMIR and other regulatory initiatives.”