Collateral management product of the year: Calypso Technology

Asia Risk Technology Awards 2019

Alan Sheehan, Calypso Technology

As banks seek to optimise their use of collateral and lower the funding costs of trades, they face a complex challenge in centralising their inventory across the enterprise. But the effort and investment is worth it because a centralised inventory brings increased visibility into collateral positions and enables exposure netting across multiple business lines, as well as optimal allocation and minimal deployment of cash collateral.

Calypso Collateral Management helps banks achieve these goals as it features a real-time centralised inventory, as well as support for a wide range of collateral agreements and offers flexible workflows so banks can implement their own business processes. These, and other features that address the key business and regulatory requirements currently impacting collateral managers, have led more than 70 organisations across the globe to opt for Calypso Technology’s collateral solution. Furthermore, the system’s ability to accommodate the needs of many different types of market participants has resulted in successful implementations across multiple industry sectors, including investment banks, insurance companies, investment managers, central counterparties (CCPs), clearing members and central banks.

Collateral is a key component of Calypso’s cloud-enabled cross-asset front-to-back solutions and managed services for financial markets. Calypso Collateral Management can be deployed as a standalone application or seamlessly integrated with the Calypso front- and back-office solutions. It can run on the premises, on the cloud or in a hybrid way.

Calypso has an open collateral agreement framework to support agreement types, including International Swaps and Derivatives Association credit support annexes (CSAs) – both legacy and those based on Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (Iosco) regulation, as well as global master repurchase agreements, global master securities lending agreements, and cleared over-the-counter and exchange-traded derivatives. 

“The biggest challenge with collateral management is still the ongoing implementation of the BCBS/Iosco margin requirements for non-centrally cleared derivatives,” says Alan Sheehan, director of product management at Calypso Technology. “September 2019 sees the implementation of phase 4 of the uncleared margin rules, which entails the documentation and execution of the regulatory initial margin (IM) CSAs and the IM regulatory calculation process, and then, specifically from a collateral management processing point of view, the setting up of the settlement agent arrangements. In most cases these are triparty agent arrangements, as the triparty agents provide the necessary regulatory segregation model.”

Having an integrated solution for collateral management, inventory management and settlement through to general ledger is key to streamlining 

Tri Nguyen, Calypso Technology

Calypso’s automation of collateral management operations and algorithm-based allocation work together in its solution to find cheapest to deliver collateral and reduce the number of collateral calls and disputes. Collateral trading desks can take advantage of Calypso’s securities finance front-to-back office to access repo and securities lending markets to release contingent liquidity and reduce overall funding costs for the enterprise.

Calypso was selected by a leading Indian bank because of its track record as a leading collateral management technology provider, with the company’s strong local support and project team a key factor in the decision. The standalone implementation took less than five months and was on time and on budget. The bank now has a fully integrated solution, from trade feed to settlement and accounting, that complies with its security and internal procedures, delivers the ability to scale for additional credit support annexes and enables it to manage collateral smoothly. The automated workflow for the collateral management process also helps reduce operational risk, says the bank.

As well as India, Calypso has been expanding its client base in other fast-growing markets, such as the Philippines and Indonesia, as well consolidating its position in China, Taiwan, Hong Kong, Japan, Australia and New Zealand. As a result the company now has more than 40 clients in the Asia-Pacific region.

“While collateral management in Apac may not yet be as sophisticated as in some of the markets in Europe and the US, new regulatory requirements such as the variation margin and uncleared margin rules are forcing operational changes, with financial institutions looking to automate the process as much as possible,” says Tri Nguyen, market specialist team lead at Calypso Technology. “Having an integrated solution for collateral management, inventory management and settlement through to general ledger is key to streamlining this operation. The collateral offering also needs to be flexible enough to support any part of that end-to-end requirement. Calypso is an integrated end- to-end solution, but offers the ability to just implement selected modules – and that is one of the reasons why many Asian clients have been leveraging Calypso to support their collateral management needs.”

An Asia Risk Awards judge said: “Calypso’s collateral management modules are well regarded and have rich, long-developed functionality. The company has an impressive number of Asia-Pacific and global clients using its collateral management applications.”