Collateral management and optimisation product of the year: LSEG Post Trade

In recent years, collateral management has evolved from a back-office operational task into a critical risk management function. In addition, market demand for new innovative processes and services to help optimise financial resources has grown significantly. This shift has been driven by significant changes in regulatory frameworks and market dynamics that have heightened the need for robust processes to mitigate counterparty credit risk effectively, with market participants seeking better ways to mitigate capital and margin costs across their portfolios.

In response to these challenges, LSEG’s flexible post-trade ecosystem, LSEG Post Trade, takes home this year’s Collateral management and optimisation product of the year award.

The firm continues to work closely with the market to deliver a combination of solutions that focus on resource and operational efficiency across cleared and uncleared portfolios. One example is LSEG’s FX Smart Clearing service, launched in November 2023. A collaboration between LCH’s ForexClear, SwapAgent and Quantile, it helps reduce counterparty risk and capital costs across foreign exchange portfolios.

This solution leverages Quantile’s optimisation algorithms to intelligently select which FX trades and risks to clear through LCH ForexClear, a central counterparty (CCP), during optimisation runs. This efficiently reduces counterparty risk and capital. The process is customisable, allowing participants to manage their risk and resource changes, as well as their preferred currency pairs and trading partners.

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Market participants can benefit from multilateral risk netting, portfolio margining and 24-hour clearing, five days a week, offered by LCH ForexClear for deliverable and non-deliverable FX. This includes 25 non-deliverable forward currency pairs (15 emerging market and 10 G10 pairs), nine non-deliverable FX option pairs and eight deliverable (spot, forwards and FX options) pairs.

The effectiveness of LSEG’s FX Smart Clearing service in reducing counterparty risk and improving capital efficiency was validated in proof-of-concept runs with members before its launch. Results showed an average of more than 50% capital reduction without significantly increasing initial margin, and more than 70% compressibility of the novated FX forwards.

Additionally, FX Smart Clearing can also sweep risk into LCH’s SwapAgent service, which is part of LSEG’s Post Trade Solutions, thereby benefiting from settled-to-market treatment for capital purposes. This standardises margin agreements, aligns operational workflows with CCP standards and introduces a standardised rule book.

The SwapAgent service extends some of the benefits of clearing to the bilateral over-the-counter derivatives market. It helps reduce trading frictions in the cross-currency swap, swaption and linear rates markets across 18 currency pairs.

Acadia, acquired by LSEG in March 2023, provides integrated risk management, margining and collateral services for the derivatives community.

Acadia’s uncleared margin rules (UMR) suite of services provides an industry-recognised method of managing initial margin exposure within a single platform, helping firms with their UMR compliance.

To address the challenges of implementing the International Swaps and Derivatives Association’s (Isda’s) standard initial margin model (Simm) and its shift to semi-annual recalibration from 2025, Acadia has expanded its toolkit of UMR solutions. The company launched its IM Recalibration Analytics (IMRA) in June 2023. This enables firms to immediately assess the impact of new Isda Simm versions on their initial margin calculations, and automates a range of tasks that are currently executed manually.

Judges said:

• “The combining of LSEG and Acadia enhances capabilities and offers value to clients. UMR solutions are clearly important, and there have been some enhancements of note this year.”
• “An impressive and well-positioned offering.”
• “LSEG has created a single corporate home for these three very helpful and important services.”

Andrew Williams, CEO, Post Trade Solutions at LSEG Post Trade, says:

“We are delighted that LSEG Post Trade has been recognised as Collateral management and optimisation product of the year in the Risk Markets Technology Awards 2025. Given the recent significant changes in regulatory frameworks, such as the implementation of UMR and the standardised approach to counterparty credit risk, our LCH ForexClear, Quantile, Acadia and SwapAgent businesses have worked closely with market participants to deliver a combination of solutions that help improve and optimise collateral management processes. This is also allowing our customers to benefit from robust risk management, while reducing the cost of margin and capital.”

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