Finadium releases report on costs of collateral
15 April 2011 New York
Image: Shutterstock
Finadium has released a free white paper on the mechanics of who pays the cost of collateral for OTC derivatives trades in the US.
The paper analyses recent CFTC and FDIC hearings, Basel III rules on bank capital and the financial alternatives for OTC derivatives end-clients.
Although commercial end-clients appear to have won a victory by not having to post collateral for non-cleared trades, in fact costs will increase in the OTC derivatives market for commercial hedgers and speculators alike.
For end-clients to minimise the impact to their balance sheets, now is the right time to evaluate cash and non-cash collateral needs including investigating the utility of collateral conversion trades.
The paper analyses recent CFTC and FDIC hearings, Basel III rules on bank capital and the financial alternatives for OTC derivatives end-clients.
Although commercial end-clients appear to have won a victory by not having to post collateral for non-cleared trades, in fact costs will increase in the OTC derivatives market for commercial hedgers and speculators alike.
For end-clients to minimise the impact to their balance sheets, now is the right time to evaluate cash and non-cash collateral needs including investigating the utility of collateral conversion trades.
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