Baton’s Cleared Collateral Platform: A Demo

Industry Article

Baton’s Cleared Collateral Platform: A Demo

Tucker Dona demonstrates Baton’s Cleared Collateral Platform which allows firms to achieve automated collateral management and is currently in production with several major FCMs and CCPs.


Enabling firms to automate and optimise collateral holdings and expedite the movement of cash and securities to and from CCPs, Tucker explains that the Cleared Collateral Platform offers a variety of functionality, designed to specifically support the needs of FCMs today.

He first highlights the summary screen which normalises and standardises information coming from all of the connected CCPs. He explains that the Collateral Profile screen offers a quick and easy way to see haircut and CUF information across CCPs and the platform also offers a consolidated source to pledge and recall assets directly to the CCPs – accelerating productivity by eliminating the need to access each CCP’s individual GUI.

“All information is updated intraday as close to real time as each CCP offers.”
– Tucker Dona

The summary screen gives an overall picture of requirements and holdings, both cash and non-cash, at a summary level. Expanding any of the listed accounts gives a more detailed view by currency.

The right-hand side of the screen shows when the information was last updated. “All information is updated intraday as close to real time as each CCP offers,” Tucker explains. “The information is, naturally, downloadable to Excel and, with integration, can be sent to FCMs via an API or SFTP.”

———————————- Download the full Article to read more ———————————-


FX Living Dangerously

Industry Article

FX Living Dangerously

Baton Systems recently spoke with Colin Lambert, publisher of The Full FX, about what is getting the FX market talking and why the back office is ripe for transformation.


In its 2019 Triennial Survey, the Bank for International Settlements (BIS) surprised the FX industry by highlighting settlement risk as an area of growing concern when previous surveys had focused solely on trading volumes. Specifically, data collected for the survey showed that approximately USD8.9 trillion worth of FX payments is at risk on any given day.

“It made the industry sit up and take notice,” Colin said. “It was, frankly, a flag that the regulators want something done about settlement risk.”

The Global Foreign Exchange Committee (GFXC) has answered this call to arms. As part of its ongoing review of the FX Global Code, it is looking to strengthen guidance on the management of FX settlement risk, wishing specifically to place greater emphasis on PvP settlement mechanisms where available.

“Clients will look towards the banks for a solution, but I think the solution will come from the fintech industry.”
– Colin Lambert

As part of its feedback programme, the GFXC proposes an amendment to the Code that ‘if a counterparty’s chosen method of settlement prevents a Market Participant from reducing its Settlement Risk (for example, a counterparty does not participate in PvP arrangements or does not agree to use obligation netting) then the Market Participant should consider decreasing its exposure limit to the counterparty, or creating incentives for the counterparty to modify its FX settlement methods.’

———————————- Download the full Article to read more ———————————-


The Benefits of Effective Collateral Management in Cleared Derivatives

Industry Article

The Benefits of Effective Collateral Management in Cleared Derivatives

The effective management and deployment of assets has always been an important factor in the performance of Futures Commission Merchants (FCMs).


However, until now it’s not been possible to achieve consolidated connectivity to multiple central clearing counterparties (CCPs) to enable FCMs to access real-time collateral and margin data – invaluable insight that can be used to optimise and instruct collateral movements across CCPs globally.

Market volatility resulting from the COVID-19 pandemic fuelled trading activity and led to a rise in margin requirements from CCPs – in some cases by more than 100%. Whilst recent activity has been more subdued, the backwardlooking risk models deployed by CCPs mean that high margin requirements remain in place. This in turn, has led to increased pressure on FCMs to manage collateral effectively, maximise liquidity, and reduce risk.

“It can take up to three days to move collateral from EMEA to APAC, and this can prevent firms from responding to margin calls in a timely and efficient manner.”
– Ragu Raymond

Within FCMs, the function of collateral management involves multiple manual processes. Each CCP produces end-of-day reports in different formats and communicates with FCMs via its own dedicated channels. Very few firms have reliable access to the intraday data that can prove critically important in fast moving markets.

Added to this is the need for FCMs to monitor collateral and assess risk, optimise margin in line with tight CCP cut-off times, and check eligibility of collateral with multiple CCPs. While an FCM can to some extent reduce workload by setting its own criteria on the types and volumes of collateral it will accept from its customers, in practice a client may only have certain collateral to pledge.

———————————- Download the full Article to read more ———————————-


Stress Fatigue: Addressing the Urgent Threat of Settlement Risk in the Global Financial System

White Paper

Stress Fatigue: Addressing the Urgent Threat of Settlement Risk in the Global Financial System

While financial markets appear to have recovered almost without damage from the Global Financial Crisis (GFC) more than a decade ago, the truth is not so uplifting.


The threat now is not the products that are being traded, or even the creditworthiness of participants, but the industry infrastructure itself. Failure to address the inadequacies of the creaking settlements process, most likely by using distributed ledger technology (DLT), could result in tragedy for the financial system – one that could easily be avoided.

The G20’s September 2009 Pittsburgh meeting set in motion a multi-year process to address systemic risk. Its intent was to ensure that the risks and exposures arising from the trading of standardized derivatives would be captured, quantified, collateralized, capitalized, and buffered against the potential contagion arising from the default of a market participant. Pushed along – and at times shoved – by global regulatory authorities and national governments, market participants and infrastructures have, at least to the naked eye, made good progress with the implementation of this vision.

“In March 2020, when markets became unhinged, most risk managers found themselves staring down the barrel of unprecedented, and often unsecured, exposure.”
– Jerome Kemp

By 2020, cleared traded notional value for interest rate swaps and credit default swaps represented 90.2% and 82.5% of traded notional value respectively. Banks around the globe are now much better prepared to withstand severe, adverse shocks, thanks to the significant increases to regulatory capital requirements necessitated under the provisions of Basel III.

While the industry is still digesting the reform agenda introduced over the past decade, the migration from a world dominated by outsized risk, multilayered bilateral exposures, poor risk management, lax credit practices, and undercapitalized exposures to the more secure global ecosystem we enjoy today, was clearly warranted.

———————————- Download the full Article to read more ———————————-


Baton System's Programme for Expansion

Industry Article

Baton System's Programme for Expansion

In 2020 constraints imposed by the Covid-19 epidemic accelerated Baton Systems’ move to virtual working and recruitment processes. Baton has further extensive plans to expand in 2021.


Baton Systems will significantly expand its workforce in India in 2021, and is looking to onboard not just traditional lateral hires, but a diverse talent base. 

“We have a very large recruitment target for 2021,” says Sonia Bathija, Baton’s head of operations. “To achieve this, our strategy has been to lay out a strong foundation with the talent community. The philosophy of our business is that hiring is everyone’s business, not just the responsibility of HR. Business leaders, employees and candidates all have a degree of accountability.” 

“When you join Baton, we want you to feel that you belong to Baton and Baton belongs to you.”
– Sonia Bathija

 Technology has transformed the overall talent domain in the past twelve months. Baton’s interviews and campus recruitment procedures are now virtual and the company has worked with various partners on the gamification of talent for the employee onboarding process. 

Before the global Covid-19 pandemic, Baton’s employees were already able to work with some degree of flexibility. This culture coupled with the company’s existing infrastructure meant that transition to home working for all employees in March 2020 was able to be made seamlessly in three days. 


Watch our segment for 'Meet the Engineers' with Sonia Bathija

———————————- Download the full Article to read more ———————————-


An Overview of the PvP Settlement demo

Industry Article

An Overview of the PvP Settlement demo

Based in Austin, Texas, Tucker Dona is Head of Business Development and Client Success at Baton Systems, responsible for driving sales and business development.


In PAY21 Tucker gives a brief demonstration to help the audience better understand the functionality of Baton’s real-time PvP settlement process for FX.

“The Baton system indicates official ownership change as settlement of the netting group takes place.”
– Tucker Dona

“The Baton settlement process can be reduced to as little as three minutes,” Tucker explains, keen to stress that settlement risk and funding costs are hugely reduced as a result of shortening the settlement cycle.

The key to Baton’s process, he says, is both parties’ use of Baton’s shared permission ledger and workflow. The ledger is legally supported by a rulebook which provides for settlement finality and certainty.


Watch the PvP Liquidity Demo with Tucker Dona

———————————- Download the full Article to read more ———————————-