20 May 2020 | Increase in volatility and margin calls highlights importance of control over collateral

By Arjun Jayaram, CEO and Founder of Baton Systems

With the increase in the number and size of margin calls – as well as other financial obligations – speed, automation, visibility and control over cash and collateral is more important now than ever. Why? Because liquidity constraints are increasingly becoming problematic in capital markets.

Take the cleared derivatives markets for example. A small number of well-known financial institutions handle the key “plumbing” of these markets, namely the margin collection and collateral management functions with their clearinghouses. That means they are exposed to large demands for liquidity whenever volatility increases and the clearinghouses step up their margin requirements.

As an illustration, many CCPs increased their initial margin…Commentary – How technology can free up capital in clearing systems