The Margin Transit Utility (MTU) delivers streamlined and standardized collateral management for OTC derivatives transactions and other marginable products. MTU provides flexibility for counterparties by accommodating bilateral, third-party and triparty workflow, while the automation of manual tasks helps reduce operational complexity and risk of margin-call processing.
We streamline processing of margin settlement and expedite collateral mobility, to enhance operational efficiencies and reduce operational risks for market participants.
Who We Service
The buy-side, requirements for the posting of initial and variation margin and mandatory central clearing of OTC derivatives are substantially increasing margin call volumes and the amounts of needed collateral, thereby challenging buy-side operating models and introducing new costs and regulatory reporting requirements for these firms.
MTU addresses these challenges with its straight-through margin and collateral processing and settlement for buy-side firms and their dealer counterparties, administrators and custodians. MTU provides flexibility by accommodating firms’ bilateral, third-party custodian and triparty provider arrangements. It reduces processing costs, complexity and risk by standardizing middle-office inputs and output, captures settlement instructions, accelerates processing velocity and consolidates settlements and position reporting in one standardized format.
For broker-dealers, operational costs and risks are rising in tandem with the volume of margin calls and amount of collateral required in daily trading activity, a result of recent regulatory reforms. Collateral management solutions that streamline processing of margin calls with myriad counterparties can deliver substantial benefits to sell-side firms.
MTU provides such benefits through its straight-through margin and collateral processing and settlement for sell-side firms and their counterparties, administrators and custodians. MTU reduces processing costs, complexity and risk by standardizing middle-office inputs and output, securely captures settlement instructions, accelerates processing velocity and consolidates settlements and position reporting in one standardized format. MTU accommodates bilateral, third-party custodian and triparty provider arrangements.
Custodians that support counterparties to OTC derivatives contracts typically facilitate collateral settlement, by providing services that include taking instructions from clients, setting up the collateral to be settled, and delivering the related messaging and status updates. MTU streamlines and simplifies these activities for custodians through expedited workflows, consistent formatting of messages and increased data transparency.
MTU automates settlement processing and normalizes reporting from multiple custodians and triparty providers, lowering operating costs and risks.
MTU streamlines settlement processing and messaging, reducing costs and increasing efficiencies for dealers.
MTU reduces operational costs and risks—through streamlined workflows, consistent formatting of messages and increased data transparency.
How the Service Works
The collateral settlement process begins when both counterparties agree on the margin call amount and either the counterparties or the triparty provider allocate the collateral.
In a bilateral or third-party arrangement, the counterparties agree to the margin amount and affirm the collateral to be posted/received via AcadiaSoft. Then a pledge accept message is sent from AcadiaSoft to MTU where it:
- Validates the collateral message from the matching source
- Enriches the SWIFT-formatted message with ALERT® collateral settlement instructions and sends it to the parties responsible for settlement
- Provides status updates including exceptions and rejections
- Delivers settlement confirmation to counterparties
Where counterparties use a segregated account at a third-party custodian, the MTU instruction is recognized and no authenticated release (fax) is required.
Where counterparties use a triparty collateral service provider to optimize their collateral management and one or both counterparties use MTU, MTU provides one or both firms with consolidated reporting. After the counterparties agree to the RQV (Required Value):
- MTU consumes the RQV and shares it with the respective triparty provider on behalf of one or both counterparties (pledgor and/or pledgee)
- The triparty provider processes the collateral settlement and sends a SWIFT-formatted status update to MTU
- The status update can be viewed by either or both counterparties in the MTU GUI or sent to the MTU user's collateral management system via an XML-format SWIFT ISO message
For More Information
Learn more about how to streamline and standardize your collateral management.