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Ask the Expert: Risk Management as a Service

By DTCC Connection Staff | 4 minute read | May 3, 2021

The financial services industry continues to face operating margin pressure due to competitive, regulatory and operational stress. These realities demand continuous calibration and optimization around operational processes and capital management. DTCC clients, in particular, are looking for tools that can help them gain better transparency into their risk profiles.

In 2017, DTCC launched its Risk Management as a Service (RMaaS) initiative, which gives clients access to risk data, a new client portal to view intra-day and historical portfolio risks, and a clearing fund calculator. The calculator provides clients the ability to submit intra-day or ‘what-if’ portfolios to gain an estimate of margin impact.

DTCC Connection met with Gregory Kalina, DTCC Managing Director, Risk, to learn more about the benefits of RMaaS to DTCC clients.

What is Risk Management as a Service?

RMaaS is a suite of products launched by DTCC’s Risk Technology group that operate as an extension of the internal solutions our own DTCC risk analysts use on a daily basis to monitor client portfolios and risk exposures. These products include a NSCC, GSD and MBSD Client Portal, which provides intra-day views into a member’s variation and initial margin calculation through our intra-day calculations of Mark-to-Market and Value-at-Risk (VaR). The Portal provides views into the largest individual instruments causing the largest impacts to these calculations and provides trend lines that measure intra-day performance versus historical measures.

For DTC clients, DTCC launched its Settlement Insights Portal, which provides these clients the ability to view their settlement receive and deliver information, trend lines on transactional blockage versus the industry norms, and settlement and transactional processing history.

Another feature of the RMaaS suite is the ability to access our clearing fund calculator to perform ‘what-if’ scenario analysis based on user input. Members can enter or upload portfolio information and retrieve an estimated VaR charge allowing clients to better understand their portfolio risks and anticipate potential liquidity funding needs based on adjustments to their portfolio.

Lastly, RMaaS has partnered with DTCC’s enterprise-wide rollout of the API Marketplace to provide all this information, including all detailed portfolio contributions to NSCC’s Mark-to-Market and VaR, through an API interface available to all clients to consume as data files into their own premises for an added ability to calculate their portfolio risks in-house utilizing their own systems.

How does the calculator work?

The calculator is an open system that provides clients the ability to hypothetically upload single securities or entire uploaded portfolios into an interface that will provide the calculated VaR, broken down by category, versus the current VaR. The interface can get accessed via the portal or API and provide clients the ability to measure impacts to their VaR charge based on hypothetical portfolio changes.

What are the major benefits for clients?

Transparency. By providing these tools, we feel that risk to the industry is mitigated as there is less potential for surprise margin changes that could lead to an unanticipated margin charge, which could potentially lead to a liquidity issue. DTCC’s mission is to protect the financial industry and we are pleased to provide any new tools to help mitigate industry risk.

Can clients use these new features now?

Yes. Right now, NSCC members have full access to all portal and calculator features. In addition, just released in the second quarter of 2020, are enhancements to the NSCC Portal and Calculator. These enhancements include the ability to view intra-day slices every 15 minutes, as well as an extension of portfolio updates to 7 pm ET, which provides clients even more transparency into estimating the next morning’s margin requirement, as this data is populated post-settlement. Also, the VaR algorithm will be publicly available on the portal for clients to re-produce in house should that wish to do so.

What’s next for Risk Management as a Service?

RMaaS plans further enhancements targeted for FICC client base. Currently, all these features are available to FICC clients on an hourly basis. During the next year, plans are in place to extend to a 15-minute process of exposures. In addition, with upcoming margin enhancements such as Common Margining, DTCC will provide FICC members added flexibility into monitoring their individual GSD and MBSD exposures -- both isolated to the clearing corporation and combined through a common margining methodology. DTCC is looking to expand its transparency regarding portfolio liquidity and upcoming settlements to reduce systemic risk and providing added expansions to the API Marketplace. Furthermore, DTCC will combine the interfaces that provide client margin letters and the RMaaS portal into one interface to streamline risk data and information under one access point.

Greg Kalina - 432x576px
Greg Kalina DTCC Managing Director, Risk