Lessons learnt from 2022 market turmoil: how financial firms can prepare for the year ahead

2022

LONDON / NEW YORK / SYDNEY / HONG KONG, 20 December 2022Cassini Systems, the leading provider of pre-and post-trade margin and collateral analytics for derivatives market participants, is helping their clients prepare for 2023 by ensuring that proper risk management strategies are in place to overcome potential market challenges and encourage growth. As 2022 draws to a close, here are the three major lessons from this year that all financial firms can benefit from learning.

First, and perhaps the most important, volatility isn’t going away. Because of ongoing market instability, companies have seen increased margin calls which at times have posed severe liquidity problems for the sector. This issue is further underscored by a lack of real-time information to guide decision-making, resulting in traders and portfolio managers who have little to no visibility, before execution, on how margin costs are attributed to strategies, portfolios, and funds.

Second, long-term and short-term strategic planning is key to sustainable growth. For firms at or near the threshold for Phase 6 of Uncleared Margin Rules (UMR), they must prioritize properly managing their derivatives portfolios and collateral. Intraday and long-term data insights provide firms with an invaluable understanding of how close they may be to this threshold and what they can do to either stay under that threshold or maximize margin efficiency within that new boundary if they are in scope.

Finally, firms must look outside their existing internal structures and cultivate a larger ecosystem supporting their growth and clients’ needs. Over the past few years, many firms have begun implementing new systems to streamline their workflows or increase transparency on margin drivers affecting portfolio drag.

Instead of building these systems internally, which is both costly and time-consuming, firms should look for a few select partners that will not only bolster their growth but will allow firms to support their clients better, strengthening all business relations.

Liam Huxley, founder and CEO of Cassini said: “We have seen time and time again that proper planning is the major difference between firms that fail and those that succeed. As the financial market transitions into 2023, companies cannot afford to repeat the same mistakes of the past. The reality is, if you haven’t adopted a data-driven strategy by now that focuses on alpha-generating strategies despite market volatility and continuing regulation, you’re already behind.”

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Editorial contacts:

John Norris / Emma Dodds

Moonlight IQ

Email: cassini@moonlightiq.com

Tel: +44 (0) 20 7250 4770

About Cassini:

Founded in 2014, Cassini Systems offers award-winning derivatives margin analytical platform that provides the industry’s only front-to-back margin and cost analysis across the entire lifecycle of a trade. Cassini users can calculate any margin on any cleared or uncleared derivatives asset; analyze drivers and movement in margin exposure; reduce Initial Margin levels; and maximize margin efficiency with the firms’ industry-leading, advanced algorithms. Cassini services have a proven track record of enhancing portfolio returns at every point in the daily business cycle, empowering traders and portfolio managers with the ability to analyze instantly in the pre-trade stage the all-in, lifetime cost of a transaction.

Top-tier hedge funds, asset managers, and Tier 1 banks rely on Cassini for powerful, flexible, automated tools to manage their portfolios of over-the-counter and exchange-traded derivatives products. Cassini was named Best UMR Service of the Year in the Risk Markets Technology Awards 2022.

For more information, please visit Cassini and follow us on Linkedin.