What does optimization really mean to the industry?

optimization-industry

Over the last few weeks, we at Cassini have been discussing why the buy-side needs collateral and cost optimization tools which provide margin transparency, collateral sufficiency, and the ability to understand margin drivers – enabling you to reduce your margin costs.

 

The need for these types of optimization tools has only been highlighted further by the current unprecedented volatility which has led to significant swings in Mark-To-Markets (MTM) and increased margin calls.

Now more than ever, it is key that you are equipped with analytical and optimization tools that will allow your firm to understand the costs, and drivers, of margin movements and then act accordingly.

But what does optimization really mean? 

Optimization of your margin and collateral – at any stage of the trade lifecycle – is designed to minimize the cost impact on your firm and minimize the carry cost of your trades.

The above optimization can be done both pre-trade and post-trade. How this is done is explained in full, here.

Below, Cassini’s founder and CEO, Liam Huxley, further discusses what optimization means, and how it can impact the entire lifecycle of a trade – from pre-trade to end-of-day. Liam also touches upon why your entire organization – from the front office to the back office – can benefit from margin and collateral optimization tools that give you transparency over your margin. This in turn helps you make better trading decisions and minimize cost.

Key takeaways

Ø Optimization can mean a variety of things, depending on where you sit within your organization. Essentially, optimization of your margin and collateral – at any stage of the trade lifecycle – is designed to minimize the cost impact on your firm and minimize the carry cost of your trades.

Ø Firms have started looking at optimization tools – from pre-trade to end-of-day – that not only enable them to become regulatory compliant but also reduce costs, improve the liquidity of collateral and efficiently perform operations; essentially ensuring minimal drag on portfolios.

Ø Collateral optimization will start to be used as a front office tool so that firms can understand the costs of a trade (including the required amount of collateral to be posted), before they trade and ensure best-execution under MiFID II.

Last month, to kick off our collateral optimization series, Mohit Gupta – Senior Product Specialist at Cassini, explained why your front office needs access to collateral and cost optimization tools providing margin transparency, collateral sufficiency, and the ability to understand margin drivers – enabling you to reduce your margin costs.

In the second video of this series, Mohit also explained how margin and collateral optimization tools can benefit an entire organization, from the front office to the back office. 

In Mohit’s third video, he discusses what the future holds for those firms’ whose collateral operations have changed dramatically, not only in the last few years, but the last few months?  How do we see collateral management evolving further in the next five years?

Resources for you:

Ø Booklet download – Evolution of Collateral: Moving Collateral Optimization into the front office 

Ø How Pre-Trade IM Calculation can optimize and reduce collateral drag 

Ø Take control of IM with forecasting and optimization